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Action Time for Pensioners (Particularly Brits)
And anyone else who hopes to retire one day!

My last article on pensions drew a response from a member of a group representing a coupleof hundred British retirees living in Indonesia who are affected by a curiously British form ofdiscrimination. The issue he raised highlights the plight of this group but the wider implications
should be of concern to all pensioners and anyone who plans to retire one day. But first let’s takea look at this particular anomaly.
Imagine you are British and decided toquarter of a million UK pensioners affectedconcluded this is a political issue andlive in Indonesia when you retired in theby the policy worldwide live there.

not a judicial one.

your National Insurance contributions,

WHAT IS THE PROBLEM?

Imagine if a financial institution were to

you would have been entitled then to

Under regulation 3 of the Social Security

sell a private pension plan to an individual

an income of around GBP 10 per week.

Benefits Up-rating Regulations British

and then told him they were reducing hisBut that is the amount you would stillpensioners who retire to any one ofbenefits if he chose to live in any one of 120

be receiving today, now the equivalentover 120 countries, including many inlisted countries. That financial institutionof around Rp.140,000 a week or

the Commonwealth, have their rightful

and its executives would probably be

Rp.600,000 a month. The same would

state pension frozen. Meanwhile, thosegiven a rough ride by politicians.

apply had you moved to any one of

who retire to other countries have theirover 120 countries. Yet had you moved

pension uprated annually, just as though

WHAT CAN AFFECTED PENSIONERS

to countries not on that list, as diverse

they never left the UK. This curious

DO ABOUT IT?

as the US, Barbados or Spain you would

policy currently affects the lives of over

There is actually an organisation, thenow be enjoying the current UK based

half a million British pensioners.

Internationallate 70’s. If you had faithfully paid all

pension of GBP 102.15 per week.

ConsortiumofBritish

Pensioners (ICBP) which has arranged
These actually represent no more

an online petition that can be signed

Had you retired to Australia you would

than12by going to the website: http.bit.ly/

suffer the same frozen pension as inmillionsuccessive

BritPensions. Also check out http://Indonesia but at least the government

governments have steadfastly resisted

www.pension-parity-uk.com

there would provide some additional

bringing them into line on the grounds

www.epetitions.direct.gov.uk

support rather than allow you to descendof cost. The issue has been brought

into abject poverty. Understandably thisto the courts but while they have

A direct approach to the MP representing

is a sore point in Australia as around a

acknowledged the injustice they havea person’s last constituency will also

14 |

4%

of

approximately

pensioners

butandFEBruary 2012

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help to convey the message. I can also

current annuity rates at 65) you would• If you hold a frozen pension (notprovide the contact details of a groupneed to have income-generating assetsstate) in the UK it may be possible

representative living in Bali if anyoneof $720,000 to produce this monthlyto convert it to an approved QROPS

wishes to become more directly involved

income. You would need to revise bothwhich can provide a regular income

or be updated on developments.

the $3,000 and the $720,000 upwards

and also become part of your estateeach year in line with inflation until

upon death.

A return to the UK is a solution in

the year you retire. Even then at some• Real estate, investment property etc

desperate cases. But it is not that easy forpoint after retirement you will have(valuable asset but beware of possible

someone who has lived overseas for muchto start dipping into your capital (notilliquidity and maintenance costs)of his working life. Many have a local wifepossible with an annuity) to preserve• Forestry products (trees, biofuels etc.)

and even young families. Imagine if large

your monthly purchasing power. If you• Structured bank products (linked tonumbers of such families decided to move

have unexpected large expenses such as

financial markets but with capitalto the UK. The fact is the country saves a

medical care you could see your capitalguarantees). Typically take five years

large amount of money when pensioners

diminishing at an alarming rate.

to maturity.

move overseas since the cost of social• Shortterm

asset-backed

lending

services, healthcare and long term care is

The ideal objective is to accumulate(funds that that pay high returns forlikely to far exceed the cost of pensions.

sufficient assets to ensure thatloans to farmers, developers, law

theisfirms etc.) Many opportunities now

SHOULD OTHER NATIONALITIES BE

significantly higher than the income

exist in this area since banks haveCONCERNED?

being drawn so that the capital

become reluctant to lend.

While the issue raised affects a relatively

value continues to grow.

returnoninvestments

It is important to diversify and not put

small group, the matter of a comfortable
retirement or even just surviving inHOWCANTHISOBJECTIVEBE

all or most of one’s eggs in one basket.

retirement affects all westerners. TheACHIEVED?

position is a little different for most Asians

The situation is eased if you can expect

THE CALL FOR ACTION IS FOR

where strong family support ensures theat least one source of regular income

EVERYONEsurvival and care of the elderly, although

in retirement such as a state pension

While the headline theme has beeneven here things are changing and(preferably unfrozen!), and ideally an

the plight of British expatriates whose

employers will need to adjust. The situation

occupational pension related to final salarypensions have been unfairly frozen we allis more critical in the case of expatriates(although unlikely if you have worked

need to address the reality of a future that

because many no longer contribute tooverseas most of your life). If you have cash

could be bleak without proper planningstate schemes and are unlikely to have any

that you can turn into an annuity this wouldand early action. In Bangkok recently

active occupational schemes. Even theseguarantee you a fixed income for life.

I was taken aback to see a westernercannot be relied upon; many companies

begging on the sidewalk alongside local

are no longer able to sustain the crippling

All the above provide the comfort of abeggars. I hope it was not a sign of things

costs of such schemes. American Airlines,regular income. But they also have one

to come, but we have to accept that thewhich has just entered bankruptcy, isthing in common. They die with you, ordays of counting on others to take care

proposing to abandon its pension scheme.

there may be only limited provision for aof us are disappearing. We have to take

Others are likely to follow.

surviving spouse.

ownership of our own destinies.

WHAT ARE THE SOLUTIONS?

To build up wealth that has the potential

The first priority is to make a realistic

to grow and which will become part ofassessment of what income would

your estate upon death you should be

be required to provide an acceptablelooking at the following:standard of living in retirement.

• One or more private pension plans(investing in a wide range of assets

Let’s say you determine you can live

such as stocks, bonds, gold and othercomfortably on a pension of US$3,000

commodities).

a month in today’s money. Assuming anannual return on assets of 5% (close to• An offshore portfolio bond (againColin Bloodworth
Director of PPI Indonesia, has worked as a financialadviser in Indonesia since 1992. He is a Directorof PPI Indonesia and can be contacted at colin.
bloodworth@ppi-advisory.com or +62 213004 8024.

with a wide range of assets).

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