What do you do when you work from abroad? You may be employed in Vietnam or start your own business far from your home country. How is the pension system in Vietnam organized? Many expatriates want to know more about the pension system and have questions about contributions.
Getting posted to different countries in the course of your career is an experience that every expat longs. However, it may become an issue when you’re concerning about preparing for retirement as every country has its individual rules and regulations regarding pension plans. This is even more true in Vietnam, which does not provide contributions directly deducted from the salary of the majority of expatriates.
In other words: you do not contribute to any pension fund while working in Vietnam. Nevertheless, it is not too late to start doing so. Yes, because there are effective solutions that make it possible to keep saving in an offshore pension plan while working in Vietnam. I am about to give you concrete actions that you can start to implement today to secure your future and plan for your retirement.
It is said that retirement is not the end of the road but the beginning of a bevy of opportunities, especially for retirees with an open mind and a clear vision, particularly in the real estate industry. Some people will choose to make investments (real estate, stock market) all along their career to build up alternative income. Others will be more comfortable with traditional pension systems where you contribute all your life and secure a retirement pension. Depending on each person’s profile, affinities and wishes, let’s see in this article how contributing to a pension fund can ensure a retirement without surprises.
Before going into detail on the subject of offshore pension funds, remember that we also introduce alternative methods that many expats choose during their career to grow their wealth :
- Stock market opportunities with secure long-term strategies such as Ray Dalio’s permanent portfolio.
- Investment in real estate in Vietnam, one of the fastest growing economy in South East Asia
Offshore Pension Plans : is it always necessarily ?
An offshore pension plan is a combination of insurance and investment where your money is divided, such that some money goes to your life insurance premium payment and the other amount to investing in other equities.
The insurance company then creates a mutual fund for investing in different markets. Either insurance companies or international banks design offshore pension plans.
Brief History of Offshore Pension Plans
In the 1970s, the UK based institutions, to target expatriates as investors, established non-domestic fund management subsidiaries, which later on birthed the idea and the development of the offshore pension fund.
These funds are located in different countries worldwide, with the local authorities regulating them.
Benefits of Offshore Pension Plans
The benefits of choosing an offshore pension plan as an expat are immeasurable.
- From Asia to the Mediterranean, the vast icy lands of the north pole to the sizzling hot Sahara desert, your contributions can be made from anywhere across the globe.
- As a human being, you may face different life circumstances that affect the status of your finances. These offshore plans are a superb option because they are very flexible; you can stop or begin, increase, or reduce your contributions with no repercussions at all.
- You can begin saving at a very young age due to their long saving term that is mostly between 5 to 25 years.
- The pension plan premiums can be paid in the commonly used currencies; US Dollars, Sterling, Euros, and Hong Kong Dollars.
- If you plan on investing once you retire, there will be a wide range of funds for you to choose from.
- All the investment solutions are available to you.
- Some tax jurisdictions offer you as an investor favorable tax treatment, in which these pension plans get constructed around to take full advantage.
- Whenever you would like to get your savings, you can have it all paid to you at once.
- The icing on the top of this ‘appetizing’ cake is that you are guaranteed the sweat deal of earning tax-free income during retirement.
Having such benefits in mind, then offshore pension plans are your most attractive choice when planning for that “unrestrained” retirement.
Possible Detriment of Offshore Plans
100% guarantee is an unachievable aspect of any human-made creation, and thus offshore plans have a few hiccups now and again.
The major demerit of offshore plans is brought about by the fact that the money you contribute is invested directly in the world stock markets. The stock market tends to be volatile at times, with regulations and tax changes now and then. As a result, the validity of the plan shifts up and down every time.
Considerations to be looked at
Apart from the pros and cons of the offshore plans, we have some external factors that you should also put in mind before choosing your pension plan.
- Location: You must first determine which country you want to live in upon retirement. This is vital because each state has its own financial policies, especially when it comes to taxation issues.
- Amount: You must sit down and evaluate an estimate of the amount you will need, not just to cater to your family but also depending on the cost of living of the particular country you have picked to retire in.
- Duration: As an expat, the income you earn is considerably high, and you may then want to retire earlier than the average retirement age. Hence you need to factor in the age at which you should begin saving, including the amount and the impact that inflation will have on your living standards in the future.
Q&A : Offshore pension funds for expatriate living overseas : answers to your main questions
🌍 Why would I choose to go for an offshore pension plan?
Simply imagine living in any place of the world, and receiving pension from your country. Sounds intriguing, right? With an offshore pension plan your dreams can come true. Choose the one that works best for you and start living a new life when you retire.
💰 Will I have to pay taxes on my offshore pension?
No. This is one of the main benefits of offshore pension programs – there will be no need to pay taxes on your pension in the country of your residence during the retirement.
💥 What are the risks of stock market investment as a pension plan?
Investing is stock market is one of the most popular ways of ensuring a good retirement plan. However, it might be risky as the stock market is constantly fluctuating, and thus may not bring stable profit. Therefore, we would recommend considering stock market investment as a “Plan B” for your offshore pension plan.
📊 How to calculate how much I need to save for my offshore pension?
This fully depends on your planned country of residence. Learn how much you will need to have in order to pay for your basic needs there, such as rent, food, entertainment, and other. Besides, make sure you get enough money to save or invest in order to have extra income sources.
🇪🇺 Does my country have an offshore pension program?
Most countries offer offshore pension schemes. For instance, in the UK it is the Qualifying Recognized Overseas Pension Scheme. Please check your country’s regulations to see whether you will be able to benefit from an offshore pension program and spend your retirement in the country of your dreams.
Transfer of Local Pension
The movement of your domestic pension funds to the foreign country you have selected for retirement can be either an easy or a tremendously difficult task, depending on your country of origin. However, for UK citizens seeking to retire abroad, the portability of these savings has become a piece of cake literally.
Qualifying Recognized Overseas Pension Schemes (QROPS) is an approved scheme that enables you to transfer your pension from the UK to an offshore pension fund. If you are a non-UK resident but have savings in the country and want to move them to the country you are retiring in, then you can use the International Self Invested Pension Plan (SIPP). Another scheme is; Qualifying Non-UK Pension Scheme (QNUPS). It’s used by UK citizens who are permanently staying abroad or those within the country. It is for pension plans for assets and cash do not get tax relief.
Offshore Pension Plan Providers
The mobility of labor is no longer something new in the business world of today. Different multinational organizations and companies have developed by setting up offices in every significant economically growing city in the world.
Offshore pension providers enable you as an employee to save up for retirement in the country of your choice, or if you are an employer who wants to create a pension plan for your mobile workforce, then this is your sure bet. Some of these providers include:
- Expat Financial: They are a division of TFG Global Insurance Solutions Ltd. They provide an international pension plan for expatriate employers. Expat financial works with acclaimed and secured insurance companies globally to provide your employees with a mobile group pension plan that is tailored to meet your company’s or organization’s specific needs.
- The Sovereign Group: This is one of the significant pension providers in the market today. It offers different international pension schemes such as QROPS across five jurisdictions in the UK, Isle of Man, Gibraltar, Malta, and Guernsey. They are a large pension plan provider company; hence their options for you to choose from are considerably very vast. However, in comparison with other providers, the Sovereign is substantially very expensive.
- Generali Worldwide: Its headquarters is in Guernsey, and it is a subsidiary of the Generali Group. It is an insurance company with many branches around the world, such as in the Bahamas, Hong Kong, and the British Virgin Islands, New Jersey, Singapore and in the Cayman Islands. They offer retirement and investment plans to their customers. They were recently renamed Utmost Worldwide.
- Friends Provident International: They are part of the Aviva group and provide services in Asia and the UAE. They have a variety of saving plans provided, such as the Premier Advance Savings Plan. This saving plan is designed as a medium to long term investment plan with a regular payment procedure. It can be paid for in any of the most acknowledged currencies such as US Dollars. Another savings plan by Friends Provident is the Ultra Advance Savings Plan. This plan is slightly more expensive, also, for medium to long term investment purposes and acceptance in different currencies.
- Zurich International: This is an internationally-recognized insurance company that offers mainly life insurance covers. Under it, we have the Term Assurance. In this, you can choose from a 5 to 35 years period term for saving. It is a cover for critical illness and total or permanent disability. It has a waiver of premium benefits that states you get paid your policy premiums if you cannot work due to an accident that will cause disability or illness of any kind.
- RL360 Insurance Company: It is part of the International Financial Group Limited (IFGL). Their headquarters is in the Isle of Man, and they provide offshore savings, investment, and protection services to their customers.
These customers are expats in Africa, Asian, UK, and Latin America and all over Europe. It was previously called Royal London 360. They offer different insurance covers, such as their LifePlan. It is long term saving and is a life insurance policy that you can insure for two. It can be for family, business, or even loan protection. Another one is the Quantum Savings Plan, where you save an agreed amount over a mutually agreed period of years regularly.
The list of pension plans is quite vast, but others that you can look into include Alliance Pension Fund, Global Pension Fund, Hansard International, Investors Trust, and Old Mutual International.
They say retirement is delightful if you have these two essentials: a lot to live on and much to live for. Therefore, as you enjoy the ride of your career life, with its ups and downs and to whichever part of this marvelous world, it may take you, remember retirement is inevitable. It is wise to begin planning for it as soon as possible.
If you have any queries about the offshore pension plan, get in touch with us anytime. We are here for you.