British expats working internationally, especially those on short contracts, should be wary of falling into the trap whereby they create a shortfall in their pensions contributions, warns international financial planning group Guardian Wealth Management (GWM).
‘All too often when people take a short term contract and move abroad they put their UK pensions on hold. Since they are on a contract they are unlikely to be eligible to enroll in any local company pension scheme,’ said Gavin Pluck, European director at GWM.
‘Even where they can enroll, many don’t simply because they know they are on a short contract and they don’t want the hassle of transferring the pension out further on down the line,’ he explained.
‘What then happens is that contracts are extended but the pensions are forgotten and people find ten years down the line they have failed to make adequate provision for their retirement,’ he added.
This omission can be compounded as early contribution into a pension scheme can benefit from year on year accumulated growth, greatly impacting the final pension pot available to that person at retirement, Pluck pointed out.
Some countries, such as Switzerland, return pension contributions when an individual ceases to work in the domicile. The danger here, Pluck said, is that very rarely is it re-invested into another pension scheme.
‘Unfortunately, this can lead to a huge pension reduction in later life. We find that contracted international workers can be the worst prepared for retirement, even where they have left their home country because it is financially beneficial to work abroad, as they tend to adopt a short term outlook and, in consequence, omit to plan for their long term needs,’ said Pluck.
‘Accordingly, we make retirement provision one of the first areas of financial planning we focus on when we talk to any new client, because getting pension provision right and as early as possible can make a huge difference to that person’s retirement,’ he added.
Guardian Wealth Management is a professional financial planning service dealing with international workers and expatriate clients across the UK, mainland Europe and the Middle East.
With a reputation built on reliability and the highest ethical standards, Guardian Wealth Management is devoted to helping its clients create, preserve and pass on their wealth.