Planning for retirement in 5 years while living overseas

splinters

I am sure elements of this are covered in many other threads, and I know I really need to speak to a financial advisor, but you guys have so much experience and good advice I thought I would throw the question in here. My current situation:

I recently turned 56, debt free with no young dependents (my wife has her own income/pensions etc.). I am a teacher, with a modest teachers pension due at 60 and I am eligible for the full state pension at 67. We own a home in the UK while I currently live in Zurich.

I have managed to save around £400K (around half is in ISA's, rest in savings accounts) and I have £75k in a Royal London workplace pension. Alas I can no longer pay into ISA's due to living overseas.

I recently moved to Switzerland where the salary is generous, so I plan to save around £60K cash a year plus the £30k a year 2nd pillar pension from my employer, and I put money into a third pillar to offset the tax bill here (but the limit is around 7500 chf). If all goes well, that is another £400K+ to add to the savings by the time I reach 60.

My plan is to work here until I am 61 then 'retire' and live off the interest from the cash/ISA's and the teacher pension until 67 when the state pension will allow me to live a frugal but comfortable lifestyle and still have the money in the bank if I need it (we would also sell our home and upgrade to a nicer area to see out our final years). I can return to educational consultancy for some additional income or to fight off boredom.

So, to my dilemmas. I really need to move this growing pot of cash to work for me and avoid large sums being taxed. I looked at an Expat SIPP to move some the cash to somewhere it might work but it feels like I have left it a bit late, although it says I can take advantage of the tax relief for 5 years which is how long I plan to be here. I am also concerned that the pension accumulated here in Switzerland cannot be transferred to the UK now we left the EU. I can either live off it here from 65 or take the whole as a lump sum when I return to the UK. That will be over £200k which I imagine will cause me problems with tax.

As I write this, I see how professional advice would help, but I would appreciate some direction where to head before doing that, and I like to make my own arrangements where possible so any advice here is welcome. I should add that I am not big on taking risks, and I'm looking for moderate returns free from tax bills where possible over making as much return as possible.

Brie

Do you plan to retire while still living in Switzerland? If so have you checked what the situation is for SP increases? Residing in some countries means no increases. Not sure what happens if you retire there and then move back to the UK - something to be aware of in any case.

I may be confused but was/is Switzerland in the EU? I didn't think so. I do know that other people (myself included) have either transferred in foreign pensions or put them into payment but being paid in to a UK bank account. I would suggest that talking to an IFA in Switzerland about their pension system. I seem to recall a friend was able to cash in her entire Swiss pensions without retiring on the basis that it was used to purchase a property (for her, in France) so they obviously are possibly more flexible than pensions in the UK.

Bostonerimus1

Do not use Expat SIPPs etc. They tend to be expensive and the field is full of dubious actors.

Cross border pensions can be complicated, but there are things in place to regularize taxation. Take a look at the UK-Switzerland tax treaty. Generally speaking you should use pensions and tax advantages accounts in the country where you are working and then leave them invested and make cross border withdrawals. This will maintain the tax advantaged nature of the gains and the tax treaty will tell you how and where the income will be taxed.

Ask your questions on the various expat forums ie

https://britishexpats.com/forum/

splinters

Thanks for that, Expat SIPP are one such company that pop up a lot in searches etc. so good to know. I was surprised to find that we can no longer transfer a Swiss pension to the UK. Another downside of leaving the EU…

splinters

https://forums.moneysavingexpert.com/discussion/comment/81988987#Comment_81988987

No, the plan is to retire in the UK. I would need a substantial amount of money to retire here and the medical insurance/housing costs are bordering on ridiculous. The plan is to grab a chunk of money while its possible to earn it and then make it work better in the UK. Sadly, as we left the EU, the pension has to be either drawn here, or taken as a lump sum if I leave Switzerland as the provider is not classed as QROPS. That plus the cash saved is what I am trying to put somewhere to maximise earnings/minimise costs for when I return in 4-5 years…

Brie

Maybe talk to the big investment banks in Switzerland that have links to the UK. A UK bank such as Barclays Wealth or International spring to mind. That's not a recommendation but just that you are likely to find someone who has dealt with your situation of retiring in the UK before. They might find it easier too to move the money through to their UK bank.

Bostonerimus1

Looks like the UK and Switzerland have just signed a new SS agreement so pillar 1 should be simple enough. If you have to cash in pillars 2 and 3 then I would make sure you have the pensions in a low tax canton before you move back to the UK and then pay close attention to the UK-Swiss DTA Article 18 paragraph 2 and check in with the relevant expat forums to see what other people have done. Be wary of QROPs and international pension transfers as they can be complex and very expensive.

LHW99

Looks like the US and Switzerland have just signed a new SS agreement

Do you mean UK and Swtzerland….?

https://www.gov.uk/government/publications/ukswitzerland-convention-on-social-security-coordination-cs-switzerland-no42021

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/81989488#Comment_81989488

Yes that's right 😀

splinters

https://forums.moneysavingexpert.com/discussion/comment/81989405#Comment_81989405

Thanks, that is a complex read for me so I will take your word for the first part. I am in Kusnacht (Zurich) for the foreseeable future as I got a nice apartment 10 min walk from my school and it will see me through my time here. Although are you saying you can utilise a vested benefits account in a low-tax canton before leaving?

I have posted on the expat forums so will see what comes back. In the meantime, I have around 100k in UK savings (not ISA). Would some or all of that be better invested in a SIPP? I believe you can claim the tax relief for up to five years after living in the UK up to a certain amount (around £3k?) which is essentially how long I will be here. I should also have around 60k cash a year saved here (Swiss cash) after all my living expenses. Could I move that somewhere so it will be earning money for when I return to the UK but avoiding tax bills as much as possible?

I would still have the issue of the Pillar II and III lump sum when I return to the UK as it can't be drawn from overseas or transferred outside of the EU. We are planning on selling our house in the UK in the next year or so and buying a better place when we return in case that is a way of dealing with the cash??

Bostonerimus1

Are you sure you can't move the Pillar 2 and 3 cash lump sums, that sounds very strange. If you have money to invest then to best avoid taxes you'd invest it where you live and are tax resident ie. Switzerland. If you have money invested in the UK make sure that you are paying tax on it correctly in the UK and Switzerland.