Your Pension Scheme



Freedom and Your Pension Scheme

It Has To Fit

Your pension scheme can determine the extent of your freedom of action as a retiree. This may have little to do with actual amount of the pension that you receive. There is nothing standard about pension schemes. They vary from country to country and company to company. Governments are attempting to phase out pensions paid to citizens once they have attained a certain age. Such pensions are often unfunded as is the case with many government expenditures. This means that the government has no reserves or allocated funds on which to draw to pay these pension schemes. Payment is made from current revenue or other reserves not earmarked for a particular use. With increased life expectancy the pension burden on governments is increasing. What you get, when you get it and where you can deal with it is always in a state of flux. Constant vigilance with respect to changing regulations is vital to ensure your flexibility.

The Pension Tussle

All In The Plan

Governments are always looking for ways to reduce the pension scheme payout whereas recipients try to ensure that they get all that they feel entitled to receive. In many countries the age qualification is being raised and the alternative income threshold is being changed. Thus people are being asked to work longer before qualifying to receive the pension. Also the amount by which the state pension is diminished owing to the receipt of other income is being increased. Recipients or prospective recipients of the state pension often try to arrange their affairs so that they attract even just $1.00 of the state pension. This is because other benefits go with the fact of being a "pensioner". In Australia the holder of a pension card may pay as little as one sixth of the standard price for prescribed medicines. This benefit often increases with age as more drugs may be needed.

Governments are also trying to move the payment of pensions from state funds to the accrued benefits to which employees may be entitled via superannuation schemes. In some countries governments are trying to recover some control of pensions already being paid. In the United Kingdom a restriction has been placed upon the unfunded pension schemes of civil servants which prevents such funds from being moved out of the country. Again in Australia there is no provision in law or in the constitution for the payment of an age pension. Precedent has made it virtually impossible for this payment to be stopped now. In the United Kingdom the National Insurance Scheme no longer covers the cost of all that the collections from wage earners were intended to cover. It is likely that the pension part of this scheme is still "in profit" from the period when few lived to claim a pension and most drew one for a short period only. No contributions were ever returned. Even so the British government pays some of its pensioners less than others simply by virtue of the country to which they have retired. This has nothing to do with the fact that contributions to the state were the same as other pensioners who have remained in the United Kingdom or a who went to small number of other countries. One of the benefits of recipients of pensions from governments such as those of the U.K., Australia, Canada, New Zealand is that they may be paid to almost any country in the world.

Negotiability is Important

If You Say So Prime Minister

Most countries to which retirees may wish to go for retirement have an income requirement as a qualification for applying for a residence visa. Although many members of the public do not trust politicians, governments trust most other governments in non-political matters. A letter from a government pension paying authority confirming that you are receiving and will receive for the rest of your life the pension benefit via a state pension scheme that you so claim will be accepted. The letter may need translating and possibly going through the apostille procedure but it will be accepted as proof of your entitlement.

The situation may not be so simple if a pension is being paid by a non-government organization. You will have to take advice on this point from the department to which you are applying for the residence visa. A pension from a large multi-national company may well be easier to confirm than one from a smaller firm. If a firm has employed the services of an international insurance company or other pension payment or administration organization it may again be easy to have a statement from such an authority accepted as proof of entitlement to a pension.

Transfers

Non-government organizations may not be so willing to pay pensions abroad. The only recourse here is to make arrangements through your bank. This may involve fees. As a matter of simple income protection it is important to establish with your bank - or another is necessary - an offshore account. Such accounts are perfectly legal. This kind of account moves your funds one legal step away from creditors and governments.

Safety and Access

Often these accounts come with a debit card which can be used at ATMs all over the world. Note has to be taken with regard to exchange fees that the bank may charge for foreign transactions. Depending on your relationship with your bank you may be able to get a credit card with such an account. Debit cards serve equally well for making payments and obtaining cash. There is just no accounting period for settling the account when paying for, say, hotels and airline tickets.

Having a pension paid in your new country of residence via a bank has advantages. It is possible to transfer to a local account just what you need for living expenses. Governments will usually not split payments. The whole of your pension will be paid to your nominated bank. Unfortunately payment will often only be made to the country in which you are resident. This can give problems if your new country gets into financial strife as have Cyprus and Greece recently. Local banks may have no customer guarantee facility from the government in the event of bank failure although this may be an arrangement of little value if it is the government rather than just the bank which is encountering difficulties. An offshore account in a place of political and economic stability offers some protection and the ability for you to act quickly if local problems occur.

Positive Benefit of Your Pension Scheme

That's Good!

Usually pensions enjoy tax free status in the receiving country. This is a major advantage over other forms of income. It is particularly so if the new country taxes earners on world-wide income. This situation is rare and often not as extreme as the U.S.A. which taxes personal world-wide income on the basis of residential status, place of birth and citizenship. This has given rise to a very odious piece of U.S.A. legislation known as the Foreign Account Tax Compliance Act (F.A.T.C.A.). This is making access to overseas bank accounts for U.S.A. residents very difficult but this is not a subject for discussion here. As usual those likely to be affected by it should make themselves familiar with its requirements. Pensions, particularly government or social security pensions, are excellent forms of income for satisfying the income requirement that many countries impose upon applicants for permanent residence visas.


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Malaysia

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Dominica

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Belize

Australia

New Zealand

Canada

Retirement Abroad - Your Complete Resource

A Short English Grammar

Your World




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