Why you should invest your pension pot as an expat

Whether you’re in your thirties or you’re closing in on retirement age, it’s wise to regularly assess your pension to determine whether or not you’re going to be left with enough to get by when you no longer work. If you’re originally from a country like the United Kingdom, for example, then you’ll receive a basic state pension as an expat, but you’ll need to top it up with a private or work pension if you want to afford to live comfortably as an expat abroad.

What’s more, with exchange rates changing, a pension from your home country may not be worth as much in your new country, so thinking about currency fluctuations is an important task, and investing your pension pot as an expat to make your money travel is a good idea.

Below, we’ve put together some of the reasons why you should start investing your pension pot as an expat to protect your future and enjoy a prosperous, comfortable retirement, and offer some considerations before you withdraw your pension to use for investment purposes.

Improve your quality of life

The most obvious benefit to investing your pension pot is that you’ll have a larger sum of money to play around with when you eventually retire. Whether you want to travel back to your home country to spend time with friends and family every now and then or spend some of your retirement travelling the, having a chunky retirement pot will make that possible. 

The more money you have in your bank account or retirement plan, the less you’re going to have to worry about making ends meet. Being able to relax knowing that your bills, insurance and lifestyle is covered and that you’ve got money left over to spend on living life to the full, will afford you a more comfortable and stress-free retirement. After all, you have worked hard all of your life, so why should you struggle to make ends meet when you enter into old age?

Political changes

You only have to look at the Brexit debacle to see how governments can change - relying on a state pension alone will not afford you enough confidence as an expat, as legislation could change and you could be forced to return to your home country if you want to receive a state pension. Indeed, the UK government has already said that it could offer ‘no guarantee’ on state pensions for UK expats if the UK leaves the European Union without a deal, and that is just one scenario on the cards. Backing up your state pension with private investments will ensure that, if the worst was to happen and you’re cut off from receiving a state pension, you would have additional funds to help you get by, and assets to sell or rent if you’re struggling.

Whilst we’re on the subject of politics, it’s worth moving your private pension funds from your native country to your country of residence. As an expat moving from the UK to Dubai, for example, having your life savings in a UAE-based account will ensure you can continue to access your money (these resources may help you: best bank for expats in Dubai, the best expat savings accounts in the UAE, and the best pension options in Dubai for UK expats).

Paying for healthcare

Unless you’re an expat in a country with universal healthcare (Canada, the United Kingdom, Denmark, Finland, etc) you should invest in a health insurance policy for yourself and your family so that, if the worst was to happen and you needed medical attention, you would be covered and would not have to eat into your personal or retirement savings. But as we all know, not all conditions and circumstances are covered by a standard insurance policy.

Make sure you read the small print on your health insurance policy and understand what is and is not included, and set aside some money for anything extra. Remember to purchase travel insurance when you’re out of the country, and lead a healthy lifestyle to keep you at your fittest. A life insurance policy is something else to consider to protect your loved ones.

Considerations before investing

Although there are clear benefits to investing your pension as an expat, you should be sure to think about the potential negative consequences, too. No investment is risk-free, and as such, you should weigh up the pros and cons of opportunities and be sensible with your money, or you could be forced to work past retirement age or struggle to afford your lifestyle.

Calculate the risk

Before you move retirement savings into high-interest accounts or invest in the stock market or the housing market, calculate the level of risk. If there’s a 10% chance that you will lose money on an investment, then decide whether it’s worth it and consider what you would do without that money. As you draw closer to retirement, it’ll be harder to make the money back.

When you do decide to make an investment, try not to put all of your eggs in one basket. It makes sense to have a diversified investment portfolio, allowing you to spread your money further and reducing the risk, but remember that if you spread your money too far, you may miss out on new opportunities, which is why investment accounts are often recommended.

Understand markets

Invest only where you feel comfortable, and take the time to get to grips with a new market before you start spending money. For example, property in Dubai can command high rents and deliver strong annual yields but requires a significant upfront investment, money that may be better invested elsewhere. Calculate your return on investment and the opportunity cost of each investment, and don’t go into a new investment opportunity or market blindly.

Work with an expert

Finally, if you’re considering investing your pension pot then you should work with an expert accountant or financial advisor who can make recommendations and help to reduce the level of risk. Always work with a verified and experienced investment broker or reduce your risk by opening an investment bank account and letting the professionals do the hard work for you.

Managing a pension as an expat can be challenging, but with the right strategy and support you can grow your assets and enjoy a more prosperous and comfortable retirement. Don’t forget to check back to the Money Saving Expat blog for more money advice by expats, for expats. We cover everything from tax and family planning to pensions and borrowing.

Tags: pensions