Guide to Retirement Planning by deVere Group

TAKING CONTROL OF YOUR FUTURE A BEGINNER’S GUIDE TO SUCCESSFUL RETIREMENT PLANNING

The only way not to think about money is to have a great deal of it Edith Wharton

Introduction An increasing number of professionals of all nationalities have been moving and working abroad in the last decade. Whether you are a young executive or a high net worth individual with a diversified portfolio of global assets, you will have specific financial requirements and objectives. Offshore financial products and services can help you achieve financial security and provide you with the quality of life you require as an expatriate or international investor. Investing in international accounts is no longer the premise of the rich and famous; all expatriates living abroad may now enjoy flexibility, among other benefits, by investing their money overseas. The offshore financial industry has become more popular and financial institutions from around the world have entered the offshore market as a result of the high demand. There are now many providers that offer a broad range of services ranging from saving schemes to pension and retirement plans and wealth management accounts to lump sum investment products. Over the years, deVere has developed strong partnerships with some of the world’s leading investment houses and insurance companies, all of which offer some of the most competitive products in the marketplace and a high level of protection for the investor. In this guide, we provide you with essential information on effective retirement planning as an international investor or expatriate. In addition, one of our experienced financial consultants can assist you further and take you through some of the options available to you that will help you start saving for your retirement.

IT IS NEVER TOO EARLY TO START PLANNING FOR YOUR RETIREMENT However young you may be it is important to understand the impact that not planning properly for your retirement will have on you and your family. Even if you have just started your working life it is essential to start thinking about making regular contributions to set you up for the future. The younger you start to contribute to your pension, the more opportunity you will have to secure yourself luxurious retirement years. Unfortunately for those starting out in the workforce, their retirement outlook looks bleak. They could be facing an uncertain future without taking steps to secure a sizeable personal pension. As a result of the global downturn many pension schemes have huge deficits, meaning that a number of companies are closing final salary schemes to new members. It pays to start thinking about your retirement options as soon as possible to ensure that you have enough to live on when you start drawing your pension. For example, if a 25 year old and a 35 year old started saving towards retirement with the aim to retire at 55, the 25 year old could invest £300 a month, while to create the same return, the 35 year old would have to save £803 a month. You may feel that your retirement is a long way off and that you do not really need to think about it just yet. However, if you look at your pension in terms of how many pay days remain until your retirement at 55, you will see that you do not have long remaining to save an adequate amount.

TAKING CON T R OL OF YO U R F U T U R E A BEGINNER’S GUIDE TO S U CC E S S F U L R E T I R E M E N T PL A N N I NG

Current Age 30 40 50

#of Pay Days Until Retirement 360 240 120

#of Pay Days After Retirement 300 300 300

The above table shows how available pay days will decrease as you get older. This is on the assumption that the retirement age is 60 and the mortality rate is 85.

STATE PENSIONS If you continue to pay your contributions towards your state pension and decide to move abroad, then it could prove problematic when investing for your retirement. If you do not continue to pay contributions into your UK state pension then this could potentially reduce or eradicate your entitlement completely. This would mean that you would have to start saving towards your pension through other means if you have not been investing already. If you continue to pay into your state pension, your final entitlement will almost certainly not keep you in a luxury lifestyle in your retirement years. Another issue is that the age of retirement for state pensions will almost certainly rise in the coming years, meaning that you will have to work over the current 60 year old threshold. In order to overcome these problems with state pensions, you will need to start saving or investing towards your retirement as early as possible.

WOMEN WILL BENEFIT FROM SAVING TOO It is a harsh fact to face up to but statistically one marriage in two will end in divorce and women who have not planned for their retirement could end up with nothing to live on. So do you rely on your husband to support you through your retirement years, or will you start saving and investing into your pension fund for yourself? Only about 20% of all women will receive an adequate pension when they retire. Therefore many women are approaching retirement without any financial security measures in place leaving them open to potential hardship should their marriage break up. Additionally, a typical woman’s earnings will be much less than any man’s meaning that they will automatically have lower pension benefits. That is, if a woman has a pension. Around 50% of working women do not have a company pension plan and are less likely than a man to receive an adequate pension. So what can you do to ensure that you are financially viable on yourself when you retire? Start planning your pension while you are young and begin investing as much as you can each month into your future pension fund. Although your spouse will more than likely have a larger pension fund to retire on than you, at least you have prepared for the worst with your own retirement plan. After all, if you stay together, your retirement could be more luxurious than planned.

TAKING CON T R OL OF YO U R F U T U R E A BEGINNER’S GUIDE TO S U CC E S S F U L R E T I R E M E N T PL A N N I NG

RETIREMENT FACTS At the state retirement age of 65 for a man, a woman will have, on average, 22 years more to live and a man will have 19 more years. This means that you could potentially spend 25% to 30% of your life in retirement and will therefore need a substantial fund to support yourself. According to recent figures, individuals aged between 25 and 44 are saving about one third of the amount that they should be in order to support their current lifestyle in retirement. In countries other than the UK individuals are forced to make sure that their pension provisions will meet their needs in order to live comfortably, but the UK are behind in this thinking. However, a good offshore retirement plan should allow you to do the following:

• Reduce contributions – usually after an initial period of about two years.

• Switch investments between different funds to respond to changes in the market.

• Have the option of retiring when you choose to.

• Allow certain access to monies invested after an initial period.

• Be realistic about how much you should be contributing.

• Be sure to check that your prospective plan is suitable for your individual requirements.

To make sure that your pension covers you for your retirement lifestyle it would be beneficial to seek advice from a financial consultant who specialises in retirement planning. It is essential that you explore all avenues available so that you can live comfortably in your retirement years.

SIPPS (SELF INVESTED PERSONAL PENSION SCHEME) SIPPS is a personal pension plan which is suited to the more sophisticated pension investor. There are very few restrictions on what you are available to invest your funds in, meaning that you will have complete control over your own funds. With a SIPPS plan you are able to invest in property funds both in the UK and internationally. All assets within a SIPPS fund benefit from IHT mitigation. Investing within a SIPPS can have great benefits for those who regularly pay into the fund, including:

• Individuals can benefit from full tax relief on contributions based on annual income up to £130,000 per annum and basic rate tax relief thereafter up to £235,000.

• There is no need to purchase an annuity untill you reach 75.

• In addition prior to taking an annuity, the fund can be made available to your beneficiaries

free of inheritance tax. • If you retire abroad you are able to move your SIPPS plan in to another jurisdiction using a QROPS scheme.

• Have a wide choice of investment options available to you creating greater flexibility.

• If you wish to choose early retirement, this will happen irrespectively of whether you remain

at work or not. • You may also benefit from staggered or phased retirement.

Further information on SIPPS can be found in the SIPPS guide.

QROPS (QUALIFYING RECOGNISED OVERSEAS PENSION SCHEME) QROPS schemes allow individuals to transfer their UK accrued pensions in to another jurisdiction when they retire abroad. An individual can qualify for a QROPS if they are between the ages of 18 and 75 and have retired, or

TAKINGTHE CONET URSOL AV IOF NGYO S TA U RX :F U T U R E A BEGINNER’S WHAT TO DO GUIDE TO TO TODAY S U CC TO E SL SE FU GL A LRLY E TAVOI I R E MD E NTTH PL I S ATA NX N I NG

are seriously considering retiring abroad to another country in the next 12 months. You must also have accrued a pension of over £75,000 and are planning to be overseas for 5 years or more. If you are planning to move abroad, a QROPS scheme can offer you greater benefits than by leaving your pension in the UK, including:

• The pension income is more tax efficient.

• You can take a tax free lump sum of up to 25%.

• There is a much greater investment freedom.

• Take income and benefits in the currency of your choice.

• All unused pension funds can be left to your beneficiaries.

• No need to take an annuity or pay a UK tax charge upon death.

Further information can be found in the QROPS guide.

HOW TO FIND THE RIGHT SOLUTION Although researching and investing in pension schemes yourself may seem like the best idea, sometimes it is just not practical especially if you are new to investing. You must also consider whether you will have the time and patience to make important decisions on your future. Retirement planning is essential, as is gaining valuable advice that will set you up for your retirement years. Help yourself by finding the right pension solutions for your circumstances. At the deVere Group we take positive steps to help you gain the most from your retirement planning with a group of professional retirement planners based globally. To find out more information contact us on the below details.

About the deVere Group The deVere Group is the world’s largest independent financial consultancy group. We work with international investors and expatriates to find financial services products that suit their medium to long term requirements for investments, savings and pensions. With in excess of US$7 billion of funds under administration and management, deVere has more than fifty thousand clients in over a hundred countries. Our independence and ability to offer financial products that are tailor-made to fit an individual’s needs are behind our success. As a result we now have offices in over forty countries. You can find us in Abu Dhabi, Brussels, Dubai, Geneva, Hong Kong, Johannesburg, London, Mexico, Moscow, Shanghai, Tokyo and Zurich, amongst others. The advice we provide is free and without obligation.

TAKING CON T R OL OF YO U R F U T U R E A BEGINNER’S GUIDE TO S U CC E S S F U L R E T I R E M E N T PL A N N I NG

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The companies below are part of the deVere Group: deVere and Partners (UK) Ltd is authorised and regulated by the Financial Services Authority (469151). deVere Recruitment Ltd (503055) are an appointed representative of deVere and Partners (UK) Ltd. deVere and Partners Investment Services (Pty) Ltd is an Authorised Financial Services Provider in South Africa. deVere and Partners (Belgium) BVBA is authorised by the Banking Finance and Insurance Commission (CBFA) in Belgium and registered on the intermediaries register under number 61476, category insurance brokers. The following group of companies operates under the same license in Belgium: - deVere and Partners (Cyprus) - deVere and Partners (Belgium) Limited BVBA, succursale Luxembourg S.a.r.l. - deVere Germany GmbH