May

12

do you think about retirement?

Filed Under retirement | 20 Comments

I’m in my late twenties, so it’s about 40 years until I hit state retirement age, and it’s more than 25 years until I reach the age at which I can withdraw any of my pensions. I don’t often think about what retirement might be like, or whether I’ll be able to afford it.

I do have a little spreadsheet, that tracks my pension contributions, and investment balances and gives me an inflation adjusted projection of my retirement income. (What can I say, I’m a spreadsheet geek.) It’s currently suggesting that I’ll be ok to retire when I’m 68. I’ll be rich enough to have an income that’s about what I have now, assuming that I’ll have paid off the mortgage by then.

I do put a reasonable amount away that’s earmarked specifically for retirement - currently around 11% of my gross salary. My combined investment amount this year is likely to be around 16%-17% of my gross income. This is marginally more than 2007, and I’m hoping to increase it more each year if I can.

The rule of thumb is to contribute 10% of your income, and although I’ve had a pension since I left Uni, I’m not sure when I started contributing more than 10%. But then, I don’t know if 10% is going to be a good rule of thumb for me. I’m pretty sure that you’re supposed to start with what you want retirement to look like, and then work from there, but I honestly can’t really imagine it.

I’m not anticipating taking early retirement. Compared to many of my m-network friends I have quite a conventional career/life thing going on. David @ my two dollars works for himself in various online ventures, Mrs. Micah has a patchwork career, being frugal and paidtwice are both pro-bloggers/SAHP/loads of other great suff, Patrick @ cash money life, pinyo @ moolanomy, gibble @ gather little by little, single guy money, and the doughroller are all heavily into alternative income (or have aspirations that way). I’m just well, me.

If things continue as they are for me, I’m likely to work (at a job I like) for a number of years, and then just retire when I can afford to. Pretty traditional and conventional. I absolutely don’t mind this at all, it’s just that without envisaging a kind of semi-retirement, it all seem such a very long way off. I am likely to be at least twice the age I am now when I retire, after all.

Because I’m sensible, and because I have no intention of being a poor old person, I’m dutifully putting away a good proportion of my money into retirement. Only enough that will do for retiring at 68 though. I just can’t get excited enough about retiring to work harder on it.

What do you think? Are you working towards early retirement or semi-retirement? Or are there other conventional people like me out there? Let me know in the comments.

Image by Tracy O

Mar

5

expat finances - National Insurance and State Pensions

Filed Under retirement | 7 Comments

mosquito beach, michigan

I could have sworn that I’d written a very similar post to this before, but I couldn’t find it. In any case, I get asked quite a few questions about expat finances from British people living overseas (especially the US) and I know that a few readers are expats living in the UK. I thought this information - whose discovery was inspired by a conversation I had with a friend the other day -  might be useful to you. 

Did you know that British National Insurance scheme (the one that qualifies you for your state pension) is reciprocal with a number of other similar schemes in other countries?

This means that if you are British and you work abroad you might be able to use your contributions there to qualify for a state pension over here, and vice versa.

The rules vary from country to country, but for example, if you have worked in the US and you haven’t paid NI for enough qualifying years to get a full British pension, you can treat the time that you spent paying Social Security to qualify. The amount you would get would be based on how many years you paid into both schemes, and the proportion of time you spent in each scheme.

Suppose you spent 10 years working and paying NI in the UK, and 20 years working and paying Social Security in the US. In the UK, they would calculate how much pension 30 years contributions would give you and pay one third (10/30) of that. In the US, they would calculate how much pension 30 years contributions would give you and pay two thirds (20/30) of that.

It works pretty much the same, as the agreement with the USA for all the countries in the EU - except of course that you could have worked in all 25 (or more) of them.

For Britons living in Canada, if you are not entitled to Canadian Old Age Security pension, you haven’t lived in Canada for more than 20 years, and you live in the UK for the 10 years prior to your retirement, your time in Canada is treated as if you paid contributions to the UK.

If you spent time in New Zealand, but return to the UK to retire, any time you lived in New Zealand will be treated as if you paid contributions in the UK, for the purposes of qualifying for the British State Pension.

Similarly, if you retire in New Zealand, any time you lived in the UK will be treated as if you paid contributions in New Zealand for the purposes of qualifying for New Zealand Superannuation. Any money you receive from the UK will be deducted from your Superannuation though.

If you are living in either New Zealand and Canada (or most other countries), once your State Pension starts being paid out it there will not increase. You can get more details from the Department for Work and Pensions, where you can also find information on the other reciprocal agreements with:

  • Barbados
  • Bermuda
  • Israel
  • Jamaica
  • Jersey and Guernsey
  • Mauritius
  • Philippines
  • Turkey
  • Yugoslavia (and former republics)

Image by mandj98

Mar

4

working after retirement

Filed Under retirement | 3 Comments

urban raptor

Chris emailed me the following question:

Can my company insist on my retirement at state retirement age or do I have the right to continue my employment?

The answer I’ve found (via the TUC) is that unfortunately, yes, your employer can insist that you retire at state retirement age, but only if the company’s normal retirement age of 65 or above. They cannot make you retire younger than 65 as that’s against age discrimination legislation. It’s possible that making you retire at 65 could be found to be against EU law, but that hasn’t been tested in the courts.

On the positive side, it has become easier to work past your normal retirement age. If you have a company pension, you no longer have to leave your job to get the pension, although whether you can draw some or all of your pension whilst working for the same employer will depend on the rules of your scheme. (More information on working after retirement.)
If you want to carry on working past state retirement age, you can defer your state pension and either get a larger pension when you do decide to start taking it, or get a taxable lump sum (with interest) to cover the pension that you didn’t take. (More information on State Pension Deferral.)

If you’ve got any questions, please feel free to contact me, and I’ll do my best to find an answer for you.

Image by mugley 

Next Page →