6 Top Tips 💡

Much has been said of the “ticking time bomb” of British pensions in recent months, with experts predicting a full-blown UK pension crisis. 

So why is there a UK pension crisis? 

The pension crisis has been brewing for a while. The fact that Brits are living longer, not saving enough and, in some cases, accessing their pension early, is proving problematic.

Add to that the end of final salary pensions and a lack of awareness around the benefits of saving from an early age, and it’s not hard to see why Brits are being caught short.

How to avoid pension problems

Thankfully there are lots of things you can do to protect yourself from a shortfall in retirement. For when it comes to managing your pension, knowledge really is power and it’s never too late to start saving. Locating & protecting assets you may have already built up should also be considered, as most of them you may not even know exist!

Here are six things you can do now to avoid pension problems in the future.

1. Find your old pensions 

'Out of sight, out of mind' doesn’t work so well for pensions as lots of things can happen over time to affect the size of your pot such as records being lost and high fees wiping out your pension - especially hard to keep on top of while living abroad. Feel free to utilise our complimentary pension tracing service if this is of interest. Leaving them where they are could end up costing you dearly. 

Furthermore, transfer values have rocketed due to record low interest rates, placing the burden on schemes who rely on such returns to fund the member's annuity. Where a few decades ago they could have parked 300,000 GBP, say generating 5% growth of 15,000 GBP a year to fund someone's pension, now with interest rates of a measly 0.75% this amount has to increase just under a whopping seven fold to 2,000,000 GBP. 

This incredibly large liability is of course something companies want rid of which makes these massively enhanced transfer out values start to look actually quite logical. With interest rates slowly on the rise again however, such high valuations won't be around forever. This should however be assessed on a scheme by scheme basis as not all pensions were created equal of course!

If tracking down any old long-forgotten pensions doesn't sound like the most fun way to spend your weekends in another timezone, just ask - my team do it for a living! Rockstar we know..

2. Calculate how much to save into your pension 

How much you’ll need to save into your pension depends on a lot of things, including your salary and how long you have left to save.

Online pension calculators will help you figure this out based on your current age, how much you already have in savings, plus the age at which you’d like to retire and how much you’d like to get each year.

Let’s say you want to retire at 65, with a retirement income of £30,000 a year. These online resources may tell you how much you’ll need to save each month to reach your £30,000 target. Get in touch if you would like a link to one or would like just to break down the simple maths together.

3. Make regular contributions to your pension

It’s widely believed that retirees will need around 70% of their salary to live comfortably in retirement so don’t underestimate how much you’ll need to save. 15% is a good portion of your salary to set aside for retirement, but don’t forget that this amount will need to increase the later you start saving.

Try and save the maximum amount that you can comfortably afford on a regular basis and if you come into any extra money, try and save some of that too.

For those living in the UK, from 6 April 2018 the employer is required to pay a minimum of 2% of your qualifying earnings into your pension. Some employers may also offer what’s called contribution matching, where increasing the amount you save into your pension will encourage your employer to pay more in too. As typically we do not have this luxury as expats, we must take this into our own hands though. This isn't all bad news though, being non UK-based comes with flexibilities and choices much more enhanced than those available back at home.

4. Don't put off saving into a pension (or setting up an international one of your own as an expat!)

We know that saving your hard-earned money for a rainy day can be painful, especially when there are so many fun things you could be doing with your cash instead. We’ve heard all of the excuses why people don’t save – from being too young to wanting to live in the moment instead – yet these are the very reasons why Brits are suffering.

Pensions aren’t supposed to be sexy. They’re practical and essential to protecting yourself in old age. They can help you achieve the fantasy lifestyle you’ve always dreamed of having or they can leave you facing the reality of life on the breadline. Building a decent pension isn’t a choice as much as it is a necessity to maintain the lifestyle you’ve become accustomed to in your working life.

The sooner you start saving the less painful it will be. Data from Scottish Widows shows that the amount you’ll need to save to draw an annual pension of £23,000 increases significantly the later you leave it.

At 25 you’ll need to save just £293 a month, rising to £443 a month at age 35. Wait until you’re 45 and you’ll have to part with £724 a month and a whopping £1,445 aged 55.

5. Combine all of your pensions into one pot

If you manage to track down some of your old pensions you’ll have several pension transfer options, including transferring them all into one pot. It’ll make it much easier for you to manage your pension and see what’s going on, as well as reducing the fees you pay on each individual pot.

With new App-based Financial Technology, or 'FinTech' available, this pot can now be monitored on your phone at your finger tips. You can see how close you are to reaching your savings target and ensure your savings are growing in the right direction.

6. Don’t rely on the State Pension

The way things are going you’re unlikely to draw your State Pension until your late sixties, so you’ll need to consider what you’ll live off if you need to stop working before then. By the end of this year the State Pension age will become 65 for men and women, rising to 66 by 2020 and 67 between 2026 and 2028.

To qualify for the full State Pension you’ll need to have paid National Insurance Contributions for at least 35 years. And even then the total amount you’ll receive is just £8,296 a year – a long way from the amount you’re likely to need.

The future of pensions...

Even though the future of pensions in the UK seems uncertain, you can protect yourself by following the simple tips above and by managing your pension more efficiently.

On one hand the government’s struggling to regulate the State Pension age and as the population continues to age, it’s perhaps inevitable there’ll be more rises in the future, along with increased tinkering to the triple lock.

Yet, on the other hand, the government’s Auto Enrolment scheme has been hugely successful in ensuring Brits have a workplace pension that they can access from the age of 55. And with minimum contributions for employees and their employers set to rise to a total minimum contribution of 8% by April 2019 things are moving in the right direction. Well at least that's the younger generation sorted..

How are you protecting your UK-based pension assets? 

Get in touch if you would like help with any of the above topics & we can arrange an informal chat; I'd love to see how we can help you.

Complimentary UK Pension Review Now Available for all East-Asia Expats.

Utilise our complimentary pension tracing service if you are also interested in receiving a simple breakdown of the following:

✓ Full valuation of all schemes; occupational or private✓ National Insurance Contribution status (£8,296 per annum available)✓ Legal entitlements (significantly enhanced as now a non UK tax-paying resident)✓ Debt level/solvency of scheme✓ Current/past fund performance✓ Current death benefits (how much is passed to whom upon death)✓ Guaranteed minimum pension (GMP)

Unfortunately with the UK pension system now at a staggering 2.3 trillion pounds in debt (3 billion shy of the UK's GDP), exploring how protect your entitlements from any losses & take advantage of being non UK-based is something strongly encouraged. 

Simply click below to find the form needed to get the ball rolling - Full review currently an entirely complimentary service for East-Asia based expats.