Pensions vs Working Abroad

d4005 · 23 May 2008 at 9:32AM

I'm just wondering what I'll be entitled to when my retirement age creeps up on me.

I'm a UK Citizen, and spent the first 15 years of my working life living, working and paying taxes in the UK. Then I de-registered for tax in the UK as I went to live/work in Germany. I lived, worked and paid taxes in Germany for 2 full years. Then I moved to America where I lived, worked and paid taxes for 6 full years. The last move was back to Germany at the start of last year, so I've been living, working and paying taxes in Germany for the last 18 months. I'm expecting to stay in Germany until retirement age (unless I split up with my g/f, in which case I'd move back to the UK).

Does anyone know what my pension(s) situation will be, when I finally am eligible? During my 6 years in America, I earned myself some social security points, but I don't know if that entitles me to anything later. I won't be living there or paying any tax there, so maybe that itself means I won't be due anything. I'm wondering whether that will also be the case in England. If I'm not living there and paying taxes there, then maybe I'm due nothing (from the state) there either. That would just leave Germany, where I am living and paying taxes, but not being German I might be entitled to nothing here either.

As you can see, it's all a bit confusing. I'm assuming that at least my private/personal pension that I set up in the UK in the 90's will still pay me out regardless of where I'm living/taxing. If not, then I'll probably have to look into transferring it to a German private pension now.

EdInvestor · 23 May 2008 at 1:30PM

This may help you on the issue of extracting the company pension in cash - now potentially possible if you live abroad.

http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/04/22/cmabroad22.xml

Re the state pension I suggest you contact https://www.thepensionservice.gov.uk after October and ask for a pension forecast After 2010 the rules will change so that you only need 30 years' conts to get the full basic state pension, and you will probably have SERPS/S2P money on top of that.

Payments made in Germany would also be credited to you when you claim the pension, don't know about the US but almost certainly they would count as well..

If you already have 15 years of UK NI conts though, I would consider treating your UK pension as separate (at least from the German pension) and funding it up to the 30 years by paying voluntary class 2 NI contributions (organised via the Newcastle office of HMRC).

These are an abolute bargain at less than 10 quid a month.

When you consider that it would cost you 150,000 quid minimum to buy the basic state pension income on the open market, you can see the attraction. See if you can confirm they will credit you with the US conts as well, that would cut the voluntary funding down to 9 years..

The German pension is much more generous than the UK one IIRC, so best to keep it as a standalone.

d4005 · 23 May 2008 at 9:45PM

EdInvestor wrote:

This may help you on the issue of extracting the company pension in cash - now potentially possible if you live abroad.
http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/04/22/cmabroad22.xml

That's great - lots of possibilities there :j

EdInvestor wrote:

Re the state pension I suggest you contact www.thepensionservice.gov.uk after October and ask for a pension forecast After 2010 the rules will change so that you only need 30 years' conts to get the full basic state pension, and you will probably have SERPS/S2P money on top of that.

Payments made in Germany would also be credited to you when you claim the pension, don't know about the US but almost certainly they would count as well..

If you already have 15 years of UK NI conts though, I would consider treating your UK pension as separate (at least from the German pension) and funding it up to the 30 years by paying voluntary class 2 NI contributions (organised via the Newcastle office of HMRC).

These are an abolute bargain at less than 10 quid a month. When you consider that it would cost you 150,000 quid minimum to buy the basic state pension income on the open market, you can see the attraction. See if you can confirm they will credit you with the US conts as well, that would cut the voluntary funding down to 9 years..

So are you suggesting that even if I were to transfer my personal pension abroad, I could still do the UK NI class 2 contris for the state pension? Now I think about it, I actually had 16-17 years worth of UK contributions. So if I'm anyway 13 years away from possible retirement, then you're right, I might as well do it.

EdInvestor wrote:

The German pension is much more generous than the UK one IIRC, so best to keep it as a standalone.

I'll have to ask my German accountant what I'd be entitled to, assuming I continue to work here until retirement age. I wonder how my getting a UK state pension will affect that (if I'm entitled to one).

This does lead me to one further question though.

Suppose I get to 50, and I feel like retiring, but I can't technically retire because I wouldn't get anything from any state or personal pension. But, what if I just stop working anyway because I have enough money in the bank that I don't need to work to pay the bills. Can I do that ? Live off savings interest for 5 years, then officially retire. Will there be some kind of dispute about "what I've been doing for the last 5 years" ?

Ian_W · 23 May 2008 at 10:26PM

d4005 wrote: »

So if I'm anyway 13 years away from possible retirement, then you're right, I might as well do it.

Wooo, boy, not so fast. You only need 30yrs contributions from 2010 but you don't get a state pension until pension age which is 65 ATM but starts to increase IIRC from 2020 by a year each decade or so.

This does lead me to one further question though.
Suppose I get to 50, and I feel like retiring, but I can't technically retire because I wouldn't get anything from any state or personal pension. But, what if I just stop working anyway because I have enough money in the bank that I don't need to work to pay the bills. Can I do that ? Live off savings interest for 5 years, then officially retire. Will there be some kind of dispute about "what I've been doing for the last 5 years" ?

Nope, it's what rich folk do all the time, there is no requirement for you to work to any particular age providing you can keep yourself. As you anticipate probably still being in Germany it might be another question for your accountant to ensure you know the rules there are the same as here.

d4005 · 24 May 2008 at 12:10AM

Ian_W wrote:

Wooo, boy, not so fast. You only need 30yrs contributions from 2010 but you don't get a state pension until pension age which is 65 ATM but starts to increase IIRC from 2020 by a year each decade or so.

OK, but I would be entitled to a state pension if I live long enough to collect on it, despite having transferred my personal pension out of the country, as long as I pay the NIC contris ? It seems so far away when I start thinking of 66 or 67 :eek:

Ian_W wrote:

Nope, it's what rich folk do all the time, there is no requirement for you to work to any particular age providing you can keep yourself. As you anticipate probably still being in Germany it might be another question for your accountant to ensure you know the rules there are the same as here.

So there's no requirement to have been working right up to the point where I decide to make my claim on my private pension (if I still have one then). That's a relief. I expect this is what I'll do. I'll stop working around 50 and live off the interest on my savings, and then at some point later my pension(s) will become available.:D

seven-day-weekend · 24 May 2008 at 1:58AM

If you have paid 30 years worth of NI Contributions then you will be able to collect NI Pension at your State Retirement age, wherever you are in the world.

Some countries benefit from the annual pension increase that the pension gets every year, some don't. I think Germany does but I'm not sure about the USA.

You can stop working at whatever age you like if you live off your own resources. There are plenty of expats in their 50s here in rural Spain living off their savings. We live on my husband's Teachers' Pension which he was able to take at 55 and will get our State Pensions and my Local Government pension later.

EdInvestor · 24 May 2008 at 12:32PM

Some more details on QROPS transfers for expats. The Guernsey -based product sounds reasonably proced though I can't help thinking there will be quite a bit of development coming up in this area as people realise what can now be done, so better products may come along.

http://www.premierfinancialsolutions.co.uk/pensions/QROPS.html

To confirm there's no connectrion between what you do with your personal pension and your state pension - so if you pay up the relevant NICs, you will get it at your state retirement age, wherever you live. EU and US both get inflation upratings - it's primarily the Commonwealth countries that miss out..

d4005 · 24 May 2008 at 5:07PM

Can't believe how cool this site is. I'm learning tons. I always thought that when you start a private pension, then you're basically giving up the state pension. Something about SERPS contributions being routed into your private pension. I really am a newbie in all this stuff. So now I know, if I resume paying my NICs for however many years I need to (about 13 or 14) then a state pension becomes mine at 65 (well, we all know it won't be 65 by that time). Now I just have to work on living that long ;-)

seven-day-weekend · 26 May 2008 at 4:01AM

EdInvestor wrote: »

This may help you on the issue of extracting the company pension in cash - now potentially possible if you live abroad.

http://www.telegraph.co.uk/money/main.jhtml?view=DETAILS&grid=&xml=/money/2008/04/22/cmabroad22.xml

Re the state pension I suggest you contact www.thepensionservice.gov.uk after October and ask for a pension forecast After 2010 the rules will change so that you only need 30 years' conts to get the full basic state pension, and you will probably have SERPS/S2P money on top of that.

Payments made in Germany would also be credited to you when you claim the pension, don't know about the US but almost certainly they would count as well..

If you already have 15 years of UK NI conts though, I would consider treating your UK pension as separate (at least from the German pension) and funding it up to the 30 years by paying voluntary class 2 NI contributions (organised via the Newcastle office of HMRC).

These are an abolute bargain at less than 10 quid a month. When you consider that it would cost you 150,000 quid minimum to buy the basic state pension income on the open market, you can see the attraction. See if you can confirm they will credit you with the US conts as well, that would cut the voluntary funding down to 9 years..

The German pension is much more generous than the UK one IIRC, so best to keep it as a standalone.

Just to point out, this is the price for Self-employed contributions. Voluntary Contributions, which may be what the OP has to pay, are around £35 a month.

Still a bargain though, imho.

EdInvestor · 26 May 2008 at 12:18PM

seven-day-weekend wrote: »

Just to point out, this is the price for Self-employed contributions. Voluntary Contributions, which may be what the OP has to pay, are around £35 a month.

Expats can pay the bargain priced class 2 self-employed contributions as long as they are employed (not necessarily self employed).

It's only unemployed expats who have to pay the more expensive class 3 contributions.The logic behind this escapes me too.

seven-day-weekend · 26 May 2008 at 12:40PM

Ah! Thanks Edinvestor.

I only know that as a non-employed expat, I had to pay the Voluntary Contributions.

Having said that, some friends of mine who only said they were 'thinking of running a B&B' but then didn't do it, payed self-employed.

Maybe it depends who you get on the day!

Pensions vs Working Abroad

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