What are the best Pension Options both UK and Worldwide?

MikeGreo

Hi,

I am currently in a position where I can move countries and live and work anywhere.

My question is what are the best options to maximize pension savings?

What countries provide the best pension plans? How does the UK pension compare to the rest of the world?

Are there any private pension plans that one should consider that could even be better than the government pension plan?

I am all up for suggesstions so lets get the ball rollin.

El_Torro

A quick Google search tells me that the UK state pension isn't great, when compared to other Western European countries. If you want a good state pension then move to The Netherlands.

Of course when looking at this it's also important to look at private pensions, how they work and how much of a tax break they provide. In my view the UK currently has some pretty generous incentives to put money into a private pension. I don't know how this compares to other developed countries though. 

Having said that I personally wouldn't base my decision on whether to move abroad on the generosity of pensions, at least it wouldn't be a major factor for me. 

If you want to move to a country where the purchasing power of your salary stretches as far as possible then the US isn't a bad place to look. As we know though the US leaves a lot to be desired in terms of social security (healthcare, benefits, etc..).

JoeCrystal

It depends on which country you are heading to. Having said that, it is important to keep on paying the voluntary NI contributions, so you still accrue the UK state pension at an outstanding rate.

I always thought that Singapore would be a good model of saving up for homes, retirement, and healthcare since they got a special account for each section, although they have their limits.

dunstonh

A quick Google search tells me that the UK state pension isn't great, when compared to other Western European countries. If you want a good state pension then move to The Netherlands.

That is not the full picture though.   The UK system has a relatively low state pension but it is topped up with benefits elsewhere (some of which are means tested) which actually make the UK position more favourable.

What countries provide the best pension plans? How does the UK pension compare to the rest of the world?

If you are looking at state pensions then that isn't really a way to plan your life.  If you are looking at investments then most countries have various tax efficient schemes that can be utilised.

bostonerimus

It's difficult to compare the value of state pensions across countries because of the varying payments, social security taxes and what those taxes fund. However, the OECD did an analysis and for state pensions the UK came close to the bottom of the table of OECD countries when you looked at the percentage of the average earners income that the state pension replaced. I know that in the US 6.2% tax is paid by the employee on earnings up to $137k to fund US social security. I have 20 years of US contributions, but based on only those contributions my US SS will be twice as much as my full UK flat rate state pension. However, my UK flat rate state pension is the best value for money of any of my pensions because the vast majority of my contributions were Class 2, so like I said, comparisons are difficult.

The UK does have very generous dividend and capital gains allowances and also plenty of tax advantaged ways to invest...the ISA is amazing. So if you earn enough to take advantage of those the UK is pretty good. But if you are a low earner the UK pension system isn't very good to you.

[Deleted User]

Median disposable income is a good measure for such inter-comparison.  Luxembourg comes top, by a large margin. Then Norway, US, Switzerland and Canada followed by a bunch of EU countries.  Australia and UK come surprisingly low but things may have changed since 2012. 

 https://www.forbes.com/sites/andrewbiggs/2016/07/20/u-s-retirees-rank-third-in-income-third-in-happiness-ill-call-that-a-win/?sh=28b425774701

Of course individual results will vary. A lot depends on your income level and on your age.  

bostonerimus

Deleted_User said:

Median disposable income is a good measure for such inter-comparison.  Luxembourg comes top, by a large margin. Then Norway, US, Switzerland and Canada followed by a bunch of EU countries.  Australia and UK come surprisingly low but things may have changed since 2012. 

 https://www.forbes.com/sites/andrewbiggs/2016/07/20/u-s-retirees-rank-third-in-income-third-in-happiness-ill-call-that-a-win/?sh=28b425774701

Of course individual results will vary. A lot depends on your income level and on your age.  

The 2017 OECD report confirmed that the UK is at the bottom when it comes to pension provision. The state pension is  very low when compared to other OECD countries. Here is a summary.

https://www.choose.co.uk/news/uk-state-pension-lowest-of-all-oecd-nations.html

If you are an average or low wage earner you will probably be worse off in retirement in the UK than in most other OECD countries, but if you are well paid you can take advantage of ISAs and SIPPs.

dunstonh

The 2019 OECD report confirmed that the UK is at the bottom when it comes to pension provision. The state pension is also low when compared to other OECD countries.

The median disposable income in the OECD data wouldn't include ISAs, GIAs or investment bonds or personal savings.  It is purely pension.  A lot of people use those other wrappers/methods for income provision in retirement.

Plus, the UK has pension credits and other benefits to top up the state pension. So, its not quite as low as it looks when you look at ALL things rather than a selected sample.

eskbanker

MikeGreo said:

What countries provide the best pension plans? How does the UK pension compare to the rest of the world?

Are there any private pension plans that one should consider that could even be better than the government pension plan?

Without any knowledge of your age, earning potential, etc, the impression I have from your OP is that you're relatively young and probably relatively well paid, which probably suggests that focusing on state pensions would be a mistake and that private provisions are likely to be more significant to your post-retirement wealth?  I'd echo the comments by others that state pension provision would be an odd choice as a significant or even primary factor in choosing where to live, so would suggest that you try to come up with a view about what funding you'd wish to have in place for your retirement and work back from that....

Thrugelmir

Deleted_User said:

Median disposable income is a good measure for such inter-comparison.  Luxembourg comes top, by a large margin. 

That's hardly surprising given it's population size. Monaco where no one pays income tax is probably even higher. 

Malthusian

MikeGreo said:

My question is what are the best options to maximize pension savings?

Probably the country with

1) the highest earning potential

2) the lowest cost of living

3) the lowest tax burden

in decreasing order of priority.

As others have said, comparisons of different countries' pension systems are usually meaningless (and often focused on proving the conclusion they started with, that the UK is awful and hates its pensioners). They generally ignore private provision and non-pension savings.

So the country that is best for your future retirement provision is probably the one where you will earn the most and have the most left over to save for retirement after paying taxes and cost of living. There will be differences from country to country in how generously they treat people saving for retirement, but I doubt the differences are large enough to outweigh the first two factors.

Your eventual retirement depends not just on the tax system in the country you will be living in but on the tax system applicable when you retire. There is however no tax system in the world where someone with a £500,000 retirement fund is worse off than someone with a £400,000 retirement fund. Which is why your earning potential and the cost of living are the most important factors to look at.