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It is all
too easy to put retirement planning to the back of your
mind, and when life is so hectic who has got time to think
about retirement in 20 or 30 years time.
The reality
is that it is best to take action sooner rather than later.
But how much do you need to save? That depends on the
following factors:
-
How
long you have until you retire
-
How
much income you need when you retire
-
How
much existing pension provision you have
-
What
other non pension assets you have
The short
answer to this question is “as much as you can afford”, and
the sooner you start the better.
Here’s two
examples which demonstrate why you should not delay starting
your pension. The examples assume both men want to retire at
age 55. They both contribute £350 per month. The figures
below show the possible results if the fund grew at 12% p.a,
which is not guaranteed and is just used to illustrate the
point. The figures below show the value of the £350 at
various ages.
|
Age |
Mr Smith
starts his pension at age 35 |
|
Age |
Mr Jones
starts his pension at age 40 |
|
|
|
|
|
|
|
40 |
£22,599 |
|
40 |
£0 |
|
45 |
£52,587 |
|
45 |
£22,559 |
|
50 |
£92,718 |
|
50 |
£52,587 |
|
55 |
£152,280 |
|
55 |
£92,718 |
The
comparison above shows that Mr Smith started his pension
five years earlier, and has paid in £21,000 more than Mr
Jones. But Mr Smith's fund, is now worth £51,542 more than
Mr Jones'. This demonstrates the effect of "compounding" -
getting growth on the growth.
The advantages of an offshore
pension:
-
Greater
flexibility than onshore pensions
-
No
minimum age at which you can take benefits
-
The
whole fund can be taken as a lump sum
-
You
don’t have to buy an annuity with the proceeds when you
retire
-
Offshore pensions benefit from tax-free growth
So your
money is not tied up until you’re 50 or 55, you can take the
benefits when you want, and in whatever format you want.
Pension
investment options
Once you
have decided to take out a pension, then you need to decide
on the underlying investments. The pension can be invested
in low risk to high risk investments, and the choice is
yours.
In fact you
have the same investment choices and fund options when
investing in a pension as you do when looking at any other
type of investment. See
investments
for expats for more details on the underlying assets
such as equities (shares), property and fixed interest.
Additionally when deciding on the underlying funds it is
important to remember how long your money is to be invested.
If you’re normally quite cautious with your investments but
have say thirty years until you retire, then you should
consider being more adventurous with your fund selection.
If you want
to know more about saving for your retirement, then contact CLR
Overseas, independent financial advisers for
expatriates,
free and without obligation on +357 22 898684 or
contact
us online.
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