What is enough ?
Anyone close to retirement will have these thoughts. Perhaps it would have been more prudent if they had thought about these matters much longer ago. However, we cannot turn the clock back, so the question remains, “how much is enough?” Most expats will not have a company pension scheme, perhaps they had one years ago, and perhaps that has been altered to a QROP, or remains in a UK scheme. Thus for most expats it is a question of building assets, in cash, equities etc.
Traditionally people retiring back to UK would have brought a pot of cash, and bought an annuity. As with many aspects of Financial Services in UK, that system is now redundant. No we can invest into assets to create an income flow until, we hope, the day we die, then perhaps a residue for family etc.
There are many variables to implementing these types of plans, not least how long will we live for? What return can we hope on the capital? What income do we require? Old Mutual recently conducted a survey, and some of thinformation they gleaned may help someone planning their retirement. It materializes that the average person expects to retire at age 63.6 and live 21 more years to age 84.5. On the basis that they were seeking an income from investments of £13,118.80, using the traditional method of an annuity, they would require a fund of £237,000. However, when they died at the estimated 84.5, the income dies with them. On the other hand if they were using capital, then using the same pot of money, £237,000, at death age 84.5, there would remain some £154,000 available for distribution. This assumes a growth rate of
5% per annum. However, what the above figures ignore is inflation. Plus could we really live on £13,000 per annum in today’s terms??