Financial Planning for Your Retirement

There are many choices and a great number of International Pension Schemes available. Often, such policies are chosen because of the word “pension” in the title although they are not really pensions at all in the true sense of the word.

For example, in the United Kingdom, a legitimate pension fund (with the benefit of tax relief on contributions) would require the policyholder to take the majority (if not all) of the benefits at retirement and purchase an annuity, thereby providing a regular income throughout the remainder of the individual’s life.

An offshore pension plan has no such legislative restrictions and the policyholder has the flexibility to choose to take a regular income from the maturity value of the plan or indeed all of the proceeds as a capital sum on retirement and is then free to invest in the manner that best meets his/her pension needs.

The basic principal is that an investment does not have to have the word “pension” in its title to be a legitimate retirement vehicle. Equally, the word “pension” is no guarantee that the plan is the most suitable type of vehicle for an individual’s own circumstances.

An Aid to Estate Planning

Another highly attractive feature of the offshore version of personal pension planning is what happens to the value of the retirement fund in the event of the death of the pension holder. Onshore rules generally dictate that, dependant on the choice made of annuity payment, if death occurs after retirement age the remaining sum maybe transferred (in part) to a surviving spouse, or in limited ‘guaranteed’ cases, paid to the policy holders estate or, in the worst case scenario, revert to the Life Assurance Company with whom the pension is held.

In contrast, the residual amount in an offshore retirement account would always form part of the estate of the deceased and would be paid (after any inheritance tax liability) to the policy holder’s beneficiaries.

For more on State v Personal Pension Plans please see
Financial Planning FAQ’s

The Cost of Delay

Out of 100 people now aged 25, nearly half will retire at 65 on State benefits only. Many will be forced to carry on working through financial hardship and only a minority will be financially independent. Just one in ten will be lucky enough to be termed “well off’.

It is all too easy to put off thinking about a pension, either because retirement seems so far away, or you think it will cost too much. Maybe you believe you can rely on the State to provide for you. However, the Basic State Pension in the UK, for example, is currently 3,150 GBP per year or just 61 pounds per week for a single person and there is no guarantee you will qualify for this amount, unless you have worked for most of your life and paid adequate National Insurance or equivalent contributions.

And even if you are in a Company pension Scheme, in most cases, you would need to work for the same company for 40 years or more to receive your maximum pension benefits. Considering the average person today is likely to change jobs several times during their working life, the odds of building up full benefits could be stacked against you.

Most People retire on less than they expected!

Whether you are employed or working for yourself, just starting out on your career or have just changed jobs, one thing is for certain, you need to spend time now ensuring your pension arrangements are up to scratch. The longer you leave it, the more you will have to contribute each month, just to get the same pension.

If you haven’t yet made any pension arrangements then it is in YOUR interest to do so quickly, the longer you leave it the worse it will get. And even if you think you are well covered, you need to check your contributions are sufficient to provide you with the income you need. Most people retire on less than they expected. It is in your hands to ensure you aren’t one of them!

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