Readers' Submissions

Retirement Funding Update

  • Written by SXGD
  • December 6th, 2007
  • 12 min read


Black Pagoda Patpong Bangkok


My original submission was posted by Stickman on 3rd December 2007 and this is a follow up submission based upon the readers responses received.

Everyone who emailed me (either retired already or not) commented that it was a logical submission.

I re-iterate I have no comment to make as to how much each person requires for their retirement.

I pointed out that I fully understand that inflation fluctuates, interest rates vary, housing can go up and down, currencies can fall, and allowances for holidays / medical etc are required.

From the feed-back I got my numbers for retirement seem to be based on sense and would be enough for a good retirement. In fact the thing was that my AU$64,000 per year seems to be very high based upon the feedback I have received. So maybe I need less to retire than my model above predicts. That can only be a good thing.

The reason for the follow up submission is to discuss (as per the feedback)

1) Inflation

2) Capital Gains on UK housing / interest on funds.

3) Savings

4) Transferring funds to your retirement location.

5) Retirement Visa.

6) Pensions.

Inflation seemed to be a hot topic in the responses, because I believe it is very hard to exactly put a figure on it, (not all governments tell the truth, Lies, Damn Lies and Statistics) and what will happen in the country of your retirement.

1) Inflation

2) Capital Gains on UK housing / interest on funds.

It seems to depend on which website data you look at, as to the answers you get! Having done a bit of research I settled on the below.

UK Inflation

http://www.safalra.com/other/cumulative-historical-uk-inflation/

From this website data from 1990 – 2006 if you add up the inflation over the 17 years you get 55.4 / 17 years = 3.25%.

As I said in my submission, I know my UK house has gone up by 7.15% on average every year for the same 17 years. I do realise that some years were flat and others very good.

Philippine Inflation

http://www.census.gov.ph/data/pressrelease/2007/cp0711tx.html

http://www.adb.org/media/Articles/2007/12159-philippines-developments-outlooks/

This is about a scientific as I am willing to get. I appreciate that there are many issues in the world today that could destabilise the world economy, but I would like to hope that things stay as stable over the next 41 years as they have done for the last 39 years of my life.

It is from the above that I have worked out my inflation / interest parameters. I may be wrong, but I have used logic, rather than “throwing darts at a board”!

3) Savings

I was only going to touch on this subject.

I keep my small amount of cash in ING on-line accounts. For me they give a reasonable rate of return, with reasonable access.

What you do with yours is up to you, just make sure you are getting the best interest rate you can, not just leaving your monies in a current or cheque account earning little or no interest.

4) Transferring funds to your retirement location.

As I stated in my 1st submission I have not yet been to Thailand yet. I hope to get there over the next couple of years, and I may, like many of you fall in (Jasmine) love with the country.

As you will recall I am English (I forgot to mention that I was born in Australia, so I have dual nationality) but have lived in Australia for 10 years now. The following applies to the Philippines, but I am sure Thailand expats have worked out the best way for Thailand.

I looked around at the different banks for those that had the lowest account fees and or other fringe benefits that would help me as an expat access my funds.

My bank of choice is Citibank. They have branches in amongst other places England, Australia and Philippines.

The Australian account costs AU$5 per month to have (unlimited transactions) and is free for me at the moment as I have my salary paid into it. This might change when I retire, but I hope to call any investments that I receive into it “salary” thus saving the $5 fee.

https://www.citibank.com.au/AUGCB/APPS/portal/loadPage.do?path=/prod/cat_land/Deposits.htm&tabId=Deposits

The Philippine account costs nothing per month to have (unlimited transactions).

I have not opened this account yet as I do not need it until I retire.

http://www.citibank.com.ph/PHGCB/APPS/portal/loadPage.do?tabNo=4&path=/staticfiles/english/promo/sub_det/di_onsa_open.htm

The English account costs £10 per month to have (unlimited transactions).This might change before I retire and be fee free if I am lucky. I have not opened this account yet as I do not need it until I retire.

http://www.citibank.co.uk/personal/banking/bankingproducts/currentaccounts/sterling/plusaccount.htm

The great benefit of the Citibank accounts is that you can transfer monies between them fee free. You only have the exchange rate to worry about. This means that I will be able to transfer any amount of money from my Australian or English account to my Philippine account for free.

http://www.citibank.co.uk/personal/banking/international/globtransfer.htm#table

You have to remember that if you have a UK / Oz bank account and use that card to draw from most overseas ATMs there is normally a nasty fee or poor exchange rate.

Here in Australia, if I use the normal banks to send AU$1,000 to the Philippines as of today 06/12/2007 the amounts can vary quite a lot:-

Commonwealth Bank – $1,000 @ 34.054 peso plus $22 online transfer fee.

Citibank – $1,000 @ 36.2735peso. No fee.

The Citibank rate is 6.5% better than the Commonwealth Bank (for the Philippine Peso) and there is no fee.

The difference for the UK £ is not so different.

Commonwealth Bank – $1,000 @ £0.4139 plus $22 online transfer fee.

Citibank – $1,000 @ £0.4191. No fee.

The Citibank rate is 1.3% better than the Commonwealth bank (for the UK £) and there is no fee.

I suggest that we all really worry about how much interest we are getting on our savings, but maybe we must also really consider how much our hard earned funds are diminished by choosing an expensive funds transfer system.

Even losing 1.3% or 6.5% on every international transaction is lot, when we are all trying to maximise the funds. Most people would all jump at the chance to earn an extra 1.3% or 6.5% interest on our savings! This could mean that any interest gained is immediately lost.

I am still looking around to see if I can get a better deal than the Citibank, with the flexibility of the ATM account. I am open to ideas if anyone has found it?

5) Retirement Visa.

I have no comment to make as the Thailand visas as there has been more than enough learned discussion and comment on the subject.

Philippine Retirement Visas.

In a word, easy.

http://www.gov.ph/faqs/retirement.asp

http://www.gov.ph/faqs/immigration.asp

http://www.gov.ph/faqs/retirementfaqs.asp

I won’t re-write what the above links say. Have a read.

Basically there are 2 types of long term retirement visa open to you if you are over 39! Very old!

One long term visa requires you to invest in the country (stocks / shares / condo), the other year by year does not.

Like Thailand you can not own the land, but foreigners can own up to 40% of a condo development.

6) Pensions. UK / Australian.

I will 1st admit that I have no comment to make on USA or other countries pensions as I know nothing about them.

Australia.

Government Pension.

Pension claimable at 65, currently AU$537.70 per fortnight.

http://www.centrelink.gov.au/internet/internet.nsf/filestores/co029_0710/$file/co029_0710en.pdf

See page 7 and page 19. There are certain criteria, but I can fulfil them all, including making sure I am in Australia on the day of lodgement!

The pension is asset tested, but I am sure that I can make sure that I have spent most of my Australian monies by the time I am 65!

This seems to be a very fair and reasonable pension.

Private Pension – Known as Superannuation.

The superannuation scheme over here seems to be very sensible and very well sorted out. Basically your employer pays in 9% on top of your monthly wages into a fund, set up in your name, controlled by big fund managers who invest in stocks / shares / building portfolios. (Legislation has just recently changed and you can self-manage if you so desire).

You can if you desire top-up the fund further with your own contributions. All contributions (company or individuals) are taxed at a one off 15%.

The returns for the last 5 years have been very good, around 20%. I appreciate that with the current volatility in the world this will reduce.

The great thing with super is that it all remains yours, and you can access it either as a monthly amount or as a lump sum from the age of 55 if you have fully retired. No waiting around. The withdrawals up to a reasonable limit per year are tax free.

This way you can either spend it all if in bad health etc, or draw down against it as you desire, leaving the rest in the fund to still grow. When you die the balance can be inherited.

England.

Government Pension.

http://www.thepensionservice.gov.uk/atoz/atozdetailed/retirement.asp

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/PensionsAndRetirement/BeginnersGuideToPensions/DG_10027106

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/PensionsAndRetirement/StatePension/DG_10014671

According to this government website, based upon my date of birth, due to the changing rules I will be eligible for the state pension at when I reach 66 years, 8 months and 8 days old in September 2035.

I paid into the UK pension scheme from 18 – 28 years old, so 10 years of contributions.

The number of qualifying years you normally need for a full basic state pension is equal to about 90 per cent of your working life. This is calculated from the start of the tax year in which you reach 16 until the end of the tax year preceding the year in which you reach state pension age.

Currently men normally need 44, and women normally need 39 qualifying years to get the full state pension.

However, if you reach state pension age on or after 6 April 2010, you will need 30 qualifying years for a full basic state pension. (So I currently have 1/3 of the qualifying years)

In 2007-2008, the full basic State Pension is £87.30 a week for a single person and £139.60 a week for a couple, but your individual circumstances may affect the amount you get.

If you don't qualify for the full basic state pension, but have 25 per cent or more of the qualifying years, you'll get a weekly basic state pension between the minimum (£21.83 in 2007-2008) and the maximum (£87.30 in 2007-2008).

I am advised that I can top up my “qualifying years” by giving the government some monies so that I can get the full pension. This is something I am going to look into. Depending on the cost I can either “top-up” or put the monies into other investment vehicles that I control and I decide when I can get it. At least I could then leave it to someone in my will if I desire.

Private Pension.

I have a small amount in my private pension that I stopped paying into about 8 years ago. I will explain why.

Currently if you have a stakeholder private pension for every £78 you pay in, the government tops it up to £100. You are allowed to access it at 50 up until 2010 when you have to be 55.

All sounds great. Here is the bad news. Somebody please correct me if I am wrong!

FYI see the link.

http://uk.standardlife.com/content/pensions/annuities/cpannuity/cpannuity.html

You can not just take your pension money. You have to buy an annuity or similar of some description. From the way I read the info / website it goes like this.

Say your pension is worth £100,000. You can take 0% of it and take a larger weekly / monthly / quarterly sum, or take up to 25% of it in cash and a smaller weekly / monthly / quarterly sum.

You can then take either the same amount each time (larger sum to start, but never increasing) or an index linked amount starting off with a smaller amount.

You can also opt for an even smaller amount if you want the benefits to go to you wife etc upon your death.

But here is the rub, when you die they (pension fund) get to keep the balance of your fund! It’s all based around the average numbers. <That is a fxxxing croc! – should go to whoever is nominated in your willStick>

So if you retired at 55, took 25% then died 1 month later, all of your hard earned monies would be kept by them! (Ok if you live to 90 I suppose)

I personally have stopped paying into the UK private pension scheme. I would prefer to put the monies into other investment vehicles that I control and I decide when I can get it. At least I can leave it to someone in my will if I desire.

I truly think that the UK private pension scheme is a scandal.

Summary.

I do not have a lot of faith in the UK private pension schemes and I need to review the option of “topping-up” my UK government pension, and if beneficial do so.

Currently the Australian superannuation scheme and government pension seem to be very fair.

Stocks and shares are too volatile for me, but I may change my mind. Slow and steady works for me.

So apart from my savings, I expect to:

  • Access my UK private pension at 55. Value currently unknown.
  • Access my UK pension at nearly 67. Current full value £87.30 per week. = £4,560 = $AU$10,944.
  • Access my Australian pension at 65. Current value AU$537.70 per fortnight. = AU$13,980 per year.
  • Access my Australian Superannuation at 55. Value currently unknown.

So if I was to retire tomorrow (if I was 67) I would get an income of AU$24,924 per year from the 2 government pensions alone.

You may recall from my 1st submission “So using Stickman’s 55,000baht a month living expenses = 660,000baht = AU$25,801 a year.”

I would suggest that there are many people who could retire much earlier if they put their minds to it. The above are only small basic government pensions.

I believe the above to be 100% factually correct. If you notice an error please send me an email, as we are all only human.

Stickman's thoughts:

That’s a lot of good information and food for thought. It’s something we all need to be thinking seriously about.