Savings Plan / Pension Plan

[GuestHouse]

I note you need 44 years worth of contributions to get the full benefit (if a man).

That is no longer the case, the minimum years of contributions to receive a full state pension is now 30 years FOR MEN AND WOMEN.

The change was brought about because it had been noted that women where loosing out on full pensions on account of not meeting the full contribution requirement. Then when 30 years was decided on it was necessary to reduce men's contribution years to the same level of those for women (on account of EU laws relating the discrimination).

I mention this just incase anyone gets the impression the law was changed to help men out - it of course was not.

[AFKAFSinLOS]

- Ignore any advice about paying voluntary NI to get a pension for someone your age. That info is outdated. NI is worth considering for health, but not for UK state pensions at your age. You only need 30 years for the maximum UK pension (previously 44), anything you pay above that is wasted. You can only take the pension when you are 68 - assuming you live that long. Plus it dies with you! Doesn't take a genius to work out that 68 - 30 = 38years old, so you don't have to think before that, though people still insist on quoting this old chestnut... If you had never paid before and start now you would have paid the max by 62. You then have to wait 6 years. Increases in state pensions and therefor returns in those 6 years are poor. My guess is you've paid several years already so would finish even earlier. BTW you can also buy back years at a later date if need be. Better to build you money elsewhere first.

Here we go again....

On the basis that the OP has almost certainly paid some yeas of NI towards his UK State Pension then continung to do so at the reduce rates allowed under voluntary contributions is a bargain. Something like three hundred ponds a year for 30 years (minus years already paid) gives access to a full state pension - Go ask around and see where you can get that return on investment elsewhere.

Advice to put of payment is also 'suspect' - Rght now the OP is allowed to pay into the system from overseas, this has been questioned in discussion on pension reform and therefore should not be taken as a right that will always exist.

---

Anyway, over to the Naysayers, come up with the goods and show us that investment that guarantees the same return as Voluntary Contributions to a UK pension. (for the life of the pensioner and where he has registered his marrige for his spouse too).

A good response - I agree nothing is fixed in stone - However it must be recognised that there is a battle being fought over this one. If won then all is well and I agree. BUT the battle has most definitly not been won. Couple this with there may not be enough money to pay for lower level civil servents pensions in future (they are not on the same scheme as say high court judges or MP's). Will the battle be won? It is a gamble, is it not?

Think you mean, here you go again GH. You're info is out of date, as are your interpretation of facts. Looking at the trends:

1) The UK state pension has been consistently losing its value, as increases have not kept pace with earnings. Let's face it, you can't even live off a state UK pension in Thailand, let alone UK.

2) The retirement age keeps increasing. Now 68!!!

i.e you're getting less and waiting longer for it.

Why? because the UK government is struggling to fund pensions. Another trend that will continue. Hence they are unlikely to stop allowing people pay in... more likely continue to make it more difficult to take out the benefits!

Think also of the poor b*****d who has been taking GH type advice for the last 40 years+ - He's wasted 10 years+ of contributions. How long before they desperately change the rules again?

Also don't forget that if you live overseas the pension rate is frozen when you take it so each year loses value due to inflation. As you highlight the rules are a gamble. No guarantee you will be allowed to continue to pay in is the least of worries. Real concerns: UK pension won't really be worth anything much, the retirement age will be increased again before you can access; exclusions to foreign spouses become more strict; freeze is done earlier for overseas expats.

... And the big one. Life expectancy. Your "asset" dies with you...

To be honest, for the amounts involved its not worth the hassle of weekly amounts. I definitely prefer the wait and see approach. Invest your money elsewhere, chalk up a surplus, that you can pass on to family or draw earlier. I know people who have bought back years, after having had the use of the money for several years. The XS returns pay for the years bought back...

So if you really think NI is such a good deal pay back when you "have to". You'll also have a more accurate picture of the direction things are heading... your health, the government, other cash flows...

Meanwhile back to real investing...

Edited June 23, 2008 by AFKAFSinLOS

[samran]

So if you really think NI is such a good deal pay back when you "have to". You'll also have a more accurate picture of the direction things are heading... your health, the government, other cash flows...

Meanwhile back to real investing...

to be fair, I think GH means that NI contributions as part of a retirement portfolio, isn't a bad thing to have.

In terms of declining value etc...you are right. In terms of it being a good investment, it is still a good one. The only thing is that you need to have another pension plan right along side the state pesion.

[pkrv]

I am going to cheat slightly and steal this from BEENTHEREDONETHAT's thread on protecting against inflation - because I think this too is relevant.

Hi BEENTHEREDONETHAT - an interesting post. I am sort of considering the situation but at 48 am currently only really positioning myself for this type of issue, and have noted posts on UK National Insurance and UK pensions (and thanks to GH for his input).

If you have never played the markets please, please don't. I am afraid there are a bunch of predators out there that are fully aware that retirees (I don't know if you are one) who suddenly have access to a pension lump sum and are simply there to be exploited. Anyone who is onto a good thing stays quiet until it is time to sell.

My own thoughts (which can change BTW) are currently to use the concept of downsizing in property (freehold condominiums in Bangkok and London). Over a protracted period (15-20 years?) units should keep pace with inflation. By selling up and moving down market I should release cash that has kept pace with inflation.

I know the secondary market is still in its infancy here in Bangkok but there are a lot of estate agents out there who must be doing some business, plus I also have faith that the (condominium) market will develop in the future. As with all things in life, a gamble.

I do obviously have the option of renting out my UK home as an income stream, which again will be 'inflation proofed' to some extent. I have virtually no debt, and no longer contribute significantly to UK pension schemes (The HP scheme was OK I put in the minimum 1% because they put in 5% if I did) and I can shift to a SIPP at the end (it is not protected rights). But even my SIPP is now in cash only.

Downsizing should also protect me against exchange rate movement (also a big enemy). I can downsize the UK or Bangkok property dependent on the situation.

pkrv

I retired when I was 5o and have never regretted it for a minute. That by the way was over 24 years ago so I'm getting the hang of it.

Part of my philosophy when quitting was to live whatever life style was required for my principle to grow a minimum of 10% a year and typically we did better than that. Since we spent a great deal of time traveling I did not want a investment that would require regular monitoring. So most of our money has been into Bank term deposits and bonds. My favorite was a 10 year bond with Citibank at 15%.

Also have done fairly well on the property we have owned. I must admit it was rarely bought as a investment but because it was a place we wanted to live. A fair amount of that was in Australia.

I think diversification is typically beneficial and we have our money spread around a bit. New Zealand, Australia, Thailand and the US.

We are averaging a bit over 8% right now but I must admit I'm a bit concerned that inflation in LOS might exceed that. Playing with the idea of buying some property in the US since it appears to be a buyers market right now. Part of my problem with the US is the property tax can be brutal. The same for insurance. That is one of the really nice features of a condo in LOS, no property tax, very low (in comparison) association fees and reasonable insurance.

There are three things that I believe had a influence on our money growing. Don't buy anything you can't pay for (other than a house) in other words don't pay interest. Pay minimal taxes. And save at least 10% of your earnings. We found that each year the 10% grew and got easier, now we save in excess of half of our income.

But I'm to old a dog to learn new tricks so I'm staying away from the stock markets. That and staying away from investments that are time consuming or require regular tracking.

Good luck in your retirement pkrv. I'm sure you will enjoy it and most likely prosper while doing it. Don't wait to long, it is fun.

[GuestHouse]

Think you mean, here you go again GH. You're info is out of date, as are your interpretation of facts. Looking at the trends:

1) The UK state pension has been consistently losing its value, as increases have not kept pace with earnings. Let's face it, you can't even live off a state UK pension in Thailand, let alone UK.

Yeh right, so a UK state pension which offers a return on invested Voluntary Contributions of aproximately 50p per year FOR THE FULL LIFE OF A RETIREE for every 1 pound paid in now is a bad investment - Come up with the goods and produce a savings plan that betters that.

And lets remind ourselves - Income Streams!!!! - A UK State Pension is a cheap means of getting a reliable income stream - A UK Resident who moves to Thailand will already have paid into the UK Pension Scheme - Paying Voluntary Contributions up to the Minimum 30 year requirement is a cheap investment with a great return.

2) The retirement age keeps increasing. Now 68!!!

i.e you're getting less and waiting longer for it.

Why? because the UK government is struggling to fund pensions. Another trend that will continue. Hence they are unlikely to stop allowing people pay in... more likely continue to make it more difficult to take out the benefits!

Yep Retirement Age has gone up Once - Keeps Creaping up? - And look again GET THE FACTS RIGHT - The change in the retirement age effects younger people, it does not effect all people - Take a look at the age range of people moving to live in Thailand and compare that with the age range who are effected by the change in Pension Ages - The vast majority are not effected at all.

Think also of the poor b*****d who has been taking GH type advice for the last 40 years+ - He's wasted 10 years+ of contributions. How long before they desperately change the rules again?

I've not been giving this advice for anything like 40 + years and my advice is anyway 'Pay up to the Statutory Minimum to get a full UK Pension' (ie use the rights you have while you still have those rights.

Do you have evidence of another change in the retirement age/contribution requirements or are you just putting out baseless flack?

I know the forum rules obligate you to use **** to hide your profanity - but is the profanity itself necessary to give your comments meaning?

Also don't forget that if you live overseas the pension rate is frozen when you take it so each year loses value due to inflation.

Not 'Overseas' - Overseas in some countries (and that was recently challenged and is currently being taken to the EU Courts - The game is not over).

Also

As you highlight the rules are a gamble. No guarantee you will be allowed to continue to pay in is the least of worries. Real concerns: UK pension won't really be worth anything much, the retirement age will be increased again before you can access; exclusions to foreign spouses become more strict; freeze is done earlier for overseas expats

I have at no time said the rules are a gamble, you said that and then added to that un founded nonsense on how you think the rules might change. - Do you have evidence that there are any plans to freeze the pensions of overseas expats at an earlier date?

... And the big one. Life expectancy. Your "asset" dies with you...

The Real Big One - You get a UK State Pension for LIFE. (a 32 year old like the OP with say 14 years already paid in to the NI, adds a further 16 years - a shocking amount of less than 6000 and for that he gets a full life pension for LIFE!) --- 6k Paid over 16 years - A really big investment !!!

A UK Basic State Pension is GBP90.7 per week (GBP 4716 per year) - An expat can buy into that for around GBP350 per year.

To get a secure Pension of GBP4716 per year based on a 5% return on investment, the same expat would have to have (or build) a fund of around GBP94,000).

To be honest, for the amounts involved its not worth the hassle of weekly amounts. I definitely prefer

the wait and see approach. Invest your money elsewhere, chalk up a surplus, that you can pass on to family or draw earlier. I know people who have bought back years, after having had the use of the money for several years. The XS returns pay for the years bought back...

So if you really think NI is such a good deal pay back when you "have to". You'll also have a more accurate picture of the direction things are heading... your health, the government, other cash flows...

Meanwhile back to real investing...

For people on low incomes and people who have not had the chance to build large amounts of capital maintaining a UK State Pension is REAL INVESTING WITH REAL VALUABLE RETURNS.

[pkrv]

Hi GuestHouse - Obviously an emotive subject - From my perspective it is the court battles that are key to this. I know that this freezing issue has been thrown out of the E.U court of human rights before, because effectively how the UK goes about its taxation and internal financial affairs is 'sovereign' business.

I'm 48 with some 22 (ish) years of class one NI contributions. I would however like to buy back missing years, but only if the battles are won. OK we can all work out there are other 'tactics' that can be used here (I live in the UK, honest dib dib, dob dob) but if there is a clamp down?

How can we find out what the outcome on this important issue? And is there some time limit to buying back contributions?

[AFKAFSinLOS]

Guest House,

I know you like the sound of your own voice and spouting general info. But sticking to the facts: The guy was a 32 year old, and we are talking about Thailand. So please:

1) FACT: It is not invest now or lose it. Nor is it either/or. An intelligent investor can invest elsewhere and top up their NI later. Have your cake and eat it.

Please let's not mislead with the old 50p in the pound. That's akin to financial advisor rip-off sales speech:

2) FACT: Average life expectancy for a UK male is about 76. So the UK government will not be paying out very long on average. Even at today's 65 retirement age, that's only 11 years. So in reality it's paying in 30 years to get 11 years pension! i.e please divide by almost 3 on average for a meaningful comparison. That's 18p in the pound not 50p. Yes some live longer, but some die earlier and get zero.

3) FACT: You always forget time value of money in your calculations. Overlooking the guy's 36 year wait to get his 50p per year on his pound. Even at a modestly low 3% discount factor, that 50p is actually worth only 17p in 36 years time.

4) FACT: UK pensions grow at best in line with inflation. It would be quite easy to generate 4% above inflation, say average of 7% p.a. That's 4% real growth compounding you miss out on every year to contribute too early. i.e an opportunity cost of 4% p.a

5) FACT: UK retirement ages have changed more than once. Do your own research on that if you are too ignorant to realise. Particularly for women, who they chose to equalise at 65 because they couldn't afford to bring male retirement age down. So 60>65>68 for women is one simple example.

6) FACT: Interfering in private pensions retirement ages by raising from 50 to 55 is another example of govt changing ages.

7) FACT: For retirees in Thailand the pension is frozen

9) FACT: Locking your money away for 36 years decreases your flexibility for early retirement. That's why retirement is an option for me whenever I want to spend more time with family, and you will need to work until you are at least 55.

10) FACT: Of course I do not have evidenced of proposed future rule changes. However, I was given a brain, and the ability to project forward. FACT: The UK government is struggling to fund it's pensions. It has been and will continue to. That problem is getting worse as the population ages. The UK state pension is funded out of current earnings, not by saving your contributions. On that basis, it's pretty easy to see that fewer workers will have to support more pensioners. Hence future pension value will go down, as it has done. Pretty similar to the NHS health service which keeps detiorating, as the govt can't afford it.

Sorry, but even for people on a low income, 4k a year is a pittance. Nor is OP on a low income, as an expat working offshore. Let's keep relevant to topic, rather than you demonstrating your (outdated) knowledge

Take those blinkers off, have an open mind, and learn to have your financial cake and eat it...

[AFKAFSinLOS]

Hi GuestHouse - Obviously an emotive subject - From my perspective it is the court battles that are key to this. I know that this freezing issue has been thrown out of the E.U court of human rights before, because effectively how the UK goes about its taxation and internal financial affairs is 'sovereign' business.

I'm 48 with some 22 (ish) years of class one NI contributions. I would however like to buy back missing years, but only if the battles are won. OK we can all work out there are other 'tactics' that can be used here (I live in the UK, honest dib dib, dob dob) but if there is a clamp down?

How can we find out what the outcome on this important issue? And is there some time limit to buying back contributions?

Do exactly what you are doing now. Wait and see while you invest more lucratively elsewhere...

You only need to buy back another 8 years and have a long time to wait before you get anything at all.

[AFKAFSinLOS]

A little food for thought for Mr.Guesthouse on how to have his cake and eat it, and how the world has moved on for some Thai expats:

1) GBP 350 in October 2004. Invested in Aberdeen Long Term Equity Fund at launch:

2) Grossed up immediately for tax relief for higher rate tax payer via your payroll courtesy of Thai Govt = 350/0.63 = GBP 555.56 . That's to say you can invest GBP 555.56 and effectively pay only GBP 350 as your tax for the month is lower

3) Value today 23 June, which could be cashed in tax free: GBP 900+

4) You have waited a little to see what happens to the UK Govt on NI contributions as you were unsure and lacking confidence

5) Invest GBP 350 to gain your "1 year", and have pocketed the GBP 550 profit

No doubt you are going to tell me what about the risk? First please tell meany 36 year period in hstory where equities have fallen lower than when you started.? Note: we're talking diversified fund here, not individual stock.

Ok so we're agreed very little equity price risk.

So what about the FX risk? Well in the same period GBP has weakened from 75 baht to 65 baht, giving you an extra gain. Or put another way: Your initial 555.56 was worth THB 41,667. It grew to THB 67,595, which is actualy now worth GBP 1,039. Tax free. That's enough to buy 3 years NI when you choose or keep/use!!!

{Spare a thought for the UK pensioner who: has seen his UK pension frozen as he is now living in Thailand. Has seen the value of his pension fall 14% because of currency risk. Is paying marginal rate of 40% tax on what's left...}

Edited June 23, 2008 by AFKAFSinLOS

[GuestHouse]

Let's pick just one of your 'FACTS'.

9) FACT: Locking your money away for 36 years decreases your flexibility for early retirement. That's why retirement is an option for me whenever I want to spend more time with family, and you will need to work until you are at least 55.

I take it for granted that you know your own financial circumstances and can determine from those when you are able to retire: In order to ascertain the veracity of this 'FACT' of yours, can you please explain what you know of my financial circumstances and how you have determined the 'FACTS' of when it is I can or cannot choose to retire?

Observation - In your earlier response you resorted to thinly vailed profanity, in later responses you seem unable to restrain yourself from personal insults. - Just an observation, but surely one to take note of.

I'm inclined to think that your arguments might benefit from a little civility - Ranting is not a good way to try and convince others of your argument - quite the contrary.

[pkrv]

Let's pick just one of your 'FACTS'.

9) FACT: Locking your money away for 36 years decreases your flexibility for early retirement. That's why retirement is an option for me whenever I want to spend more time with family, and you will need to work until you are at least 55.

I take it for granted that you know your own financial circumstances and can determine from those when you are able to retire: In order to ascertain the veracity of this 'FACT' of yours, can you please explain what you know of my financial circumstances and how you have determined the 'FACTS' of when it is I can or cannot choose to retire?

Observation - In your earlier response you resorted to thinly vailed profanity, in later responses you seem unable to restrain yourself from personal insults. - Just an observation, but surely one to take note of.

I'm inclined to think that your arguments might benefit from a little civility - Ranting is not a good way to try and convince others of your argument - quite the contrary.

Tricky stuff, we aren't going to do handbags at dawn again are we?

[GuestHouse]

Tricky stuff, we aren't going to do handbags at dawn again are we?

Not from this corner we are not. I'll settle for noting the abuse, I've neither the need nor the intention of joining in on it.

[pkrv]

Tricky stuff, we aren't going to do handbags at dawn again are we?

Not from this corner we are not. I'll settle for noting the abuse, I've neither the need nor the intention of joining in on it.

It is interesting that we have focused in on the UK pension’s issue. For me the critical problem is that the issue exists at all. I know that in the past the UK could revoke all pension privileges at will! (Especially for those males who even liked 'soft furnishings' (dishonourable discharge from the armed forces! And I am not kidding!)).

For me it is difficult to trust in such an obvious mechanism where control is 'centralised' for its own (sometimes religious but of course always monetary related reasons, but of course there no difference they are all revenue earning)

It becomes a question of trust. If trust is so betrayed then the UK is in deep, deep, trouble. I think that is true source of contention here on UK NI contributions. And indeed the answer to why battles have/are been fought. We must ask the question. Why?

[GuestHouse]

Well while I understand some people like to see conspiracy and intrigue in all matters relating to government - The reason why the UK State Pension is an issue here is because there are TV Members who hold UK Pension Rights who have retired or moved to Thailand before their normal retirement age. This together with two other factors: The UK State Pension Rules allow People with Pension Rights living overseas to pay voluntary contributions and thus continue building pension rights and the number of years of contributions have now been reduced to 30 years (an improvement amidst this sea of predicted doom).

It is for those reasons and only those reasons why UK State Pensions are discussed - Once the Topic is up, people will of course express varying views.

---

I would comment though, if you are worry about who to trust is 'The Government' or the 'Financial Services Industry' then it seems to me that the UK Government's commitment to state pensions since the time of Lloyd George! Take a look at why and how State Pensions came about - not a tool of control. And how religion got in here I don't know - Morals yes, Tom Pain made a few moral arguments for Pensions, an Lloyd George's Moral arguments for Pensions over the Poor Laws won the day.

[pkrv]

Thanks GH - I note my post was vague - I can be like that when exploring new issues - sorry.

I can only speak for myself - It is not the prospect of retiring before normal retirement age, It is that a 'poorly' document subset of pensioners could still potentially have their pension frozen. I agree it is a good bet, if the UK pension pays out, which it won't do if frozen. This anomaly in its own right causes me pause and to review past behaviour. I also know for instance the Gurkhas (a military force) have fought over this issue as well (I believe they won).

I agree things have moved forward with the age reduction (30 years), again given financial constraints with an aging population things look a little 'odd', though appear to be counter balanced by an increase in pensionable age? (Which as you say may not affect many of us).

I agree that the original intention was to create a better society - not a problem, I am all for it, this is actually solely a humanitarian issue.

Unfortunately I have noted Religion and Politics do mix, in a rather disgusting concoction that always attempt to divert funds from the vulnerable (and an ex-pat pensioner is) and then sweep the issue under the carpet. We are going to have a new Prime minister at the next election who wishes to emulate Thatcher - OMG - no pun intended!

[GuestHouse]

Unfortunately I have noted Religion and Politics do mix, in a rather disgusting concoction that always attempt to divert funds from the vulnerable (and an ex-pat pensioner is) and then sweep the issue under the carpet.

Off topic I know, but again to alay some of the pessimism, religion and Politics do of course mix, but not always with negative results - It was after all a pressure from religious groups that put and end to Slavery at a time when the very privalaged of British society and commerce (and indeed the UK) were making vast profits from the trade.

I'm inclinded to see the balance, rather than the conspiracy.

As I say, off topic a bit but it does illustrate that fears are sometimes unfounded.