Expats in Oz want to come home-can we afford it?

Tassie_Devil

We've been in Australia for the last 15 years and have based all our retirement planning on staying here, but recently we've started to think about heading home in 3 years.

I think if we did, we'd want to make a clean break and leave nothing here-one option is to leave our superannuation funds here, leave an Aussie bank account open to pay our pensions into, and operate everything online, but something feels a bit off about having all your net worth on the other side of the world-however the advantage with this is that investment earnings within the super fund are free of tax once you retire, and income stream payments once you start to take a pension are also tax-free in Oz, but obviously taxable in the UK once we return.


So what we're exploring at the minute is cashing everything in, selling our house, and arriving back with a bucket of cash and setting up again.


Assuming we bought a house that would leave us with a pot of around £1.1m to invest and live off. As we've been abroad, we have neither SIPPs nor ISAs so nothing would be sheltered in those.


I've been doing a fair amount of reading about investment strategies, and various things seem to be feasible e.g. the basket of 7 Investment Trusts, or a simple Vanguard portfolio of a global equities tracker plus a global bond fund.

What we can't decide though, will that be enough capital? Given that the big unknown is life expectancy, I think it's reasonable to look at a 30-year timescale.

On our return , I'd be 67 and would receive my state pension of approx. £8k straightaway; my wife would be 7 years away from getting her state pension. If we want a total income p.a. of say £35k in the first year, do we have enough money taking inflation into account, or is this a non-starter?


We'd like your thoughts, and any better investment strategies you can suggest.

jamesd

Please read my initial posts in [URL="https://forums.moneysavingexpert.com/discussion/5466114safe withdrawal rates[/URL]. That will give you the tools to determine the prudent initial income to take and explain why claiming your state pensions on the earliest dates is likely to be unwise.

You might get some extra relevant replies by editing your post, clicking on advanced and mentioning Australia in a revised title.

If your state pension would be only 8k you can probably increase it by buying more years.

You have far more money than is needed for 35k. Using the Guyton-Klinger rules that vary income based on the times you end up living through starting on £71,000 is more like it. That includes both state pensions, or deferring for a while, as well as margin for 7 years. It assumes you're content to build a gradual drop to around 65-70k in your 90s into your plans. More than 71k is doable if you're willing to plan for bigger drops later.

Tassie_Devil

Thank you for your reply, title edited.

tempus_fugit

I may be missing something here, but would the OP be entitled to a full state pension bearing in mind they will have been living in another country for 18 years?

Apodemus

tempus_fugit wrote: »

I may be missing something here, but would the OP be entitled to a full state pension bearing in mind they will have been living in another country for 18 years?

I nearly posted the same question, but if the OP is currently 64 and left UK at age 49 (as the post suggests), then they could feasibly have 33 years of contributions, which would probably put them into £8k territory as suggested (but not necessarily “full state pension” which you mention).

finance101

are you aussie citizens? Not sure if it applies post preservation age but if you are it can be hard to relocate super outside Australia. Tbh despite the issue about it being on the other side of the world I don’t see why you could not follow the same investment strategy within your Aussie super wrapper. Many banks and investment companies are global- you can buy Vanguard in Aus and UK. and given the sums involved I would be getting tax advice about how best to do this and build assets in the UK in ISAs etc over time.

jamesd

tempus_fugit wrote: »

I may be missing something here, but would the OP be entitled to a full state pension bearing in mind they will have been living in another country for 18 years?

A person could easily have accrued up to and above the single tier cap level because of the earnings-related part of the old system.

A person abroad or on returning to the UK could buy at least the past six tax years worth to get up to the single tier maximum.

The International Pension Centre can tell people what to do and how, to help them get to the maximum possible. Anyone abroad who hasn't yet accrued up to £168.60 a week, £8767.20 a year, should contact them to find out how to get that much.

It wouldn't be possible to get to the around £300 maximum state pension*, though, because that requires a full work history as a high earner, the earnings-related part not having a cap on the number of years until further earning-related accrual ended on 6 April 2016.

*inheritance and deferral can go higher than this but inheritance doesn't apply in this case

Tassie_Devil

OP here.



When I left the UK, I had 27/30 years of contributions under the old system, now 27/35. I can top up to 35 years by buying 3 years worth of pre-2016 contributions and 5 years of post-2016 contributions, giving me a maximum of £8633.02 p.a.

happyandcontented

jamesd wrote: »

A person could easily have accrued up to and above the single tier cap level because of the earnings-related part of the old system.

A person abroad or on returning to the UK could buy at least the past six tax years worth to get up to the single tier maximum.

The International Pension Centre can tell people what to do and how, to help them get to the maximum possible. Anyone abroad who hasn't yet accrued up to £168.60 a week, £8767.20 a year, should contact them to find out how to get that much.

It wouldn't be possible to get to the around £300 maximum state pension*, though, because that requires a full work history as a high earner, the earnings-related part not having a cap on the number of years until further earning-related accrual ended on 6 April 2016.

*inheritance and deferral can go higher than this but inheritance doesn't apply in this case

How is that done? I thought the maximum was around £168?

p00hsticks

happyandcontented wrote: »

How is that done? I thought the maximum was around £168?

The maximum for the new State Pension is £168 - but anyone working prior to 2016 and contracted in could have accumulated additional pension (SERPS or S2P) and so have a greater starting amount (even £300+) which is protected under the transitional rules

jamesd

happyandcontented wrote: »

How is that done? I thought the maximum was around £168?

That's the single tier cap after which you stop accruing more from 6 April 2016.

Those who reached their state pension age before then are on the old system which was 1/30th of the basic state pension per year capped at 30 years plus uncapped earnings-related part on roughly up to the higher rate income tax point. You could contract out of almost all of the earnings-related part. The BSP gets triple lock, the rest CPI.

Everyone not yet at state pension age had their old rules and new rules amount calculated as of 6 April 2016 and the higher one used as their foundation amount. New accrual adds to that if they haven't reached the cap yet. Amounts over the cap are retained but increase with CPI instead of triple lock.

The maximum is what a lifelong high earner could accrue under old rules. On top of that much of the extra can be inherited by a spouse under old rules and old rules deferral adds 10.4% a year. Which means I wouldn't be surprised to see a few state pensions above £1,000 a week.

Deferring under new rules adds 5.8% per year not inheritable and tends to be a good move for those of normal life expectancy without ample guaranteed income.