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I'll move some money into less risky funds as the years go by, but I'm 43 so still capable of working if I chose to. Using a compound interest calculator I should be on for a little over a million in ten years time.
Am I at a disadvantage not having a pension?
you clearly know the answer, you aren’t quite the regular demographic of this thread I think ?
From memory of your various posts, I understand you’re in your early 40’s, living a somewhat nomadic lifestyle having moved away from a fixed home base and living in a van, around UK and Europe with no kids or dependents.
If have picked this up incorrectly apologies, if not then I reckon your financial outlook is probably pretty unique, though you do come over as having a pretty good and pragmatic approach to it all.
Thanks @Edukator
Think I've only got 8 or 9 years NI contributions before leaving the UK.
I thought you needed ten years NI contribution for minimum pension from the UK, although I was told that once you receive it and you're not UK resident it doesn't increase with inflation like it does for a UK resident.
Where do I look online to check?
You need to fill in a CF83 and send it to HMRC. Have a look at NI38 online. You create an account with gouv.uk. then just browe through the future pensions, social security abroad and you'll find how to do it. I did it while it was still a paper trail but now you can do it all online including the CF83. If you live in Australia it isn't inflation linked but it should be in the full EU countries - we'll see.
Read all the clauses very thoroughly before you fill in the form, we have one friend who has been refused on a technicality.
I had 9 years contributions and Madame Edukator only the minimum 3 before leaving the UK. We both had our CF83s accepted and bills for voluntary contributions sent.
^^^i need to look into my uk pension rights. I worked from age of 16, part time/student stuff up to about 20, then more regular/full time up to about 28 before moving to Ireland. I will of worked 32+ years in Ireland when I stop working at 60. I need 40yrs for full Irish pension and can combine my uk years to get there…….but……I believe I can claim them separately too, so I might have enough contributions for the 10 years qualifying in Uk (or might get to buy a year or 2 to get there? but might not be able to as I am now abroad?)this would mean a reduced (32years+ or 37 if I go to 65) Irish pension, ( but again might be able to buy years or get credits for 60-65yrs) I need to figure out if 2 reduced or one full Irish pension pays more. It’s a bit confusing/complicated to be honest.
but might not be able to as I am now abroad?
You can make voluntary contributions from abroad at the same time as working abroad and contributing in another country. You can get separate pensions for each country worked or try to combine them. I say "try" because people have mixed success and I won't know until I make my claim next year and try to include time in Spain. I've got all the Spanish records ready to go. For France I had enough years to make a separate claim which as I could make it before the UK claim I did. According to EU regs at the time I was working you can "borrow" years, I'll see next year if the withdrawal agreement has protected all that.
Go through it all online, there has been a lot of misinformation over the years but they've sorted it now and it's all online.
https://www.gov.uk/government/publications/social-security-abroad-ni38
Sign up to gov.uk and check your NI contribution records, Andy4d. Given what you say I suspect you are old enough to benefit from three free education years given to people in full-time education from 16-19. When I checked my records I had a couple of years more than I expected and found they'd given me my A-level years. If I hadn't taken a year out and worked before uni I'd have had the first year of uni for free too.
Cheers Edukator...
I'll give it a look tomorrow and maybe try serial to someone next week.
You can make voluntary contributions from abroad at the same time as working abroad and contributing in another country.
Hmm.... Never contributed into the German system (bar the stuff months I was employed (never again!)).
Using a compound interest calculator
How does one choose a rate of growth for such a calculation? Given the current market valuations do you assume we are at the start of a decade of near average growth, I'm not convinced we are.
How does one choose a rate of growth for such a calculation?
Average market growth over the last 50 years is 8-10% per year.
Using this calculator you can enter your own growth % and add % deviation.
https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator
Given the current market valuations do you assume we are at the start of a decade of near average growth,
Last couple of years have been above average.
That is my point, the decade following the .com crash also included the 2008 financial crisis, it was called the lost decade for a reason - it took 10 years to recover to the previous level. The market historical average was meaningless for that particular 10 year period.
Last couple of years have been above average.
And it is widely acknowledged that markets are cyclical.
I’d also be really interested in hearing what pension-top-up, part-time jobs people are doing. And how that’s working out.
no pension top up here......... and no intention of doing any work.... far too buy.
5 grandkids and a couple of bikes to keep me occupied.
This is also my goal. SO retired nearly 4 years ago and has been astonished that they ever found time for work among the many activities of retirement.
Folks wondering about the stock market volatility/variance would do well to consider the time in the market. Mentioned many times in the thread. A, retired, friend reminded me last week of something I 'knew' from reading and researching about 30 years ago: "put your money in a cheap passive index tracker fund and over time you will do OK". I had a look at https://clark.com/sp-500-return-calculator/ and was reminded of this. Short term you might gain or lose. Long term it's a win. My more balanced approach has not paid off as well as just dumping it in a tracker would have.
Interestingly that calculator linked above tallies up pretty much exactly with my experience.....
60k invested in 2005 equates to ~500k today.
I started with 40k in 2005 and have added a few grand occasionally over the years when funds allowed.
Interestingly that calculator linked above tallies up pretty much exactly with my experience.....
60k invested in 2005 equates to ~500k today.
I started with 40k in 2005 and have added a few grand occasionally over the years when funds allowed.
With the S&P calculator you see the variance as well as the overall change. It's quite fun to play with variations of 'if I put $10,000 in at a high point and needed the money at a low point [some years later] what do I get'? And so on. Obviously different indices are different but the general 'it goes up in the long run' seems fairly reasonable.
The problem I have with thinking of pension funds in terms of compound interest is that stocks are different from savings accounts. Sure, there's an equivalent average interest rate you can estimate over time for an index but that elides the variance and falsely equates equity investment with savings accounts. OK for a quick look, but you need to feel comfortable with the 'real' thing to decide on your feelings about risk. Like I wrote, if I'd applied what I 'knew' 30 years ago and just went, say, 90% index tracker and 10% bond fund instead of a more balanced approach I'd likely have been able to retire already instead of umming and ahhing about whether to retire and see what happens or continue working for a while. Ah well, hindsight and all. At least work is still fun.
I don't have a pension as such.... Have all my monies invested in various funds (via Hargreaves Lansdown) and I plan on releasing some of that as and when I need it.
Have always been self employed so no employer contribution scheme for me.
I could have paid into the German pension system for self employed but my accountant told me years ago not to bother as you pay way more in that you get out. He told me bung any spare cash into my investments.
I know I'm at the whim of the markets. I'll move some money into less risky funds as the years go by, but I'm 43 so still capable of working if I chose to. Using a compound interest calculator I should be on for a little over a million in ten years time.
Am I at a disadvantage not having a pension?
'..at not having a pension'. It depends what you mean by 'a pension'. IRL with the removal of DB pensions by many employers and the introduction of DC pensions I think that many employees have just been moved into a position that the self-employed and others were in anyway: if you aim to stop working at some point and want to maintain a lifestyle beyond what any state provision offers then you need to have some additional savings set aside for that time.
In many countries that encourage personal pension provision there are significant tax and savings advantages to having your funds within a pension 'wrapper' (SIPP, 401k, ...). A few folks on here who have historically been at the UK pension savings limit that was abandoned a few years back or who have been at the top end of the annual pension savings allowances and wanted to save more might have had to use additional methods to avoid tax and improve savings and investment efficiency (ISAs, investment credits, etc.).
Anyone who has the option to save for retirement and does not use the [tax] advantages available to them is unnecessarily losing out.
Maxed out my ISA and SIPP as much as I could after leaving the UK. Not paid into any of the German schemes as being self employed my accountant says I was better off doing what I had been doing.
Been away from the UK for so long that I'm now no longer eligible to pay Capital Gains on my UK money. How that works when it comes to realising that money with the country I reside in I'm not sure, but then if they don't know it's there how can they tax it? (Am currently officially of no fixed abode and have cut ties with Germany).
That is my point, the decade following the .com crash also included the 2008 financial crisis, it was called the lost decade for a reason - it took 10 years to recover to the previous level. The market historical average was meaningless for that particular 10 year period.
Last couple of years have been above average.
And it is widely acknowledged that markets are cyclical.
Yeah we can guarentee crashes and corrections will happen, we just can't time when, but time in the market will win -that's why with investing they say a 10 year+ time in the market will ride out any crash to recovery*
Calculating gains, I'd be conservative and assume a 7% per year average for a global ETF or whatever, so if you happen to be lucky and average 10% then happy days.
*unless you are stuck in the unfortunate position of being forced to cash out during a big dip - but that's why they also say you should have fund in savings/cash ISA etc, too, so you can use that if you have to, while you wait for your investments to recover.
Am currently officially of no fixed abode
I'm pretty sure you will be resident *for tax purposes* in either UK or Germany (unless you're moved somewhere else on a fairly permanent basis). Which, I have no idea - and you may be able to choose. NB this does not necessarily correlate to any specific visa, legal residency, nor where you happened to sleep last night.
I’d also be really interested in hearing what pension-top-up, part-time jobs people are doing. And how that’s working out.
I think the challenge is finding something part time that pays a good hourly/daily/salary. I have been looking at non executive director type roles in the public arena - boards with NHS trusts, public agencies etc, as they generally are around 30 days a year and between £300 and £500 a day, plus expenses, so both interesting and well rewarded for the hours carried out.
As for being a tax resident, thecaptain, I left the UK and was never contacted by HRMC. I left Spain and was never again contacted by the Spanish authorities. If you don't spend more than half a year in any country and don't have an address I don't see how a country could claim you as a fiscal resident. When you do decide on a base, Alpin, do a lot of profit taking so all of your investments are new without profits.
As for being a tax resident, thecaptain, I left the UK and was never contacted by HRMC. I left Spain and was never again contacted by the Spanish authorities. If you don't spend more than half a year in any country and don't have an address I don't see how a country could claim you as a fiscal resident. When you do decide on a base, Alpin, do a lot of profit taking so all of your investments are new without profits.
that seems like skating on very thin ice to me, and I'd certainly not assume that simply based on the fact that the tax authorities hadn't been in touch.
you might think differently but personally I think contributing to the countries you spend your time in and whose tax funded services you are relying on, is a moral obligation.
Ai generated answer-
No, you cannot legally avoid paying tax anywhere by simply spending half your time in one country and half in another. Tax systems are designed to ensure individuals are tax-resident somewhere, and splitting your time often results in becoming a tax resident in one or both countries, subject to their respective laws and double taxation agreements.
Why this approach does not work
Dual Residency: It is possible to be a tax resident in two countries simultaneously, a situation known as dual residency. Both countries might have rules (like the "183-day rule" or "center of vital interests" tests) that could classify you as a resident.
Double Taxation Agreements (DTAs): To prevent paying tax twice on the same income, countries have DTAs. These treaties include "tie-breaker" clauses to determine which country has the primary taxing rights, meaning you will ultimately pay tax in one of them. You cannot use a DTA to avoid tax altogether.
Worldwide Income Taxation: If you are a tax resident in a country that taxes worldwide income (like the UK or the US), you are generally liable for tax on all your earnings regardless of where the income is generated or where you spend your time.
Strong Ties: Tax authorities consider various factors beyond just the number of days spent, such as where you have a permanent home, your family, your business interests, and your bank accounts. These "ties" can establish residency even if you spend fewer than 183 days there.
Source of Income: Income is often taxable in the country where it arises, regardless of your residency status. For example, UK rental income is still taxable in the UK even if you are a non-resident.
The "Tax Orphan" Exception (Highly Limited)
The only potential, highly complex, and difficult way to be a non-tax resident anywhere is to become a "fiscal nomad" with genuinely no permanent home, no strong ties, and by spending very short, non-tax-triggering periods in multiple countries. This usually requires continuous travel and is not feasible for most people with established lives or consistent income sources.
In summary, attempting to use split time to avoid all tax is considered tax evasion by most authorities if done improperly, and legal tax avoidance methods require working within the specific rules and treaties of the relevant countries. Professional tax advice is essential for anyone in this situation.
If you don't spend more than half a year in any country and don't have an address I don't see how a country could claim you as a fiscal resident.
The UK rules are a little more complex than that for a start:
You will be regarded as resident in the UK during a tax year if :
· You spend 183 days or more in the UK during the tax year, or
· Although here for less than 183 days, you have spent more than 90 days per year in the country over the past four years (taken as an average). You will then be classed as UK resident from the fifth year.
Strong Ties:
Source of Income:
GF is resident in Germany despite not spending more than 183 days in the country as all her clients (bar two) are based in Germany, therefore her main source of income is Germany.
I'm not working, least not officially, and the German tax office has told me I need not worry unless I register my residence in Germany again.
you have spent more than 90 days per year in the country over the past four years (taken as an average). You will then be classed as UK resident from the fifth year.
No chance! Not spent more than three months in the UK since I left in 2008.
Circling back to Voluntary NI contributions:
I completed a CF83 early September and got a letter back from HMRC outlining which years I could contribute to, and what cost.
Anyway, the mechanics of the payments wasn't entirely clear to me so I called up the phone number (only on hold for about 10 minutes 👍) and when they checked my records they said I could contribute back further than the standard six years that the letter referred so as there was evidence on their system* I had asked about this is the past...
So, those of you interested in this, it might actually to worth calling HMRC as, I presume, they are being lenient about restricting contributions to six years...
(Frankly, I don't remember any details other than a call multiple years ago after which I'd changed my mind about making the voluntary contributions anyway)
^^
How much are the contributions and does it make sense financially?
If, for example, they want 18k for the last 18 years and I then receive £500* a month after the age of 67 I'm not sure it's worth it.
* I've no idea what the minimum state pension is or would be in 25 years time.
The minimum is £58.24/week, but you have to have contributed 10 years of NI.
The maximum SP is a little over £1000/month (with full contributions - 35 years is it?)
How much are the contributions and does it make sense financially?
If you're not employed, Class 3 voluntary contributions are around ~ £900 per year. For any years you are employed, you may qualify for Class 2 contributions which are ~ £165 year.
The exact amount is determined by which (UK) tax years you are "missing" and which you are actually able to contribute to. In my case, nearly all past years would be Class 2 as I was employed (as opposed to self-employed).
But I retired last year, so for 24/25 tax year and any future tax years, I'd have to pay at Class 3 rates.
Theoretically for me (I'll believe it when my NI records are actually updated), I can max out my contributions (38 years in my case) as Class 2.
Whether it makes financial sense....? I'm still in the process of sorting this out with HMRC but, currently, my forecast pension is ~£160 per week based on 27 years current NI contributions but would increase to £230 per week if I can pay missing contributions up to (my) maximum of 38 years.
That's supposedly gonna cost my around £1900 but the pay back period is only around 27 weeks and I'll be ~£70 per week better off (before tax) after that point....
You'd be paying class 3 given what you've said on here, Alpin. To quote someone I had on the phone from HRMC back in the paper trail days "it's a no brainer". If you think you'll live beyond 70 it's worth it. If you start again now you'l be able to get 35 years. I restarted again too late so will only get to 29 years.
This usually requires continuous travel and is not feasible for most people with established lives or consistent income sources.
so possible
When you read stuff about voluntary payments not being worth it, it's for those who already have sufficient years contributions, but continue to work (self employed etc).
When you read stuff about voluntary payments not being worth it, it's for those who already have sufficient years contributions, but continue to work (self employed etc).
True.. It's on a sliding scale too once you've got over the minimum amount of qualifying years.
If you check your NI record it will tell you how much state pension you'll get as it stands under the current rules, compared to what you'll get with the full amount of years.
This usually requires continuous travel and is not feasible for most people with established lives or consistent income sources.
so possible
Yes, possible. I didn't say it wasn't, but I definitely wouldn't rely simply on 'HMRC didn't contact me'
It's completely possible to be resident and not declare income as well (I've heard of people doing it with multiple rental properties). You might get away with it. It doesn't make it legally or morally right.
Lol at the idea that an intelligent poster might assume they have no tax liabilities just because authorities haven't contacted them at some particular time or place.
I think for most of us, resident in UK, it is possible to pay very minimal tax on pension drawdown if cleverly combined with ISA income etc, though it appears that the more you have the easier it is, unfortunately! ….. which comes back to the original point, of how much of a pot to retire early, say about 60.
Lol at the idea that an intelligent poster might assume they have no tax liabilities just because authorities haven't contacted them at some particular time or place.
Yeah, but I've contacted them. 🙂 I've mentioned having an account with HRMC above - there is simply no record of my "nowhere" years in the 80s. For one year I contacted HRMC hoping to get tax back on some temping I'd done and paid PAYE on, but they ignored me. I've been in touch with Spain about pensions records and they haven't raised the question of where or when I paid tax since I left. Since 1992 I've been a fiscally resisdent in France and they have never raised the question of the "nowhere" years prior to that even though I'd worked seasonal nomad jobs in France. For 5 years travelling around and no fixed address for more than 6 months I was ignored.
I’m sure others will disagree and let us know how they’re doing great with much less but for early retirement I still have the 1 mill figure in my head, as soon as I’m nearly there my notice is getting handed in!
I’m sure others will disagree and let us know how they’re doing great with much less but for early retirement I still have the 1 mill figure in my head, as soon as I’m nearly there my notice is getting handed in!
I'm 57, nowhere near £1m and no chance of getting there, like the majority of people I know. They all seem to be managing to cut their cloth or pick up a few days part time work without living in poverty, and I'll be joining them in 3 years and 6 months time.
for early retirement I still have the 1 mill figure in my head, as soon as I’m nearly there my notice is getting handed in!
Similar things have been mentioned in the thread before but I'm still unclear whether this is pp or per couple.... Will your spouse have similar?
Mine is insistent that we both need that amount before she'll even consider it. Which just makes me think we'll be working too long, dying early of exhaustion and paying stacks of IHT 🙂
think for most of us, resident in UK, it is possible to pay very minimal tax on pension drawdown if cleverly combined with ISA income etc,
Dunno about minimal, but about 3/8 of my pot is in savings and should get transferred to ISAs in the next few years so I guess I'll pay about 7% income tax in retirement..
( OAP will fill the nil rate band, then perhaps £22k taxable at 15% from my pension, then tax free top-up from my ISA)
Which is weirdly close to the tax rate I currently pay ~6.5%
I’m sure others will disagree and let us know how they’re doing great with much less but for early retirement I still have the 1 mill figure in my head, as soon as I’m nearly there my notice is getting handed in!
Do yourself a favour and take 2 years off your projected date and retire then. You get another 2 years to enjoy life and you really won't need that much money.
Similar things have been mentioned in the thread before but I'm still unclear whether this is pp or per couple.... Will your spouse have similar?
Mine is insistent that we both need that amount before she'll even consider it. Which just makes me think we'll be working too long, dying early of exhaustion and paying stacks of IHT 🙂
I think retiring as a couple with a £2M pot would put you into a fairly narrow band of wealthy retirees. My recent research shows the majority retire with less than £1M per couple, and many a lot lot less.
Depends, as always.
Mortgage paid? Worried about paying for care? Several expensive holidays a year? Need a new car every few years?
Most would get by on a lot less than £1m.
My recent research shows the majority retire with less than £1M per couple
Indeed. This ONS data is fairly dense but 500k would still put a male very comfortably in the top 25%, and that's after they've stripped out all the people whose pension pot is £0, as they drag down the average...
Mortgage paid? Worried about paying for care? Several expensive holidays a year? Need a new car every few years?
Yes
No
Yes
No
I'm 57, nowhere near £1m and no chance of getting there, like the majority of people I know.
This. Same age as you, I have a small pension (around £110,000) and a SME business that I may or may not be able to sell in the future (but I am assuming I won't be able to sell it as we've tried and not getting any tangible interest). My wife has a similar value pension to mine, and we'll both be eligible for full state pension. We may or may not come into an inheritance but, if not, we'll just have to make it work. Fortunately we could downsize our house, still own our own place but get a reasonable lump sum – of course that would mean any inheritance our kids would be vastly reduced though.
Mortgage paid? Never had one. We rented till we had enough to buy.
Worried about paying for care? No but junior should be given the laws here.
Several expensive holidays a year? I don't fly and enjoy simple holidays so no.
Need a new car every few years? Yup, I'd live without but I'm married. It's usually many years rather than few though.
A million? Nope, miles off. Even if I lived to 95 which I really hope I don't that would be 33 333 a year on top of annuities - what would I do with it?
Mortgage paid? Worried about paying for care? Several expensive holidays a year? Need a new car every few years?
Most would get by on a lot less than £1m.
First point.... The majority of retirees are sitting in properties that are way too big for their needs. My old man is in a three bed property with a garden that's so big you can play golf in it (diagonally and with a wedge, but still). Same goes for many aunts and uncles..... Whilst their kids are putting off having a family because they can barely afford the rent (let alone a deposit and mortgage) on their pokey flat.
Most retirees could sell up and live off the profits of their fortunate position for years.
WRT to your second point.....
A mate of mine recently organised it for his old man to legally top himself. His dad was 70-odd but had the onset of dementia. He didn't want to be sat in a home with some random wiping his arse with little clue as to what was going on. Mate's mum topped herself four years ago but didn't do it right and ended up in hospital for a week before passing.
Kinda respect the geezer for going through with it.
I know a nice place in Tuscany where the fumes escaping from an old volcano (Monte Amiata, good bike park there too) will put you to sleep within 20 minutes. That's kinda my plan. Nice bottle or two of Barolo, Chianti or Morellino di Scansano and let nature take its course.
Point three... Holidays needn't cost much. If you want to sit on a cruise ship swaffing G&Ts then it might cost you, but it needn't be the case (my nan died on a cruise ship swaffing G&TS, so let that be a warning to you).
On your last point.... I don't get why some people seemingly need a new motor every other year or two. More fool them.