IMPORTANT WARNING: The contents of this report have been compiled in good faith by Investorsoffshore.com to provide assistance to investors, but do not constitute investment advice or recommendations. Investors should not rely upon the information given in order to choose types or routes of investment but should make their own independent enquiries before making choices. Investorsoffshore.com has taken reasonable care in researching and presenting the information herein but makes no representations as to its accuracy and accepts no liability for actions taken or not taken as a result.

Retirement planning is a complex business at the best of times, and for the expat or aspiring expat, the myriad of tax considerations, legal restrictions, rules and regulations can make retirement planning seem, frankly, a nightmare! However, armed with the right information, and with the right advice, it is entirely possible for residents of high tax countries to retire to sunnier, tax friendlier climes without facing heavy financial penalties.

While it is not the intention of this article to explore specific pension schemes or planning strategies, we will attempt to supply an overview of the decisions many will face when making provision for retirement offshore. Unless one is an expert in the nuances of international tax and finance, the services of a reputable independent financial advisor who specialises in offshore tax, investment and pension planning will however be essential. Having said that, it certainly can't do any harm to do a bit of swatting up on the subject oneself, and there are plenty of resources on the internet, many run by expats themselves, dispensing invaluable information on all aspects of life offshore.

It may be the case that you currently live and work in a high tax country and, for financial or lifestyle reasons, are looking to retire abroad. Or, you may currently be an expat worker, and are also thinking of spending your retirement years somewhere other than your original country of residence. Whatever your circumstances, you are likely already making provision for your pension through a personal or company plan. But how easy is it to take that plan with you and benefit from it when you are abroad? Well the answer is, in varying degrees, not very, although with careful advance planning, it can often be done.

Sometimes, an international company will offer a pension plan to expatriate employees as part of their benefits package. However, for most individuals, the onus will be on them to make adequate provision for their retirement, and the different avenues you can take in this domain are many and varied. Whilst pension saving and income is privileged in most high tax countries, moving a pension across a national border can at best add a further layer of complication, and at worst be well nigh impossible. On top of that, any pension income you draw from your former high tax residence, whether a state or private scheme, is almost certainly going to be taxed at least the basic rate.

One solution would be to find a safe place to harbour your retirement savings or investments (or both) enabling one to move between countries without this having any adverse affect on your assets. If this course of action is taken, then careful consideration must be given to the choice of offshore jurisdiction: there are a number of well regulated low tax countries and territories with regimes that cater for pension investment. Jersey, Guernsey, the Isle of Man, Ireland and Luxembourg are but a few of these.

What planning paths are open to you depends very much on your current jurisdiction of residence, or your country of citizenship, as some governments have imposed more restrictive offshore tax regimes than others. A notable example is the Unites States, where the international tax regime for individuals means that US expatriates, and other expats that have been relocated to the States are unable to fully take advantage of international retirement planning options in the same way as other expats.

Most expats will have to decide whether to go for a pre-wrapped pension plan, or put together a portfolio of suitable investments with a view to providing retirement income. Both forms of pension investment have their advantages and their disadvantages, and in the end, which path you choose will come down to your personal circumstances and preferences. Again, it must be stressed that employing the services of a reputable and experienced financial advisor will make this decision a lot easier.

Choosing a ready-packaged pension plan will naturally take a lot of the worry and hassle out of the equation, as your investments will effectively be managed for you. On the other hand, locking your money into such a scheme on a long term basis means you lose some flexibility if your circumstances - income, place of residence employment, etc - happen to change, and penalties are likely to be incurred if you do not stick to the payment schedule or cease contributions altogether.

On the other hand, constructing a portfolio of investment will give you more flexibility by allowing you to vary how much you contribute to the scheme given changing levels of income over time. There are also unlikely to be other restrictions in place such as maximum and minimum investment limits, or penalties if you decide (or circumstances dictate) that you need to stop making contributions.

The complexion of this investment portfolio will vary depending on what level of risk you are comfortable with. Foreign property and real estate is becoming an increasingly popular investment vehicle for internationally orientated investors and may be one of the safer bets if the investment is handled and researched properly. Hedge funds are also becoming an ever more popular alternative (or hedge against) the ups and downs of the world's equity markets, although these may require substantial investments (usually at least $100,000), and the jury is still out as to whether these investments will consistently produce good returns. The best investments to suit your needs will need to be discussed with an independent expert or advisor, and establishing a good rapport with an IFA over the long term will be beneficial if this route is taken as your investments will need to be regularly reviewed to ensure that you remain on course to meet your pension income target. Bear in mind, however, that the greater flexibility and financial freedom achieved by taking the self-investment route is a higher degree of risk. As the disclaimer says: the value of your investments can go down as well as up.

Ultimately, you will have to decide which plan is right for you given your current circumstances and future plans. But if going with an international pension provider, there are a few questions you (or your IFA) can ask to make the choice a little clearer, such as how charges, fees and penalties stack up against other providers; the historical performance of the pension fund; limitations on contributions or benefits; limitations on what currencies can be used to maintain the account; and the degree of investor protection that is in place. Liability for taxation on contributions and returns, both capital and income, is of course another key issue.

Another important consideration is the manner in which you wish to take your retirement income when the time comes. Most international pension providers will offer you the opportunity to take your retirement income as a cash lump sum, guaranteed annual or monthly income, or a combination of the two. This decision will likely be governed by your future circumstances; factors such as your intended lifestyle and the usual tax considerations.

If you decide to opt for a steady income, you must decide in advance whether you want to receive a fixed annuity, or to buy deferred income as you go along. If you feel that insurance companies will reduce annuity rates as life expectancy increases, then you may want to go for the deferred income option. However in reality, this is not an easy decision to make, and relies on predicting how pension providers are likely to act some years into the future. Something they don't know themselves!

So, in conclusion, whatever your current circumstances, if you an expat or an aspirant expat, then you will need to plan effectively to reduce the chance of taxation eroding your pension, and to optimise future income and benefits. There is a large industry catering for an ever more internationally mobile workforce, in addition to the growing army of sun-seeking retirement expats and fiscal nomads, and a good advisor will be able to select suitable investment products from the very many international pension providers out there.

While it is easy and tempting to put off pension planning, particularly if you are still some way off retirement age, it can not be emphasised enough that the earlier you start putting in place a strategy to provide for your retirement, the less you will have to worry that you’ve made the right investment decisions, chosen the right pension plan, taken the right advice and most importantly, that your income levels match your expectations and will enable you to have a comfortable lifestyle.