Another Sad Cautionary Tale for Retired Expats

[Guest]

5 hours ago, Ruthrieston said:

Now I would fly back to the UK just to get access to the vaccine against Covid if I could afford to.  

Thankfully covid actually makes hardly any difference to your probability of death in the next few months.  Just keep that in mind, don't worry, but do take care.

 

5 hours ago, vinapu said:

yes, I wouldn't put any age stamp on it as people start aging at different points of calendar but as soon as we notice that those financial matters start overwhelming us I'd say  grab money and run to buy an annuity so we will not survive our money

More diplomatic than me & yes, I should not have put an age on it

 

4 hours ago, PeterRS said:

I had not realised this topic would result in such a variety of interesting posts and suggestions. Having chatted yesterday with another guy here who knows the unfortunate pair, we have tried to put together a timeline of what happened up to the point where their cash seems to have disappeared.

They both retired around 1998. We expect they must then have been 65. One had received a large amount from the sale of his recently deceased mother's house. No idea of the amount, but clearly several thousand pounds. They had decided that rather than spend their retirement in the UK, they would move to Singapore. Both knew the city state and so must either have worked there or visited more than once.

Singapore must have seemed an ideal place. It was still suffering the effects of the 1997 Asian Economic crisis...........

This is one of the most interesting threads for some time.

If they both retired around 1998 at ~65, they would be ~88 now.    Perhaps if they did any budgeting (which I doubt), they might have estimated how long they will live for and worked on something too close to average life span (~79) ?    However, if retiring at 60, your average age at death is already way past 79 and it's a damn good idea to budget for being above average.   Even though one could keel over today, if retiring at 60, perhaps it's best to budget for another 30~40 years so the money doesn't run out.   

Incidentally, in hindsight, the aftermath of the 1997 Asian Economic crises was one of the outstanding investment opportunities of our generation.  

 

4 hours ago, PeterRS said:

But the reason I quoted from @Ruthrieston's post concerns the possible introduction of the 40,000 baht outpatient requirement. This to me seems the height of utter nonsense. I dropped outpatient treatment from my policy and will save around 37,000 baht annually. It made no sense since my policy has a 40,000 baht excess. Why pay 40,000 that just to claim 3,000? So I have a separate bank account with plenty of funds to cover outpatient treatment and any other additional medical costs. But will the Immigration Department and its medical advisers see the sense in this? Of course not! TIT.

I suspect someone in a position of power has investments in the Thai insurance industry.

[reader]

"Just don't do something, stand there"

The late Jack Bogle, who pioneered Vanguard into the leading low-cost investment company, had 10 rules for guiding investors, and especially those who manage their own money. What I particularly like about them is their inherent simplicity. In the end, Bogle cautions that that we're our own worst enemy but he also reminds us that there's a easy way to avoid it: it's always better to ignore the gyrations in the market and "just don't do something, stand there."

Here's a past interview that as current today as it was when he was president of Vanguard:

https://www.youtube.com/watch?v=kTk9w-XuXXk

 

[PeterRS]

4 hours ago, z909 said:

Incidentally, in hindsight, the aftermath of the 1997 Asian Economic crises was one of the outstanding investment opportunities of our generation.  

Usually I am one of the worst investors. But I did manage to take advantage of the Asian Economic crisis. In 1999 I put some cash into a Thailand Growth Mutual Fund when the stock market was hovering around 200. I also put in around $300 per month thereafter. But then when the market's upward trajectory started to stagnate a few years later with the market around 700 or so, I took the money out. I had made a very sizeable profit. Of course, had I just left it in, I could have at least doubled that. But then I am one of those who gets a bit panicky when the financial outlook seems bleak!

[spoon]

Im good at saving money but not good at investment. I should learn the investment routes soon but kept delaying it. Plus, i cant seems to shake off losing my hard savings when the stocks didnt do well. I have one stock only and havent sell mine since the IPO. It is profitable and still giving me dividen. I like reading about investments but the more i read, the more hesistant i get lol.

[billyhouston]

For those who are not from the UK it is, perhaps, worth pointing out that our retirement arrangements differ significantly from those in, say, the US. The basic National Insurance (Social Security) pension is not sufficent for a reasonable existence. It does, however, get worse and those two gentlemen, if when they retired in 1998 they were 65 years of age, would have been able to draw this very modest pension. In the UK its amount is indexed, at present, at the highest of CPI, wage inflation rate or 2.5%. Living outside of the UK is very different and while in some countries the indexation continues, in the majority it remains at the rate payable when the person moved overseas.

If you happen to live in Detroit, Michigan, you receive indexation but if you live a mile or so away in Windsor, Ontario, there is no indexation. There is neither rhyme nor reason to these countries and successive governments have refused to remove the anomaly. They can get away with it as there are no votes in it for them. Thailand is not an indexation country so those two guys would be receiving the same pension that they received in 1998. Clearly this was not the sole cause of their problems but it would contribute. If and when they return to the UK, they would receive the updated amount.

The rate in 1998, for someone who had the necessary contributions, was £3365 per annum and the indexed amount in 2021 is £7155 per annum. There have been various attempts over the years to add to an earning related component to this provision but none has been successful and all have been dropped. The first was 'Graduated Pension' which was followed by SERPS (State Earnings Related Pension Scheme) which morphed into 'Second State Pension' which has been abandoned.

We did have a very good system in both the public and private sectors based on 'Defined Benefit' schemes but, in the private sector these have been destroyed over the last 20 years by a combination of increasing longevity, low interest rates and Gordon Brown. There are now few open DB schemes except in the public sector. Vitually all public sector schemes are, to quote Barbara Castle, 'funded on a pay as you go basis', an oxymoron if ever there was one.

[Guest]

The UK basic state pension is supposed to be just that.    A basic state pension and if you want to retire in any style, you save into an additional pension, which is what most people do.   Over the years, it mounts up to something worth having.    All this was common knowledge before I even started working, many years ago.  

Of course, not everyone has the sense to do save for tomorrow, when they can spend today.    I remember my ex-employer put £2 to the pension scheme for every £1 we did.  One year, they increased the contribution limit.  I and several much younger people increased our contribution to the new maximum within about 1 hour of this being announced.   One other hadn't done it several years later.   He's surprised at how low his pension projections are.      

I was also saving further sums beyond the employer match into a " Self Invested Personal Pension". 

The lack of inflation indexation if you retire abroad to certain countries has also been known for years.    It's a disgrace, but since it's a known problem, people should take it into account when planning and not blame anyone else.    What I didn't know was if you return to live in the UK, this resets back to the normal level, so that's one more useful item from this thread.     

Since I retired more than 15 years before I get to collect that basic state pension, I don't even include it in my planning, never mind rely on it.  If they still pay it out if and when I get there, it might be a nice bonus.

[fedssocr]

I started working with a financial planner about 15 years ago and it was one of the best things I ever did. I've been contributing to my workplace's retirement investment scheme which has a 5% matching contribution and that has accumulated quite nicely over the years. But for the rest of my money the financial planner has been very helpful in figuring out where to invest given my risk tolerance and needs. He's good for making sure I don't make any rash moves when things start going south, but I'm also a quite rational thinker so I don't let emotion take over. Having him layout the projections for the future in a relatively conservative way has been very eye-opening and I expect to retire earlier than I had expected to and should have more than enough money to last the rest of my life. It also helps that I work for the federal government which includes a very good pension given how long I've been working there. I know I've been very lucky, but I think I've made pretty good decisions - partly on my own and partly thanks to his advice. Depending on what you need services like this don't necessarily cost a lot and they can pay off. If you have the time to invest in learning about all of this stuff you can do it on your own of course.

[PeterRS]

4 hours ago, z909 said:

The lack of inflation indexation if you retire abroad to certain countries has also been known for years.    It's a disgrace, but since it's a known problem, people should take it into account when planning and not blame anyone else.

When I left University and started work, I was informed - I believe in some form of leaflet - that the National Insurance contributions of myself and my employer would ensure two things: I would receive the state pension after I had paid in for the required number of years, and I would remain eligible for treatment under the National Health Service. I seem to recall there were three levels of contribution. After I moved overseas to work, I moved down a notch and elected to continue in the scheme by paying my own personal contributions. These were at a fixed amount per year rather than dependent on employment income, since the UK does not tax non residents earning overseas. Some time in the mid 2000s, I  wrote to the relevant department just to make sure my contributions were up to date. I got a letter back informing me that I was underfunded and would need to pay an additional £7.38 to ensure my eligibility!!

At some point I became aware of the fact that the monthly pension rate would be frozen without indexation the moment I started to withdraw it. Two things of which I was not aware was Margaret Thatcher withdrawing my right to vote because I was living overseas for more than a certain number of years, and then Tony Blair introducing legislation to ensure I would no longer be eligible for National Health Service treatment unless I returned to live in the UK for at least six months each year. No government department informed me about these major changes. We were all just supposed to learn them for ourselves, which is a disgrace.

The freezing of the pension of someone living overseas makes absolutely no sense to me. We have contributed in full to the NI scheme. By living abroad we cannot now make use of the National Health Service even if we wanted to unless we do return to the UK. We place no burden on the state, but the state penalises us for reasons it will not give us. And then, having contributed in full to the NI scheme, what possible rationale is there for backdating the denial of eligibility for perhaps an occasional use of the NHS (or for even longer in the case of treatment for a severe illness) in the case of those who were in fact eligible when starting to make contributions? That is even more of a disgrace in my view.

[spoon]

I for one will not have annuity or pension as over here, only goverment workers have such benefit. My father received around 40% of his last paycheck monthly as his pension so its pretty good pension scheme for government worker here and of course free healthcare at goverment facilities as well. 

For me working in private sector, we contribute to a retirement fund. 11% of your salary, and employers will contribute a minimum of 12%. Some company increases this amount further up to 19% as part of employee benefits. The fund has a minimum dividen of 2.5% to offset inflation but has been giving us around 5% dividen annually. The fund is accessible for a number of reasons prior to retirement such as buying a house, medical spending, education etc. Our gov has allowed special withdrawals of this fund during covid period for affected workers.

On retirement (at 55 although retirement age has been revised to 60 for most of us), we can either take it out lump sum, or choose to do a monthly witdrawal of our desired amount. Im still undecided if i were to do the monthly withdrawal or take it out and put it somewhere else. 

Of course this alone wont be enough for most people, so one still need to have own savings and investment to supplement this. 

 

[Guest]

8 hours ago, PeterRS said:

The freezing of the pension of someone living overseas makes absolutely no sense to me. We have contributed in full to the NI scheme. By living abroad we cannot now make use of the National Health Service even if we wanted to unless we do return to the UK. We place no burden on the state, but the state penalises us for reasons it will not give us. And then, having contributed in full to the NI scheme, what possible rationale is there for backdating the denial of eligibility for perhaps an occasional use of the NHS (or for even longer in the case of treatment for a severe illness) in the case of those who were in fact eligible when starting to make contributions? That is even more of a disgrace in my view.

I agree entirely.   In the UK, we spend a lifetime paying taxes.   Then if we emigrate, the pension is not indexed and we don't get health coverage.   Meanwhile, countries like Germany manage to have universal healthcare, whilst giving the consumer choice of where they go AND those choices include policies with overseas coverage (if I understand correctly?). 

4 hours ago, spoon said:

I for one will not have annuity or pension as over here.............

On retirement (at 55 although retirement age has been revised to 60 for most of us), we can either take it out lump sum, or choose to do a monthly witdrawal of our desired amount. Im still undecided if i were to do the monthly withdrawal or take it out and put it somewhere else. 

Of course this alone wont be enough for most people, so one still need to have own savings and investment to supplement this.

Normally an annuity is a policy you can buy with any lump sum.   So if you were to take your lump sum from your pension, you could buy an annuity.   If annuity rates available to you were anything like in the UK, I cannot imagine you would want to do that.

I see nothing at all wrong with having a very basic pension, as people always have the option of saving more.  Ideally there should be some tax incentives for extra saving.  In the UK, we have ISAs and SIPPs.  

For many of us, the road to financial independence involves a high savings rate, investing it well and making sure it's in the most tax advantaged wrapper.   After all, if we do move abroad in retirement, we don't get much back for our taxes, so investigate all legal means to minimize the taxes.

Don't count on your state retirement age being 60 when you get there.......

[spoon]

3 hours ago, z909 said:

Normally an annuity is a policy you can buy with any lump sum.   So if you were to take your lump sum from your pension, you could buy an annuity.   If annuity rates available to you were anything like in the UK, I cannot imagine you would want to do that.

I see nothing at all wrong with having a very basic pension, as people always have the option of saving more.  Ideally there should be some tax incentives for extra saving.  In the UK, we have ISAs and SIPPs.  

For many of us, the road to financial independence involves a high savings rate, investing it well and making sure it's in the most tax advantaged wrapper.   After all, if we do move abroad in retirement, we don't get much back for our taxes, so investigate all legal means to minimize the taxes.

Don't count on your state retirement age being 60 when you get there.......

You are right, i wont be rushing to buy an annuity once retired. While the certainty of monthtly spending seems logical, all i need is to be discipline with my spending, and i believe i dont have such issue on this. And yes, 60 might not be the retirement age by the time i reach there. There have been multiple attempt to extend the current withdrawal at 55 to 60. When we change the retirement age from 55 to 60, employees in my company were given a choice, to continue working or keep their retirement at 55, and receive some compensation.

There has been talks to extend it further than 60 as well though not much has been done yet. Uts a suggestion by world bank, who proposed gradual transition to age 65 for withdrawal. Currently, those who continue to work pass 55, will still contribute to the fund at a reduced 4% rate. 

[billyhouston]

The list of countries where UK retirees enjoy indexation of their NI pension is:

Barbados, Bermuda, Bosnia-Herzegovina, EEA, Gibraltar, Guernsey, the Isle of Man, Israel, Jamaica, Jersey, Kosovo, Mauritius, Montenegro, North Macedonia, the Philippines, Serbia, Switzerland, Turkey, USA.

These are countries which have 'bilateral agreements', with the UK, in place. Not all countries with whom the UK has' bilateral agreements' are on the list so these agreements are a necessary, but not sufficient, condition for indexation. Five of them are, fo course, the former Yugoslavia and the other 'outliers' are Israel, Philippines, Switzerland, Turkey and the USA. 

In my 24 years of retirement, so far, I have witnessed huge variations in the £-Bht exchange rate and that is always going to be a concern for people who have expenses in one country and income elsewhere. Having worked all my life in the privatre sector I do, nevertheless, enjoy the benefits of a government sponsored DB pension scheme. In spite of that it's useful to hedge any currency fluctuations by investing in SE Asia. I'm sure that many people here have a well diversified portfolio of mutual funds.

 

[Guest]

Having read the previous post by billyhouston, anyone unfortunate enough to be relying on the UK basic state pension for a large component of their retirement budget should probably consider going to the Philippines rather than Thailand.   There they get the inflation increases and the cost of living seems lower.

18 hours ago, billyhouston said:

In my 24 years of retirement, so far, I have witnessed huge variations in the £-Bht exchange rate and that is always going to be a concern for people who have expenses in one country and income elsewhere. Having worked all my life in the private sector I do, nevertheless, enjoy the benefits of a government sponsored DB pension scheme. In spite of that it's useful to hedge any currency fluctuations by investing in SE Asia.

Now that's good advice.   No matter how large currency fluctuations have been in the last 24 years, there's nothing stopping it being worse in the next 24.    Particularly when certain well known large economies seem to rely on borrowing and "printing" money.     I also am keen on international diversification of investments for such reasons. 

[VancBCMan]

On 6/14/2021 at 1:49 PM, billyhouston said:

If you happen to live in Detroit, Michigan, you receive indexation but if you live a mile or so away in Windsor, Ontario, there is no indexation

@billyhouston, is this for a USA citizen living in Windsor, ON or a Canadian?
Agree it doesn't make sense for USA citizen living in Canada

Both the OAS (Old Age Security) and CPP (Canada Pension Plan) are indexed for Canadians living in Canada or outside (have to confirm the later, tho)

[billyhouston]

This is for UK citizens living overseas. In Canada, a Commonwealth country, UK pensioners do not receive indexation of their NI pension, yet in the USA they do. I chose the locations simply to illustrate the absurdity of the situation.

[anddy]

On 6/17/2021 at 10:04 PM, billyhouston said:

In Canada, a Commonwealth country, UK pensioners do not receive indexation of their NI pension, yet in the USA they do.

not only is all that absurd, it is also counterintuitive. Wouldn't you expect preferential treatment for commonwealth countries by giving them the indexation, and not giving it to non-commonwealth countries? That would seem at least somehow logical (though not justified in any shape or form). Looks like absurdity squared...

[Guest]

I agree.  UK policy on pensions is absurd.  This is a "known", so we respond accordingly. 

One is simply incentivized to use all legal means to minimize taxes.     For instance, calculate how much of the income is above the 40% tax threshold, then pay that into a SIPP (Self Invested Personal Pension), which attracts 40% tax relief (do take into account the limits on this).   For anything taxed below 40%, put it in an ISA.

 

Our pair of impoverished pensioners have had to deal with currency fluctuations and non-indexation of the pension, but the latter was a "known" and they should certainly know that currencies can move all over the place.

This is relatively easy compared with the future "unknowns".     A comprehensive list of things that can go wrong might include, hyperinflation, wars, revolutions, pandemics far more serious than the current one and so on.   I'm sure spending the last 20 years retired in Bangkok on a dwindling income would beat being retired in Syria or Zimbabwe during the same period.

[vinapu]

3 hours ago, z909 said:

 I'm sure spending the last 20 years retired in Bangkok on a dwindling income would beat being retired in Syria or Zimbabwe during the same period.

specially if concept of scaling down is used, moving farther from the center, reducing an apartment size or even finding cheaper city in Thailand to live in.

For years I had neighbor, since deceased,    whose main source of income was an annuity bought  by money  from sale of his 4 bedroom house reduced by what he spent to buy his 1 bedroom apartment .

[VancBCMan]

On 6/17/2021 at 8:04 AM, billyhouston said:

This is for UK citizens living overseas

Thanks for clarification

 

On 6/17/2021 at 8:04 AM, billyhouston said:

In Canada, a Commonwealth country, UK pensioners do not receive indexation of their NI pension, yet in the USA they do

Does sound absurd, as others have mentioned as well

[Volodya]

On 6/13/2021 at 6:53 AM, PeterRS said:

this sad tale

Thank you for this sad tale; I find the adjective very appropriate, because my sympathy is not conditional on the fate not being self-inflicted. Otherwise, soldiers who had half their bodies blown off by an IED could be laughed at as idiots, because who else would let themselves be transported to a country where they have to walk or drive over IEDs?

Those who are professionally involved in wealth managegement are of course at an advantage in financial planning.

MBTI TJ types like to plan extensively, and the more anxious and fussy someone is, the more likely they are to be put off by the adventure of juggling two countries. Should we always do only what seems reasonable?

I can imagine that people who don’t come from a European welfare state find it easier to plan, because they are used to being more or less responsible for everything themselves.

 

On 6/13/2021 at 11:43 AM, PeterRS said:

I have no home in Britain. No house, no apartment, no income apart from a basic British pension which would certainly not enable me to rent even a small apartment or get me into a care home. 

He had absolutely no relatives and no place to stay in Switzerland. Yet he was Swiss and so that is where he was sent. What he did once he got there, I hate to think.

Are we not dealing with two brilliant welfare states that lovingly care for their renegade sons once they have managed to return? Well, one cannot expect more than a modest standard of living. Citizens of EU states can try to find a more attractive member state that offers more.

 

On 6/13/2021 at 1:29 PM, reader said:

I toyed with the idea of retiring to bkk several times but it was always the growing uncertainties that dissuaded me. In the end, after I weighing all the factors, I decided that three long trips per year suited me better. That practice served me well until the pandemic and I realize how much I miss that routine.

I’m sure that is the best solution for most people. I find it highly invigorating to spend two months during the European winter in a megacity in Thailand. Not because I have a preference for tropical heat or like to sit around on the beach, but because I immerse myself in a completely different world when it gets gloomy at home.

If I have an extra month, I go to another country, because after two months my Thailand needs are covered for now. Nevertheless, homesickness always sets in the day before the return flight, but homesickness for Thailand! When you talk to the people who are sitting at the departure gate, strangely silent, and who will soon have to go back to work in a European office, you realise how many others feel the same way – they would gladly do without the return flight and everything that follows. Having said that, I should add that I have repeated this routine often enough and am now interested in less tourist-crowded countries. Yes, decades ago Thailand must have been fantastic.

I guess 3 x 2 months Thailand would be too much for me, 2 x 2 months might be ideal if the weather was reasonably bearable in the extra two months. Of course, with a stay of only about a month, three visits make sense – three most pleasant breaks during the year!

On the other hand, permanent residence has the advantage of relationship continuity and better opportunities to get to know country and language.

Some people are not particularly flexible either and can hardly imagine living in a completely different society to which they would necessarily have to adapt somewhat at least. Like the depressed acquaintance whose depression has the simple reason that the best years of his life with his twink are over; he has enough money but not enough adaptability to settle down in a country with more accessible twinks.

[vinapu]

56 minutes ago, Volodya said:

 

Those who are professionally involved in wealth managegement are of course at an advantage in financial planning.

 

generally speaking yes, but as with other professions quite often they are good handling other people's affairs but not so much with their  own and it's why ancient Romans had that saying ' medice curate ipso" ( doctor cure yourself) already 

[10tazione]

17 hours ago, Volodya said:

to spend two months during the European winter in a megacity in Thailand

With ongoing climate change we soon will have another reason to go during European (or even more so Canadian) summer, because it is too hot in Europe.

[vinapu]

6 hours ago, 10tazione said:

With ongoing climate change we soon will have another reason to go during European (or even more so Canadian) summer, because it is too hot in Europe.

while there's no denying of climate change , freaky weather is not limited to our times. I checked up with my friend in Western Canada affected badly by recent heat wave and while it was brutal (45 ) it barely beat previous temperature record for her city set in thirties of 20th century