RetireJapan

Hi,

I'm a Brit expat here currently going thru' the pain of applying to back-pay state pension contributions (see other threads in Pension section). As there is a such a huge difference between paying Class 2 vs Class 3 I'm wondering about taking some professional advice on this.

Anyone have any recommendations for a professional who can advise?

Thanks, KW

I'm pretty sure the cost of advice will dwarf the difference between class 2 and 3...

Class 3 is £608.40 more expensive per year than Class 2. So over say ten years that's an expense of £6084. Paying for professional advice will probably be a significant chunk of that.

Thanks for the input. I didn't realize the advice would be so expensive - I imagined a couple of hours of advice for about £50 an hour but maybe that's hopelessly optimistic.

Anyway, I contacted http://www.expertsforexpats.com/ (found them online) so I'll report back.

OK. Just be aware that the advice industry is full of friendly people in suits who will happily lock you into a contract that gives them the majority of your life savings. Specifically expats are seen as an easy target. I will be surprised if you don't get offered some kind of free advice session where they try to sell you a dodgy off-shore insurance package that uses smoke and mirrors to divert most of the earnings to themselves.

Yes, you're probably right. But I'm not looking to buy anything except specific advice about a specific matter. They can try and sell me what they want.

Seems these guys have a pretty bad reputation, I guess well deserved.

Most of the “professional financial advice “ I’ve ever received turned out to be “absolute b*****cks”.

And most of the advice people have told me that they received turned out to be similarly questionable....

I remember one guy sold me a (Newton) unit trust - as they were called back in the day - with a 6% initial charge - and said, “You get what you pay for...”

He did (get what I paid for).

Still, nice work if you can get it....

Are you sure piling into the UK pension scheme is your best bet? Wouldn’t it be better just to buy index funds every month?

ricardo wrote: ↑Sat Oct 06, 2018 1:22 pmAre you sure piling into the UK pension scheme is your best bet? Wouldn’t it be better just to buy index funds every month?

The UK pension requires 30 years of payments for the full pension. At the current prices this would be:
Class 3 payments: £761.80 / year * 30 = £22,854.
Pension payout: £8546.20 / year.

£22,854 invested in an index fund, using the 4% withdrawal rule is worth £914.16* a year (compared to the £8546.20 pension).
Or to put it another way, to get an annual payout of £8546.20 via stocks, you'd need to invest £213,655 (~10x more than the pension's £22,854).

The only caveats are that 1) The rules can change 2) You still need to pay NI if you start working in the UK again, even if you've covered your 30 years.

*edit: I forgot to account for compounded returns. The actual figure is £1,777/year (calculated in a later post in this thread). This means the 10x figure is also not accurate, but a compounding calculator tells me this equates to annual investments of £3694 - still much less than £761.80 for the pension!

adamu wrote: ↑Sat Oct 06, 2018 1:56 pm £22,854 invested in an index fund, using the 4% withdrawal rule is worth £914.16 a year (compared to the £8546.20 pension).
Or to put it another way, to get an annual payout of £8546.20 via stocks, you'd need to invest £213,655 (~10x more than the pension's £22,854).

The only caveats are that 1) The rules can change 2) You still need to pay NI if you start working in the UK again, even if you've covered your 30 years.

Exactly. It's an amazing deal under the current terms.

It also diversifies your post-retirement income. Of course I think it's a good idea to invest in index funds as well. And the Japanese pension system. Multiple streams of income, even in retirement.

Yes, agree with what's written. As a Brit it seems maxing out state pension, buy-to-let property and index funds are way to go: best bang for buck and wide diversity.

adamu wrote: ↑Sat Oct 06, 2018 1:56 pm The UK pension requires 30 years of payments for the full pension. At the current prices this would be:
Class 3 payments: £761.80 / year * 30 = £22,854.
Pension payout: £8546.20 / year.

£22,854 invested in an index fund, using the 4% withdrawal rule is worth £914.16 a year (compared to the £8546.20 pension).
Or to put it another way, to get an annual payout of £8546.20 via stocks, you'd need to invest £213,655 (~10x more than the pension's £22,854).

The only caveats are that 1) The rules can change 2) You still need to pay NI if you start working in the UK again, even if you've covered your 30 years.

Minor point, but when I put 761.8 into a compounding calculator for 30 yrs at 5%, I see 56,436.23 at the end. Four percent of that is about 2257--still not close to 8546, but at least a little better.