Best way to save for retirement outside UK

Cap_Scarlet

Sooooo confused and could use some advice.

I am a UK citizen but have not lived in then UK since 1999. I am currently 45 years old but with no great retirement provision. I am quite lucky in that I have a decent salary (last year in excess of €500,000 gross).

I have some money in the bank but that largely offsets the mortgage on my house so net net I probably would have only about €200,000.

No great pension savings . what is the best way forward?

CLAPTON

save more
consider what tax incentives there are in whatever country you live

bendix

Cap_Scarlet wrote: »

Sooooo confused and could use some advice.

I am a UK citizen but have not lived in then UK since 1999. I am currently 45 years old but with no great retirement provision. I am quite lucky in that I have a decent salary (last year in excess of €500,000 gross).

I have some money in the bank but that largely offsets the mortgage on my house so net net I probably would have only about €200,000.

No great pension savings . what is the best way forward?

For goodness sake. You earn over half a million Euro a year, and you're 'sooooo confused'?

Pull yourself together and just save more. It's simple, isnt it?

Cap_Scarlet

Thanks for the sage advice and wisdom - of course you are right and I should stop moaning.

I guess the real question is how much money I will need when I retire - having had a number of years of no money concerns when I look at my regular outgoings it is quite scary. What I don't know at the moment is how much of those expenses will fall away.

I have bits and pieces of pensions - I have a non-contributory pension with my current employer which, were I to retire at 55 (my goal) would yield about €2,500 a month (from age 62).

Then I have an old final salary scheme which I left about 10 years ago after 5 years in the scheme) - question: How do final salary schemes calculate the amount due to you if you leave the scheme? That was a UK scheme and I am guessing will be worth about €10,000 a year (again from age 62).

Then I have an early retirement scheme. I don't really understand this one. I currently pay in about 5% of my gross earnings and the scheme mutliplies that by a factor to get the amount in the fund. Currently I have around €180,000 in the fund. If I contribute for another 10 years it will add about another €500,000 to the fund. The fund pays out over a period of 5 years starting from age 60 which with 4 equal instalments of 7% of capital and then lump sum of the balance in year 5. So assuming I can work for another 10 years then that would be about €50,000 per year plus a lump sum of about €500,000 after 5 years.

So I will be alright for ages 60-65 then the question is rather how to fund the interim years before the pensions kick in (ages 55-60) and then will I have enough after age 65. Although the bigger question is COULD I retire at 50?

I gues I will have to sit down and plan through some things ........and hope I don't get the sack between now and when I am 55

Annisele

"How much money will I need when I retire" is one of those questions that can't really be answered by somebody who doesn't know you.

I know I'd manage absolutely fine by spending the €200,000 of savings between the ages of 55 and 62 (7 years at about €28,500 pa), and then living off the €2,500 a month (€30,000 pa) from then on. But - and it's a *big* 'but' - I don't earn anywhere near €500,000 a year to start with, so I wouldn't have to cut back much to live off €30k.

If you're wanting to replace your current salary, then you'll need a *lot* of money to retire at 55. This is only indicative, but the FSA best buy tables show that a male aged 60 would get an income of about £600pa for every £10k of pension (without a guarantee or indexing). With 5% pa escalation, £10k would buy that same 60 year old about £300 pa of income.

So, as a very very rough back of the envelope calculation which completely ignores tax, the fact you're not even in the UK, the fact you are aiming to retire at 55 and not 60, contribution limits to pension schemes/lifetime allowances and many other very relevant things: if you were to use a lump sum saved in a pension in order to buy an annuity, you'd be looking at needing a lump sum of between 20 and 35 times your annual income, or €10 million to €17.5 million - and you'd need a lot more than that to cover retirement at 55 rather than 60. Even with a salary like yours, I doubt you can save that sort of money in seven years!

So - when does your mortgage finish? Do you have any other debts or commitments, and will you still be liable for them after the age of 55? If so, can you do anything about paying them off early?

So far as your UK final salary scheme is concerned, €10,000 pa from 62 sounds rather high if you only paid into it for five years - but on the other hand I guess your income was on the high side at the time. The quick answer to "how is the amount due to you calculated" is that they use an actuary; the long answer is pretty long! In your shoes I'd contact the scheme administrators and ask for a forecast.

I'd also suggest you find yourself a financial adviser. For the sums of money you're talking about, I think it would be well worth getting advice on your particular circumstances, rather than ramblings from unknown strangers who don't even know which country you're in, let alone have detailed knowledge of the tax incentives/pension savings schemes available in that country!

Cap_Scarlet

Thanks for that. I am currently living in Germany. I should mention that I have only been at the income level for the last 3-4 years.

My mortgage is about €450,000 and I expect to pay that off as soon as the current fixed rate deal expires (in about 4 years). As I mentioned I have the money in savings to do that but I would pay an enormous penalty now if I paid it off. I don't have any other debts. My main expense at the moment (other than the house) is two children in private school / university which collectively consumes about €50,000 net per annum. That will likely to continue for the next 4-5 years at least.

In terms of other outgoings, I guess on average we consume about €7,500 per month excluding the mortgage and the school fees and I expect in retirement I would probably like to have a net income somewhere in that ball park i.e. about €75-90,000 per month which I think would be a decent lifestyle.

As regards the defined benefit plan - I calculated it based on the following (all figures are in GBP). At the time I left the scheme in 2001 I had a salary of 90,000 and the scheme suggested a full pension (62% of that figure after 31 years contribution) at 54,000. I took my 5 years contributions divided by the 31 years and came up with 8,800. Of course I might be completely wrong.

You are right - I need independent financial advice but I am interested in other peoples thoughts and views before i take the plunge.

bendix

Cap_Scarlet wrote: »

Thanks for that. I am currently living in Germany. I should mention that I have only been at the income level for the last 3-4 years.

My mortgage is about €450,000 and I expect to pay that off as soon as the current fixed rate deal expires (in about 4 years). As I mentioned I have the money in savings to do that but I would pay an enormous penalty now if I paid it off. I don't have any other debts. My main expense at the moment (other than the house) is two children in private school / university which collectively consumes about €50,000 net per annum. That will likely to continue for the next 4-5 years at least.

In terms of other outgoings, I guess on average we consume about €7,500 per month excluding the mortgage and the school fees and I expect in retirement I would probably like to have a net income somewhere in that ball park i.e. about €75-90,000 per month which I think would be a decent lifestyle.

As regards the defined benefit plan - I calculated it based on the following (all figures are in GBP). At the time I left the scheme in 2001 I had a salary of 90,000 and the scheme suggested a full pension (62% of that figure after 31 years contribution) at 54,000. I took my 5 years contributions divided by the 31 years and came up with 8,800. Of course I might be completely wrong.

You are right - I need independent financial advice but I am interested in other peoples thoughts and views before i take the plunge.

Other people's views are worthless. We don't know the ins and outs. You are a high earner and you should most definitely see a financial planner. What do you have to lose?

ninky_2

i'm interested to know what sort of job pays out half a million euro a year to someone so...i can't think of an adjective that doesn't sound rude. basically, what is your secret?

Cap_Scarlet

ninky wrote: »

i'm interested to know what sort of job pays out half a million euro a year to someone so...i can't think of an adjective that doesn't sound rude. basically, what is your secret?

I am a (don't laugh) accountant.

It is not a question of being stupid its just (and I am not being arrogant here), when you have plenty of cash you just don't think about it. I am getting older so now I have to think about it.

........simples :EasterBun

ninky_2

Cap_Scarlet wrote: »

I am a (don't laugh) accountant.

:beer:best laugh i've had today!

i suspect you are UAW (see the link for explanation). sounds like you'll be fine though despite being rubbish with money.

http://en.wikipedia.org/wiki/The_Millionaire_Next_Door

Cap_Scarlet

ninky wrote: »

:beer:best laugh i've had today!

i suspect you are UAW (see the link for explanation). sounds like you'll be fine though despite being rubbish with money.

That is actually quite funny (and uncomfortably close to the truth). :eek: ........in fact I do own a Mercedes and spent hours deciding on it!