Living Abroad: Pay NI or Private Pension Scheme?

MothBox

I'm currently living abroad and have signed up for voluntary NI payments in the UK. The voluntary payments are actually more than I would be paying if I was living in the UK so I've started to think about cancelling my voluntary payments and putting the money into a private pension scheme (based in the UK, probably with my bank).

I am payed in Hong Kong, taxed in Hong Kong, and pay the MPF (basically their form of pension but it seems works just as a manitory saving account really).

At present I have no intentions on returning to the UK, so I'm wondering if my money would be better off invested in a private scheme - if I was to make the decision to return at a later date I could start to pay it, and make up for the shortfall, or if I was to come back just before retirement I'd have a private pension to live off.

I'm currently 25, and have just started working after university, so I've only got a couple of years in my state pension from working before and during Uni.

Has anyone got any suggestions, experience, or is in a similar position?

bendix

I find it very hard to believe your voluntary payments are more thanyou would be paying if you were living in the UK. When I did the research on this, I was offered the chance to pay (I think) Class 2 or 3 payments only which amounted to the grand total of only £2-£3 a week.

shaun_from_Africa

I'm paying Class 3 voluntary payments, and the rate for this year is currently £12.05 per week.

This is far less than you would be paying if you were employed in the UK (unless you were on an extremely low wage).

If you're employed
If you're employed you pay Class 1 National Insurance contributions. The rates are:
if you earn more than £110 a week and up to £844 a week, you pay 11 per cent of the amount you earn between £110 and £844
if you earn more than £844 a week, you also pay an extra 1 per cent of all your earnings over £844.

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/BeginnersGuideToTax/NationalInsurance/IntroductiontoNationalInsurance/DG_190048

JOHNGT

You might not get tax relief if you pay into a UK pension. You are allowed to pay in £3600 gross a year and get basic tax relief in the 5 years after you were last tax resident in the UK. After 5 years, you don't get any tax relief which makes paying into a UK pension almost pointless.

See this from HMRC manual:

http://www.hmrc.gov.uk/manuals/rpsmmanual/RPSM13103020.htm

That said, I doubt that many UK pension providers will touch you because you are resident overseas, as there may be complex local laws which they may need to abide by e.g. you could be protected by Hong Kong law even if the seller is a UK pension provider.

Loughton_Monkey

Currently, a UK pension is actuarially 'worth' well over £100K provided you have the full 30 years. Typically it would cost around £110K to £120K to provide a CPI linked pension of £5,000 a year.

So at £12 a week, we are talking less than £20K in today's values - less, of course, whatever years you already have.

If you can find a better 'investment' than that, please let me know!

MothBox

For reference I think I pay voluntary contributions. Not sure what class, I got a letter a few days ago about the amounts changing. Its not assessed on my income. Looking at it now I think I'd probably be paying more if I lived in the UK, quick assessment, got it wrong.

I'm not sure if my bank would need to be concerned about HK laws. I'd be transferring money back into my UK account, and I'm still a British Criterion, and registered at a UK address.

Looking at what Loughton said, it does seem like quite a good investment. I suppose my concern lies in that if I was in the UK I'd have state and a private pension on the go. Here I do not.

Thanks for your replies.

Loughton_Monkey

MothBox wrote: »

Looking at what Loughton said, it does seem like quite a good investment. I suppose my concern lies in that if I was in the UK I'd have state and a private pension on the go. Here I do not..

Yes, despite its excellent 'value', it will only provide just over £5K in today's values. It would seem necessary to invest in a private scheme. But I was abroad for 6 years, in Asia, and saved huge amounts of money, but not in a pension scheme as such. There were no 'tax breaks' locally.

So basically I just accumulated offshore funds, which I could 'import' back to UK as 'cash'.

MothBox

I'm low down in my career, and working in construction the days of expat packages are long gone. There was talk of people being on 60,000HKD a month at my age when the airport and MTR was being constructed. 15 years too late! I'll be waiting more than a few years before I can pump sufficient amounts of money to be worth while into any sort of fund scheme.

I've got a few friends at various banks who invest small amounts of moneys into funds, I've never brought up the topic as I figured you'd really have to know what you're doing in order to properly invest, and be able to follow the market. However, it might be worth looking into.