International Pension Plans

International pension plans


When it comes to your retirement and the planning thereof, being covered by international pension plans could provide you with the benefits that you seek.

Covered with international pension plans

When it comes to your retirement and the planning thereof, being covered by international pension plans could provide you with unique benefits once you reach your retirement age.

International Pension plans are essentially the same as Personal International Retirement Plans except that it is normally provided by an employer and will usually have less flexibility in terms of available investment options than a Personal International Retirement Plan.

For a full discussion on the benefits of a Personal International Retirement Plan click here.
For employers wishing to provide benefits to staff spread all over the globe a single International Pension Plan is usually simpler and easier to manage than various schemes in multiple jurisdictions.

Making the global economy more efficient, requires the ability for labour to move smoothly from one jurisdiction to another.

For people who work outside of their country of residence, international pension plans can be taken full advantage of, depending on the jurisdiction the employee retires in;

  • allowing the employer and the employee to benefit from efficient administration
  • no need to transfer funds when moving from one jurisdiction to another
  • possible tax efficiencies for the member employee on retirement

You can implement an International Pension Plan with as little as 5 employees as long as the minimum contribution requirements are met.

An International Pension Plan is not only for companies with globe trotting employees but can be used alongside any companies local Pension Scheme as a valuable add on especially for members wishing to contribute more than the legislated tax deductible amount.

To understand the tax benefits of an International Pension Plan please read the tax benefits of a Personal International Retirement Plan since they are exactly the same.

How do international pension plans differ from international retirement funds?

International Pension Plans are provided by your employer who has contracted with an international Pension and Retirement Provider. The Employer pension plans are usually available from the same providers that offer Personal International Retirement Plans but with slight changes to limit complexity and investment options.

Interaction with your pension provider is usually through the HR department of your company.

International retirement plans are available through specifically registered Retirement providers on an individual basis. You will interact with the provider either directly or through your Certified Financial Planner. Since the investment options and internal structuring options are almost limitless it is advisable to make use of a Professional Financial Planner.

Only you as the member can make contributions to the plan.

In terms of international pension plans – these plans are of an employment related nature. These plans work by either the employer being responsible for contributing to the plan on a regular basis or both you as the employee and the employer both contributing to the plan.

The value of the final retirement amount will depend on the performance of the underlying investments chosen. It is thus important to remember to review your plan regularly to make sure you are on the right track for retirement.

How much money do I need to retire?

Deciding how much money you need to retire is a factor of the income required at retirement and the length of your expected retirement. Since none of us know the exact date of our death, we strongly advise that clients take a conservative approach and plan to live significantly longer than what their parents’ generation did.

Medical technology is increasing human life expectancy, but most people have not caught up in their financial planning to make provision for this change. It is therefore advised that you consult with a CFP in assisting to you determine your retirement goals properly.

Reasons to move your savings beyond the border

If the thought of emigrating has crossed your mind, then you have probably wondered how to structure your finances accordingly. Financial emigration brings forth various benefits.
Below we will list some of the reasons why you should contemplate moving your retirement savings beyond the border of South Africa.

  • Currency Hedge – Moving your investments into a more stable economy will find you reaping rewards of real growth while others are panicking, provided you decide to draw your retirement savings offshore.
  • Mitigation of political risks – In today’s day and age it is not the market that is the biggest risk, but in fact, the government. By strategizing and placing some of your retirement savings in a foreign jurisdiction, you can greatly reduce your exposure to political risk.
  • Peace of mind – Think of an offshore pension like an insurance policy. Having protection against concentrated economies, financial markets and banking system gives you peace of mind, knowing that you have taken a step forward in protecting your hard-earned money.
  • Being able to act quickly – A compelling reason to have money in a foreign jurisdiction is the fact that you can access your money from age 50 which is earlier than the minimum South African retirement plan, with less restrictions on how and when you can take your retirement benefits.

By moving your retirement savings beyond the border of South Africa, you open yourself to a wide array of benefits, offering you the ability to be completely independent. With this, you have options at your disposal. With options, comes freedom.

Advantages of international pension plans

For people working abroad or outside of their country of residence, international pension plans can be a very attractive option. Below we list the main advantages of having an international pension plan;

  • Regardless of where in the world you are, an international pension plan allows you to make contributions in a currency convenient to you and your employer.
  • You have the ability to choose how you want to be paid out (Ad hoc lump sum withdrawals or regular monthly, quarterly or annual payments). For many, having the entire sum of their savings paid out at once is deemed a desirable option especially if large once-off expenses are expected in retirement such as purchasing a retirement home. If you are restricted to only taking recurring income payments by your local pension plan, then this is very useful indeed. (Jurisdiction of tax residence in retirement will affect how best to take your pension)
  • Your plan can be structured in a way that allows you take full advantage of tax treatments offered in foreign jurisdictions.
  • You have access to a broad range of investment options.

Things to take into consideration when planning retirement

Future expenses, inheritance, retirement destination and tax are all things that you need to take into consideration as they have the potential to have an effect on the outcome of your retirement.

Familiarise yourself with local legislation, costs of living, tax, cost and quality of medical care as well political climate.

Note: it is important to not underestimate the importance of the above as they play a crucial step in ensuring your golden years stay golden and don’t turn to rust later on.

Remember your pension doesn’t have to be from the same place you plan to retire in. A good international pension plan based in a safe offshore jurisdiction invested in a hard currency can be the best investment you make especially if you plan on retiring in a more affordable jurisdiction but that has political or economic instability.

What is the perfect pension plan?
It is nearly impossible to predict what will be the perfect pension plan for an individual as no one really knows what that certain position is going to look like in the future.
In order to assist with this decision, we suggest that you speak to your financial planner in order to make a sound decision and assist you with the planning of your international pension.