A sensible saving plan for an uncertain international future?

May 15, 2008 7:10 AM

PersonalFinanceFilter: 25 year old looking to start making payments into something pensionesque, but with an international bent. Any suggestions?

I think it's time to start a pension (overdue, probably). I am British but have a Significant Other who has ties to three other countries, and feeling not a massive attachment to the UK, there's a reasonable chance that I won't be seeing out my days here.

I earn about 25k a year before taxes. I'm living in London so there's not a massive amount left at the end of the month, but I'd like to start putting a little something by.

So what do people advise? Would a regular British pension with a reputable company (Scottish Widows &c) be a good bet if I plan on disappearing from these shores in the next five, ten, fifteen, thirty years? Or might a regular/fancy savings account that isn't technically a pension but might operate like one (and still be around in ~50 years) be better for my situation?

FinanceMasters, I humbly beg for advice.

Money stories from international types are also greatly welcome.

Thanks!

posted by Cantdosleepy to Work & Money (6 answers total)

Best answer: Assuming you've got six months or so liquid cash available, do you have an ISA? Thats the first vehicle I'd look to capitalise (after your emergency fund), for several reasons: because of the tax free implications, you can get at the funds as needed, and maintain flexibility.

Pensions in the UK typically force one to annuitise, or purchase a set of future cash flows upon retirement. At your age you need flexibility and taking full advantage of your ISA contribution limits first seems to be the best course of action, especially so as you mention you probably don't want to stay in the UK.

Most banks pay somewhat higher rates for cash ISAs than they do comparable savings accounts.

I think you've got to take a broad overview of your financial situation. It's great you're considering a pension at such a young age, but unless you've got emergency funds you might have to liquidate your longer term financial asset (pension) unfavourably.
posted by Mutant at 8:46 AM on May 15, 2008

Does your employer match contributions? If so it would be foolish not to contribute upto the matching rate. I don't know the detail but would be surprised if you can transfer abroad.
posted by laukf at 2:26 PM on May 15, 2008

Best answer: Put as much as you can (up to £7,200) in an stocks and shares ISA. Buy a low cost index tracker (like the Fidelity MoneyBuilder Index Tracker Fund). Then forget about it.
posted by TrashyRambo at 5:10 PM on May 15, 2008

Response by poster: Thanks for the advice guys! So, build an 'emergency fund', then stick money into an ISA. How much should I be thinking about putting into the emergency fund?
posted by Cantdosleepy at 5:18 PM on May 15, 2008

"How much should I be thinking about putting into the emergency fund?"

This is personal preference really. Some folks think three to six months is sufficient, while others might suggest as much as one year.

The fundamental idea is to have liquid assets available to you so that, in the event of loss of income (whatever the reason), you'll be able to pay the bills without having to disinvest.

Investments should not be liquidated except to fund other investments, or perhaps major purchases (e.g., college education, house, perhaps starting a business, etc). If you don't have liquid assets to fall back on, you risk liquidating your investments in a weak or declining market.
posted by Mutant at 7:08 AM on May 16, 2008

I know very little about finance, but several separate IFAs have recommended the Friends Provident International Savings Plan to myself and other British ex-pats as an alternative to a pension.
posted by Busy Old Fool at 10:18 AM on May 18, 2008