Millennial Expat Pension Woes

Expat Pension Woes

Expat Pension? But I’m a Millennial!

In a poll recently conducted by yours truly, 90% of people under 35* laugh when asked if they:

1. Have a pension plan

2. That they understand

3. That they trust

To a Millennial-or-younger person, the word ‘pension’ brings up a number of emotions and abstract thoughts…none of them pleasant. I have yet to meet someone my age or younger who feels completely confident in their retirement planning. Granted, I don’t know anyone super wealthy, but that’s a moot point when lifestyle creep enters the picture.

 

Why don’t Millennials have pensions?

You might be surprised by this, but it’s not because we’ve never thought about it, or we that we don’t want one. It’s that many of us haven’t had the opportunity or education required to take action. Thankfully, that’s changing these days in the UK. From 2016, all companies, regardless of size, have to at least offer a pension plan for all employees. I wish that had been in effect 6/7 years ago when I entered the workforce for the first time!

But education around pensions is still missing. We just get told it’s ‘money you live on when you retire’. That’s technically correct, but using that language immediately switches off the brains of even the most eager young person.

We’ve already learned that ‘retirement’ is probably going to be ‘never’ for us, since the official retirement age keeps creeping up. We’re starting from at least £15k of student debt (I had about £22k when I left Uni, and this was just a couple of years before the new tariffs came into effect – some of my Mentees are over £35k in debt!). Oh, and you’re telling us to imagine 30/40/50 years into the future – that’s longer than we’ve already been alive!

 

Specific reasons not to have a pension.

For the sake of this blog, I asked the question outright to folks, too. Here are some of the responses:

“I have a ton of student loans, and it doesn’t make sense to put away money for retirement that I could be using to pay them off (and reduce the amount I pay overall from interest).”

“Too far away and too much can happen between now and then.”

“I haven’t even got a career yet, so pension is the least of my worries.”

“I’ve never been able to afford a private pension.”

And my personal favourite:

“Pension… yeahhhh. xD xD”

Basically, we have a lot to contend with. Now, I’m not saying that older generations didn’t have to walk through snow uphill to get to and from school every day, but something changed between the generations. (That’ll be a blog post for another day!)

 

Want numbers? I’ve got retirement numbers…

You can skip this section if you trust me and you fall asleep whenever anyone mentions the word ‘statistics’. Honestly, I won’t be offended.

For those of you still reading, I wouldn’t suggest looking at the following before you go to bed – it’s likely to give you nightmares.

Average Pension Pot

In the UK, the average pension pot (across all ages) is just £50,000. Which might sound like a lot to any Millennial, but it’s important to remember that this money has to last more than the 1-4 years that this amount might last (depending on someone’s situation – obviously it’s not going to stretch far in a rented London apartment!)

And sorry, ladies, but according to Aegon Consulting, men have saved an average of £73,00, compared to a tiny £24,900 for women. Ouch.

State Pensions

And social security…um…isn’t. In 2018, pensioners will get £164.35 per week (that’s £657 per month). Which makes living tight even for those who own their homes outright (and how many of us will be able to say the same when we reach that age? Even if we do find the money for a down-payment, we may still have a mortgage when we hit 65!)

Inflation Vs Wages

“Don’t worry Sara,” I hear you say calmly as you dunk a biscuit into your cup of tea, “I’ll earn more money when I get promoted, so I can start to sock more away then.”

Nooooo… there’s so much wrong with this statement that it’s difficult for me to form a coherent response. Instead, here’s a handy graph for you to see that even if you do earn more year-on-year, inflation is going to bite you more than you realise. (I won’t go into time and compound interest for now. Basically, please just know that waiting to save money for retirement is always the wrong choice, unless you’re so far in debt your eyeballs sting [see one of previous comments]).

UK Wages and Inflation
UK Wages and Inflation graph

Another layer of obscurity

And as if that wasn’t enough, I have the added ‘benefit’ of being an expat (or an immigrant, depending on your personal thoughts regarding such things – I answer to both).

Those who have hopped to a different country for reasons other than retirement have even more work cut out from them. And as a Brit living in Spain, the next few years are going to give me added anxiety/headaches as I meticulously keep up to date with everything related to Brexit (-shudder-).

So, as a Brit living in Spain, what on earth are my options when it comes to retirement?

  1. Remain here in Spain for the long-term…and pray the pensions don’t implode befo—oh, wait.
  2. Go back to the UK within the next few years, and hope that the pensions don’t implode befo—oh, wait.
  3. Create a DIY plan that with leverage enough flexibility for me to be where I want, without worrying too much as the future creeps closer.
  4. Sit in the corner and growl about corrupt politicians and ‘The Man’.

At the moment, I’m leaning more towards a 90/10 split between numbers 3 and 4.

 

The problems with DIY Pension Planning

I am not a Financial Advisor. Nor do I have a spare couple of grand lying around to hire someone to take a look at my wish list and then magically make something appear for me that meets my needs.

The first actual problem when it comes to creating a DIY plan is the overwhelming amount of information that it’s necessary to trawl through and consider before I even think of doing anything else. Even with standard government pension plans going up in smoke on an alarmingly regular basis, if I were in my country of birth that would at least take away a layer of extra complication.

But no such luck.

 

Light at the end of the tunnel

But despite all of the layers of crap that I (and others in my position) have to deal with, I’m not going to just throw my money into a savings account, cross my fingers and hope that by the time I retire, we’ll be living in a Star Trek Utopia where everyone has a basic standard of living and I won’t have anything to worry about. Besides, as I mentioned in an earlier post about financial goals, I’d like to retire quite some time before I hit 70, thankyouverymuch.

Instead, I’ll be diving into the murky waters of Expat Finance and figuring out what the heck I need to do next. I will (inevitably) make mistakes, but learning is never a bad thing!

But hoping for a best-case scenario and being an optimist needn’t be a waste of energy, either.

Fingers crossed, action taken!

Hasta pronto,
– Sara-Jayne

* I got responses from about 30 people, which makes my poll just as reliable as those adverts you see on TV from certain hair and skincare companies.

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