Is an Offshore Pension Right for You?

18 Apr
Why an offshore pension - Rum Point, BWI

Why an offshore pension – Rum Point, BWI

If you’re saving towards retirement and you have the means at your disposal to protect your savings in as many ways as possible, you might consider looking offshore to help you manage your pension. Governments, at least those in high-tax countries, often have a variety of ways to encourage people to save for retirement: tax-free contributions, tax-free gains, tax-free proceeds…I think you get my point. And, if you’re reading this in the first place, I’m pretty sure you know where I’m going with this line of reasoning.

But would you benefit from an offshore pension portfolio? If you’re already getting tax-breaks on your onshore retirement savings then probably not. At best you’re going to match any gains you might receive with your domestic investment. But if you plan on retiring overseas, are giving thought to expatriating before or right at retirement, or if you are currently residing in a low-tax country, you might just be in luck.

Onshore, or domestic, pensions typically bundle your insurable benefits (death benefits, disability, etc. as with a whole-life insurance policy) with a pension fund. Ostensibly, this is for tax reasons and not necessary for an offshore pension fund. The obvious benefit to an offshore fund is you can arrange to have the funds distributed when and wherever you want in the future. Essentially, you build up a tax-efficient portfolio of funds and investments which are set aside as a retirement ‘pension’. You can purchase deferred annuities for this goal if you want, and it’s very safe. But the rate of return on annuities isn’t going to attract your average offshore investor.

By now you may be wondering if you can transfer your existing pension plan offshore. Well, that depends. Where you live, the type of retirement plan you have, and when you plan on retiring are all factors. If you have a 401-k pension plan in the United States, it’s possible to use the assets from it to make approved investments into mutual funds and other assets while enjoying the tax-deferral benefit. Other types of plans, like a Keogh plan, wouldn’t allow for offshore investment at all.

You know your own finances best but you’ll probably want to seek a specialist for personalized professional advice for your own situation and needs. Generally speaking, there are some countries which allow you to take part or all of a tax streamlined pension fund (or income from one) and transfer it abroad, keeping all the tax advantages. It isn’t easy and you may have to pay the basic income tax rate on the transfer. Depending on what you have planned for the future, and where you are in the present, you might find this works to your advantage. If you’re planning on expatriating and living offshore then it’s definitely worth your while to look into the possibility.

Everyone’s future is, to a certain degree, uncertain. Nothing is more uncertain in the current political and economic climate than what the future might hold. If it’s at all possible to protect your future, and you think you might be able to with an offshore pension, why not do the due diligence and find out?

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