Flexible pension plan or buy 2nd property?

Bigmoe

Male.


British citizen.


Married to an Indian national.


Age 37


Born, Scotland


Working overseas since 2003.


Mortgage on house in UK – Paid. Value approx, 100,000 UKP


Savings – Current account – 70,000 UKP


Standard ISA – 40,000 UKP


Yearly wage before 2003 – 10,000 UKP


Current yearly wage – 40,000 UKP


Debts - zero

Hi everybody.
I’m looking for advice on pensions/retirement plans.
As you can see from the above info, I’m currently living & working in Asia and have only been returning to the UK for Asian visas for a few weeks of the year, every year since 2003. Prior to this, my employment was mainly temp jobs and driving work (deliveries – not golf). Since 2003 I’ve landed a plum job which has allowed me to save quite a bit and pay off my mortgage at home. I can see this job lasting another 2-3yrs and then it’ll be back to blighty and back to the low wages again.

Due to the forthcoming drastic change in salaries (40,000 back down to 10,000) I’m really not sure where to look for my retirement funds.

Obviously since I’ve been working overseas, my tax and NI contributions have been zero, so I’m guessing a state pension is not an option even though I paid tax and NI from 1990 through until 2003 (with a couple of brief spells of income support).

My ISA with RBS is topped up every year.


My savings will be enough in 2yrs that I can buy a 2nd house/apartment outright or get a flexible mortgage for something bigger and rent it out.

So,
Do I use my savings and buy a 2nd house to rent?



Do I take out some form of pension which has flexibility in its payments – Does such a pension exist?


Do I top-up my state pension – Is it even an option?


On the off-chance that I do get another job overseas some time in the future, is there an option which will take this into account?





Sorry for all the questions, but I really have no idea where to start with all of this and the big four-oh is imminent. I know I should've started this years ago but it was always difficult to get advice from somebody who wasn't trying to sell me something.
I leave myself in your capable hands. :grouphug:


TIA,
Moe.

dunstonh

My ISA with RBS is topped up every year.

Are you a UK resident for tax purposes?

Do I take out some form of pension which has flexibility in its payments – Does such a pension exist?

They exist but it sounds like you are not eligible to pay into UK pensions and ISAs.

Bigmoe

I'm a UK citizen through birth.

I've been paying into that ISA since I left school and got my first job in the YTS.

jamesd

Citizenship doesn't matter. It's against the law for you to make payments into an ISA unless you are a British resident. Same for UK pensions. Since it appears unlawful for you to use the ISA or pension that leaves property or investments outside tax wrappers.

Topping up the state pension is possible whether you're resident or not but it's not worth doing at the moment because you aren't eligible for the earnings-related part (S2P formerly SERPS) unless a UK PAYE employee and the basic state pension only needs 30 years counting to get the maximum payment.

You currently qualify for 14/30ths of the basic state pension and seem to need just 16 more years with at least 30 more years to go to accumulate them. You don't need all 30 years to get anything, you'd get about half of it paid already.

You should be using term deposit accounts for the cash, not a current account. If you're not a British tax payer you can ask for gross interest then report that income wherever you're paying tax.

Given the ownership of a property in the UK I'm not sure that you're not actually required to pay UK tax. Your domicile is clearly the UK and citizenship, ownership of UK property, use of UK bank accounts are all relevant to that.

Time for you to chat with a tax expert to sort out your situation. HMRC operates a number of schemes that can take care of any owed tax with minimal or no penalties, like the Liechtenstein Disclosure Facility.

dunstonh

I'm a UK citizen through birth.

This is the UK. Not the US. Taxation is based on residency in the UK (exceptions apply).

I've been paying into that ISA since I left school and got my first job in the YTS.

The minute you became a non-resident you should have stopped paying into the ISAs. You have effectively committed tax evasion. Your ISA applications have a simple declaration that ask you to verify that you are a UK resident for tax purposes. Sooner or later HMRC will find out. Tends to be many years later.

Also, most countries do not recognise other countries tax wrappers (with the exception of pensions in some cases). So, depending on the tax laws of the country you are resident in, you may have to pay tax on the interest earned on the cash ISAs. Again, you may have committed tax evasion in your country of residence.

Bigmoe

Ok. Good info there.

I'm surprised to hear about the ISA. I go into the bank every year to pay into it and nobody has mentioned my ineligiblity before. I guess they're too busy offering me useless tat in exchange for me moving into a higher interest savings account.

There's not much I can do about the state pension thing from here (India) so I guess that'll have to wait until I finally return to the UK.

So that leaves property investment as my best bet. Or investing outside of the UK.

Yup. Sounds like I need to chat with somebody who can clarify my exact tax situation.

Thanks.

Bigmoe

I'll get my ISA money moved into my deposit account ASAP.

jamesd

Good news on India is that there's a tax treaty between India and UK that will probably mean that you don't have to pay tax twice on the same money. You'd end up paying it in India probably then paying any extra to the UK if that turns out to be lower than the UK level. But you still might not be subject to UK tax, really takes more than a quick discussion here and there's enough money involved for it to be worth professional advice.

I doubt that you'll have a big tax bill to pay. More likely a chance to sort things out so you don't get a nasty surprise in a few years with HMRC trying to claim tax on everything.

Bigmoe

That sounds like a plan.

My employers here in India pay tax on my wages, but I'm guessing that it won't help any with the tax on my savings in the UK (will it?).

A tax treaty between India and the UK - Maybe I'll get back some of the billion pounds in unwanted aid which we've given them. :rotfl:

atush

Don't close your old ISAs from 2003 and before. As long as you contributed when resident in the UK, those can stay. Put the rest into a high interest savings acct.

You need a pension, but I'd be inclined to stay in GBP cash and funds until you return then start contributing.

Why will your income go back down to 10K? Haven't you gotten good work experience from the job in India that can be used in the UK?

You can make NI contributions while abroad. Contact the Dept of work and pensions.

fairleads

Bigmoe wrote: »

Do I top-up my state pension – Is it even an option?

I'm sure it still is an option, through voluntary class 11 contributions. Further, it may still be possisble to back pay some of the missing yrs. In addition, come retirement, your wife will also receive a small pension based on your contributions alone.