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Creative pension plans

Discussion in 'Teaching overseas' started by cityfree, Feb 26, 2011.

  1. cityfree

    cityfree New commenter

    Hi all,
    Following inspiration from the 'far away shores' thread, I thought it would be interesting to find the different ways people are dealing with lack of Teacher's Pension Scheme whilst abroad.
    I know we can't pay into the TPS when out of the UK and I was planning to go down the property route (long term investment rather than short term). Do people use private pensions? I have one with AXA through the company I worked for before becoming a teacher. HMRC have advised that as I only need 30 years contributions for state pension (if I get one!) so don't need to make contributions for a while.
    One, slightly amusing, thing...when I started teaching (I'm in my second year), I had 40 years until retirement, now I have 42! Go figure...[​IMG]
     
  2. cityfree

    cityfree New commenter

    So, no one has any interesting ways on preparing for retirement?
     
  3. You HAVE to get a private pension or long term investment. I have an investment plan with Generali, which was set up by a broker who works for deVere. It grows exponentially because of compound interest, so the longer you save, the more it will be. Start doing it now because after 40 years even a small regular investment will be worth a serious lump sum.
    The state pension will barely keep you alive, though the 30 year rule might be abolished soon.
    Property as investment may be a thing of the past - I hope. Starting my own business is really my pension plan.
     
  4. property has always been a sound financial investment in the past. i can't see how that will not be the case again. you have a long time left to work and if you are staying abroad you should buy property and ideally more than one as time goes by. maybe there will be a 5 year plus stagnation period with property prices now - ideal for you to save and buy in the not too distant future.
    look at your pension contributions in to the tps with your job - work out the govt contribution - put that much away combined (at least) whilst working abroad. if you are single you should save more.

     
  5. What do you mean, the 30 year rule might be abolished soon?
     
  6. cityfree

    cityfree New commenter

    Thank you guys. I like the idea of putting away the combined. I'm planning to save a he'll of a lit more than that. I am thinking that I need to either have a private pension plan or some sort of investment as over that length of time inflation will have a major impact.
     
  7. stopwatch

    stopwatch Occasional commenter

    I spotted that too.
    What will happen to the 30 year rule (I presume that you mean the 30 years contributions to NI/State Pension)?
    I agree with another poster in that I think property will also remain a good investment, but you have to buy wisely.
    People will always be looking for places to rent, and renting a 3 bed house on a 'per room' basis at say £250 to £300 pcm per room will bring in a good income. Any costs (maintenance, mortgage etc) can be offset against tax.
    If you buy in a cheaper area, the rentals aren't a lot less than in more expensive areas. If you buy at auction, you may also pick up a good bargain agt 10 to 30% less than market price.
    I am not so sure you could be that confident of 'investments' as such. I think these are less stable than the prosepct of renting. You also may not have as much control over what happens here.
    I made the mistake of only thinking I would be 0/seas for about 5 years. Here I am in my 10th year and not having made any pension contributions for 10 years (apart from NI/State pension). Most of my savings have gone into paying off my own mortgage. I have 21 years contributions from prior to when I left which will give me something.
    I wish.... old shoulders...... young head..... time again blah blah[​IMG]
     
  8. stopwatch

    stopwatch Occasional commenter

    You will have to be very disciplined as this will be a fair chunk of your money when you have the temptations to spend it on travel, nice car, good food - all the 'experience' benefits of being overseas.
    You will find there is a lot of peer pressure to indulge yourself, regularly at cost (Yes it does sound like a 'teen' thing but it happens amongst grown adults of all ages overseas). You will have to decide exactly how much of this you want to do and stick to your plan.
     
  9. nemo.

    nemo. New commenter

    Hi the rule of thumb that I was advised was that an overseas job should pay 30% more than a UK job to compensate you for not being in the TPS. That us about right but trouble is international schos have caught on that there are mire teachers these days looking to go overseas.

    I totally disagree re property. Firstly property means both commercial and residential. Commercial property has massive oversupply and long term there is a trend away from especially retail commercial property. As for UK residential? The UK has an imbalances economy due to the "ponzai" scheme nature of the UK housing Market. London high end (2 mill plus) is driven by cash rich overseas buyers from dodgy countries looking for a safe bolt hole - Russian mafia and oil rich types etc as well asthe new Chinese billionaires - but for the more affordable end we have houses at over 6 times median salary UK wise when the long term average is about 2.5. You do the maths! It will take 20-30 years to unwind that bubble.

    What happened in the last 20 years was that shares were poor compared to UK property. Returns tend to return to their long term mean and that means shares good, bonds bad and residential property bad. So I'm heavily invested in shares (not UK small caps as UK plc up the creek for 20 years).

    The real reason to have a house is to live in it. Rent one out if you intend to return and worried that supply side jazzier will cause house prices to rise (unlikely but possible as UK government worst in developed world for house building).

    I use a SIPP to wrap my pension assets in but more than half of mine is freely invested outside the restrictive pension uk system. ISA and then a self invested cheap dealing service makes a good mix. ISA investments are for UK residents only so use them when in UK of course only.

    I use index trackers mostly and pay fees of quarter percent mostly for developed markets and half a percent for emerging markets. Research shows that 90 per cent of returns are from assert alocation. I keep a fixed percentage in various markets and rebalance every year. Don't use insurance companies or managed funds as they rip you off.
     
  10. Nemo,
    Excellent advice and I completely agree with you about the use of trackers. TER (Total Expense Ratio) much lower then Unit Trusts etc. DO NOT TOUCH ANY SCHEME INVOLVING AN INSURANCE COMPANY. Sorry for shouting but these really do rip people off, IFA's love teachers coming out and signing them up for schemes that they cannot get out of. A lot more I could say but need to work.
    Top Board for novice and advanced investors is Fool.co.uk
    I hope that does not cause a problem for moderators, by naming that board as it is a free investment board.

    regards

    Nomadicranger
     
  11. the hippo

    the hippo Established commenter Community helper

    Mrs Hippo and I bought a property in Bulgaria six years ago. It was advertised as a six-bedroomed house and it cost us twenty thousand pounds. Installing a new kitchen, a new bathroom and a garage has probably cost us another ten.
    When we want to go into Sofia, about 60 km, we take the train from Dragoman. A one-way ticket is about one pound fifty.
    The Bulgarian equivalent of Council Tax is ten quid a year.
    When I asked a Bulgarian friend of mine how he keeps his house warm in the winter, he replied, "I take my chainsaw and go up into the pinewoods."
    Of course any teacher who wants to retire in the UK to need huge piles of cash, especially with the recent rises in VAT. Therefore it makes sense to retire somewhere cheaper, such as Bulgaria. The weather is better too.
     

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