Saving for retirement is key for all of us with life expectancy increasing, state pension provision shrinking and the responsibility for having enough to live out our golden years in comfort now being placed squarely on our own shoulders.
The retirement savings options for Irish expatriates are naturally different than the options for Irish residents. If you are tax resident in Ireland (sometimes referred to as onshore) you can usually benefit from tax relief on contributions into approved pension and retirement funds, however this option is not available to many expats, particularly those living in China.
If you live offshore, which simply means that you have expatriated to a foreign country and are currently tax resident in China for instance, it is nevertheless crucial to save for retirement while you are working abroad, particularly as many expats living in China find themselves with increased disposable income, an enviable situation which provides the perfect opportunity to boost their nest eggs.
Fortunately, there are some great savings options for retirement available to expats in China. I hesitate to use the term ‘offshore’ as this can have negative connotations and is off-putting for some people but offshore investing simply means that the investment is held in an international jurisdiction other than your country of residence for tax planning purposes. These vehicles are perfectly legal and cater specifically to an international expatriate clientèle.
The good news is that they also offer many advantages. Let’s take a look at the main ones.
Nine advantages of the international investment vehicles available to Irish Expats in China
The investments within this kind of fund are more accessible than your typical pension in Ireland, which usually ties in your money until you reach the age of 55 at least. Your retirement savings will grow in tax-optimised funds which you can access at any time up to your chosen retirement date (subject to policy/fund conditions).
- You maintain control
You take control and decide, in consultation with your financial adviser, where every single penny of your cash is invested. As an expat living in China you have low-cost access to an enormous range of investment funds designed for expatriates and the flexibility to adjust your portfolio to meet your changing requirements at any time.
- Currency flexibility
These retirement saving vehicles offer the opportunity to save in different currencies. This can be especially useful if you live in a jurisdiction where the currency is volatile or if you are planning on retiring to a different country.
- Perfect for expats who move around
These funds are great for nomadic expats who may move country several times over the course of their time abroad. Investors are able to both contribute and withdraw wherever in the world they are based.
- Freedom of choice
You build and create the retirement that you would like by setting your own monthly savings amount and your retirement date rather than being dictated to by a government or pension provider.
- Continuity of your financial planning
An offshore retirement fund offers the ability to invest and stay invested in the markets even if your tenure overseas is short, and this will help you to remove any gaps in saving for your retirement. The removal of these gaps is quite important because, as many expats discover, an initial overseas posting of three years often turns into ten and none of us can afford to miss ten years of saving towards retirement, in fact, to do so can be catastrophic.
- No drawdown restrictions
You can take as much or as little of your retirement fund as you wish and can even opt to take your entire retirement fund in cash instead of being restricted to 25% of the fund.
- Annuity not required
Once you reach retirement age, you will have several options with a fund of this kind. You could leave the money invested, cash it in or take out an annuity but the important thing is that the choice is yours. You will not be forced to purchase an annuity, as is the case with certain pension providers.
When you eventually die, the residual fund can pass to your wife or family according to your wishes.