Expats facing pension shortfalls, expert claims

by Ray Clancy on December 20, 2011

Expats moving between jobs and countries may lose out on pension benefits

Expats moving between jobs and countries could face pension shortfalls when they retire as well as a number of new rules in different countries, it is claimed.

Also a raft of new pension reforms could see expats losing out on valuable pension benefits due to a build up of cross border entitlements, according to Gavin Pluck, European director of Guardian Wealth Management.

Pension reforms are a top domestic issue as more countries seek ways to address the worsening economic situation and reduce their pensions bill and expats are unlikely to remain unaffected, he pointed out.

‘A raft of new rules will mean that expats who have a number of pension plans on the go may be affected by any legislation that impacts contributions, tax or other entitlement to pensions,’ he said.

‘So far, most of the reforms have been centered on raising the retirement age, but expat hot spots such as the United Arab Emirates have not been immune to the global downturn. As companies struggle in the region, they are now looking at ways to reduce current benefits paid to expats,’ explained Pluck.

Should these proposals be approved, the UAE will introduce a new pension plan that not only requires expats to share the cost of benefits once paid entirely by the employer, but introduces another layer of complexity for expat pensions.

Also many career expats could find themselves with six or seven different pension plans.

‘As expats move between jobs and countries, they are forced to leave a trail of inadequate money pots left stagnating in plans that are an administrative nightmare to keep tabs on,’ warned Pluck.

‘With the average length of company service no more than five or six years, the range of different schemes on offer and lack of ease in transferring pensions across borders means expats are least likely to successfully manage their retirement plans and will increasingly face a shortfall if left unmanaged,’ he explained.

Even expats who are employed by the same company and move cross border, find it difficult to take their pensions with them.

‘In addition, each plan is governed by the jurisdiction it is in and making further contributions is often not possible. New reforms may unwittingly make the process even more complicated and expats should review the situation sooner rather than later,’ added Pluck.

{ 1 comment… read it below or add one }

asiapacificman January 4, 2012 at 11:23 pm

UK government taken to court over Expat pension arrangements
For many years the Government (DWP) have always said pensions can only be uprated where there is a legal requirement as with the EU or where there is a reciprocal agreemnet. This is incorrect and the DWP now admits that. Pensions can be uprated in all countries where the pension is "frozen" by Domestic Legislation. All that is needed is a vote in Parliament. The House of Commons Library states that the State Pension in which people build up entitlement is on the BASIS OF THEIR NATIONAL INSURANCE RECORD. no where in that definition does it say "depending on where they live". So frozen pensions break the virtual contract between employers/ employees and the government. (payment into the schems is basically compulsory). However the Government hide the freezing of pensions in the Social Security Benefits Regulations (section 3). i.e Back door discrimination. In the new Pensions Bill 2012 there is no reference to pensions being frozen. The Bill relates to all pensioners. The Government will continue to cheat pensioners by hiding behind that SSBR section 3 again. "We had to pay in so the Government should have to pay out!" Thats called being fair Mr Cameron.

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