Help with retirement planning

lubylu2000

I am getting pretty confused with the best way to plan for my future retirement so would love it if someone could point me in the right direction.

I am not a UK resident but have recently found out that I can continue with class 2 NI payments (£2.70 a week) to entitle me to the UK state pension (I assume this is a good idea cos although I appreciate noone knows what will happen with state pensions it's very low risk). I will also be entitled to a % of an Italian state pension (I'm not sure how much this will be but I believe it's based more on final salary than a set amount) and a lump sum. However in both these cases I won't be entitled to anything until late 60s (and possibly even later.....). I can't imagine working until I'm 70 so need to plan how to try and bridge the gap between 60 and 70.


I've been unable to do very little in the way of pension planning so far but I have the following:

• A small police pension of approx £2000 p.a. that I should be able to get when I'm 60.
• £1000 in an Equitable Life pension (not sure when I can take that)
• I own a flat that I rent out - approx value £110000, mortgage outstanding £55000 over 15 years. It doesn't really make me any money per month, just the repayment of the mortgage.

I could start right away putting approx £150 per month to something but what?? Would it be worth my while just putting the money into paying off my mortgage sooner and then investing the rental income for a few years and then deciding around 60 years old whether to sell or keep the rental as my income?

I am trying to find out about private italian pensions but so far it would seem that you can only get a private pension that can't be touched until state retirement age which is not really what I'm looking for. (it's very confusing trying to understand it in a second language )

In the future I hope that once my 2 young children are a bit older I'll start earning a bit more and can put more away but for the moment I just want to get something started so I at least have a minimum worst case scenario. I do live with my partner but we keep our finances separate.

I'm a bit of a financial dunce so would love to know anyone's opinion on the best thing for me to do.

Thanks

atush

You will take your pension in the country you retire in, so your UK and italian contribs would be put together. So do look into where would be best for you to reside before retiring.

Further private pension arrangements should be made in your country of residence under the relevant tax law there. you will not be able to contribute to a private pension in the UK as you are not resident for tax purposes.

You can of course, save outside of a pension into equities and cash and other assets.

lubylu2000

Thanks for replying.

I've already enquired with HMRC and they have told me that if I have full contributions (currently 30 years) then I will receive a full UK state pension payable to me wherever I reside. I would also be eligible for an Italian pension depending on how many years I end up paying here. So effectively I could actually get 2 European state pensions (I specifically asked that and they said they weren't interested in what another country is giving me - if I'm eligible with the UK I receive the pension).

If I pay into an Italian private pension then I'm not allowed to access the money until state pension age and this is no good for me. What I'm trying to work out is what exactly I should invest in to give me an income for the gap years between when I want to retire (60) and when I will actually receive a state pension (around 68-69).

atush

Then I would say invest in equity based assets. In a tax deferred scheme such as ISas if Italy has that, and in theUK in a regular brokers acct if they don't.


You need to save in cash too, but cash these days isn't paying anything and some equities are, so that is where I would be- looking for capital growth alongside income.

Which currency to invest in will depend on where you think you will retire, and if you think the euro will prevail.

Perelandra

lubylu2000 wrote: »

Thanks for replying.

I've already enquired with HMRC and they have told me that if I have full contributions (currently 30 years) then I will receive a full UK state pension payable to me wherever I reside. I would also be eligible for an Italian pension depending on how many years I end up paying here. So effectively I could actually get 2 European state pensions (I specifically asked that and they said they weren't interested in what another country is giving me - if I'm eligible with the UK I receive the pension).

With the upcoming changes in the State pension scheme to the single tier system, you will need 35 qualifying years to get the full State pension, up from 30 as it is now. Interesting on the point around 2 European state pensions...

lubylu2000 wrote: »

If I pay into an Italian private pension then I'm not allowed to access the money until state pension age and this is no good for me. What I'm trying to work out is what exactly I should invest in to give me an income for the gap years between when I want to retire (60) and when I will actually receive a state pension (around 68-69).

In terms of tax-efficiency, for basic rate tax payers there would be no further tax to pay on dividend income- so if your pension options are too limited to be attractive for you then, as atush says, investing outside of a pension might be worth considering.

lubylu2000

Thanks.

I am interested that neither of you have mentioned repaying my mortgage sooner as an alternative to saving. Would this not be a good idea?

I will definitely check again re the 2 European pensions - it was what the advisor at HMRC said but I should make sure again really.

atush

No, we wouldn't as interest is deductable against the income for UK tax purposes.

What I would do, is if you own in italy pay off your own home mtg early.

lubylu2000

Thanks again. I will look into what you have suggested.