RE­TIRE­MENT PLAN­NING? I AM STILL YOUNG

When it comes to re­tire­ment plan­ning, a sig­nif­i­cant ma­jor­ity of ex­pats tend to take a rather cava­lier dis­re­gard about sav­ing for what can seem like a dis­tant, if not imag­i­nary event.

Qatar Today - - INSIDE THIS ISSUE - BY AYCAN RICHARDS Se­nior Fi­nan­cial Con­sul­tant Guardian Wealth Man­age­ment Qatar

The ma­jor­ity of ex­pats here tend to adopt a cava­lier ap­proach about sav­ings to lead their post-re­tire­ment life with­out any fi­nan­cial wor­ries.

The cur­rent pop­u­la­tion gen­er­ally is fit­ter and health­ier than ever be­fore and has the po­ten­tial to work long into their 60s. There is also a wide­spread dis­in­cli­na­tion to save for the long term so the prob­lem of re­tire­ment pro­vi­sion for in­ter­na­tional work­ers in­evitably es­ca­lates.

Hence, it is the sole re­spon­si­bil­ity of an ex­pat worker to pro­vide for his or her re­tire­ment. No-one is go­ing to do it for them. A fail­ure to save dur­ing what is prob­a­bly the most pro­duc­tive and fi­nan­cially re­ward­ing pe­riod in any ca­reer, means in­evitably that a bleak life­style awaits you in re­tire­ment.

In Qatar, it is the norm for ex­pats to earn a tax-free salary and re­ceive an end of ser­vice ben­e­fit, equiv­a­lent to a lump sum pay­out of one month's salary for each year of em­ploy­ment. How­ever, it is ex­tremely un­usual for em­ploy­ers to make any sort of pro­vi­sion to­wards an em­ployee's pen­sion plan. It is there­fore ab­so­lutely es­sen­tial to set aside a por­tion of in­come from the very out­set of any em­ploy­ment con­tract – no mat­ter what your age, no mat­ter what your cir­cum­stances.

The good news is, that by plan­ning early, you will not nec­es­sar­ily have to for­feit very much and reg­u­lar and long term sav­ing will not make a no­tice­able dent in your life­style. The key to all of this is to take ad­van­tage of the myr­iad reg­u­lar sav­ings, pen­sions and in­vest­ment prod­ucts which are specif­i­cally de­signed for the in­ter­na­tional mar­ket.

As­sess pen­sion size

The ob­vi­ous first step is to as­sess the size of pen­sion you think you would re­quire to main­tain your de­sired life­style in later years, while at the same time, tak­ing into ac­count tax­a­tion and in­fla­tion con­sid­er­a­tions.

In order to il­lus­trate this, let's take the ex­am­ple of a 35-year-old ex­pat who wishes to re­ceive the equiv­a­lent of £30,000 (QR186,900) per an­num at re­tire­ment. He or she should an­tic­i­pate that this amount will ini­tially re­quire to grow by 3% each year, prior to re­tire­ment, in order to at the very least keep pace with in­fla­tion, and main­tain its pur­chas­ing power. If our ex­pat plans to re­tire at 60, with­out com­pound­ing in­fla­tion, he must add 75% to this fig­ure. The equiv­a­lent sum he would re­quire would then be £52,500 (QR327,025).

As­sum­ing tax of, for ex­am­ple, 20% on this an­nual in­come, the gross amount would need to be £63,000 (QR392,490). A typ­i­cal re­tire­ment of 20 years would there­fore re­quire a mul­ti­ply­ing fac­tor of 20 on the £63,000 (QR392,490), which would then re­sult in a tar­get pen­sion pot of £1,260,000 (QR7,849,800).

Prag­matic ap­proach

The sec­ond step is to work out how this sum can prac­ti­cally be achieved, by sav­ing over the avail­able time­frame (with a re­al­is­tic an­nual growth rate of say 6%).

It is im­por­tant that you as­sess what as­sets, sav­ings and pen­sions you cur­rently hold. You may have a num­ber of com­pany schemes al­ready built up from work­ing in your home coun­try, or have a prop­erty port­fo­lio which could then be sold or utilised to pay out an in­come from rents. While these should all be taken into ac­count, do not fall into the trap of bas­ing your hopes for re­tire­ment solely on ei­ther, as this can be risky and much too spec­u­la­tive.

In con­junc­tion with other as­sets, the most re­li­able way to take con­trol over fu­ture pen­sion pro­vi­sion is to ap­por­tion a com­fort­able amount of any sur­plus in­come each month and in­vest in a flex­i­ble, long-term in­vest­ment plan. This di­ver­si­fies your sav­ings across a range of ge­ogra­phies and as­set classes such as eq­ui­ties, prop­erty, al­ter­na­tive in­vest­ments, bonds and com­modi­ties.

This method of sav­ing for re­tire­ment can not only be man­aged in line with your own risk pro­file and chang­ing cir­cum­stances, it of­fers a bet­ter way of mak­ing sure your sav­ings are not eaten away by in­fla­tion. It also helps avoid the need to boost re­tire­ment

“By plan­ning early, you will not nec­es­sar­ily have to for­feit very much and reg­u­lar and long term sav­ing will not make a no­tice­able dent in your life­style. The key to all of this is to take ad­van­tage of the myr­iad reg­u­lar sav­ings, pen­sions and in­vest­ment prod­ucts which are specif­i­cally de­signed for the in­ter­na­tional mar­ket.”

plan short­falls, of­ten when you can least af­ford to.

Look for op­tions

So what type of suit­able re­tire­ment plans are on of­fer for to­day's ex­pat?

One of the most ef­fi­cient ve­hi­cles is a long term in­vest­ment plan which qual­i­fies as a life as­sur­ance pol­icy. These plans of­fer ex­pats a high de­gree of con­trol and flex­i­bil­ity. As well as of­fer­ing a wide range of in­vest­ment op­tions, in the eyes of the vast ma­jor­ity of tax au­thor­i­ties, they are treated as non-de­clar­able en­ti­ties for in­come tax pur­poses, un­til such time as what is called a “tax­able event” oc­curs – this is most com­monly when the plan holder with­draws funds.

It is also worth not­ing that such plans only in­cur in­come tax based on the amount with­drawn each year and in the ju­ris­dic­tion in which you are tax res­i­dent at the time of with­drawal – typ­i­cally the ju­ris­dic­tion you re­tire to.

Fur­ther con­sid­er­a­tions in­clude choos­ing a plan which is flex­i­ble. The large ma­jor­ity of in­vest­ment plans will have an Ini­tial Con­tri­bu­tion Pe­riod (ICP) which must be paid. Af­ter this time, changes can be made to the level of con­tri­bu­tions. A “pay­ment hol­i­day” is also favourable. This is ad­van­ta­geous if you are be­tween em­ploy­ment con­tracts and are thus un­bur­dened by pay­ments dur­ing this time.

Fi­nally, en­sure that your cho­sen plan is ge­o­graph­i­cally por­ta­ble, in that you can con­tinue pay­ing in while liv­ing and work­ing in var­i­ous lo­ca­tions and that it is also placed with a cus­to­dian based in a safe, se­cure in­ter­na­tional ju­ris­dic­tion, such as the Isle of Man.

Most of us will re­tire at some stage and the ear­lier we put fi­nan­cial plans in place, the more com­fort­able that re­tire­ment can be made

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