Countries to start to work late in career for a pension?

fine dude
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Re: Countries to start to work late in career for a pension?

Post by fine dude »

Totally agree with joe30. Asia rocks when it comes to salary and savings. You can always visit Europe for a vacation. Honestly, European schools are quite behind even in terms of PD and tech integration. I personally don't see any value addition working at these European schools.
PsyGuy
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Post by PsyGuy »

@joe30

To begin with a pension isnt just a monthly salary payment once you retire, its access to potentially subsidized housing, but more importantly its medical/health care as well. Your savings isnt going to last very long if you have to pay for treatment for any chronic or major medical conditions that develop.

The pension scheme in the UK is a bad one at 30 years thats a long time, there are more generous regions and more importantly regions with much shorter vestment times such as the NE that are around 10 years.

If your employer/IS is making a contribution its a contribution to an investment program its not a retirement program, its a 401K.

Yes the taxes are high because those taxes are funding that pension program and other social insurance programs.

No one knows how long they are going to live, a pension provides security regardless of your age. Investments do not. You could easily live longer than your planed savings accounted for.

This is why the vast majority of ITs exit strategy is eventually to get into the EU so that they have a retirement. A retirement they can earn in a relatively short period of time, health and medical care that wont bankrupt them, and either low or no cost education for their children. As those benefits become less important then being able to take that pension and live somewhere with a much lower cost of living becomes attractive.
TeacherGal
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Re: Countries to start to work late in career for a pension?

Post by TeacherGal »

-psychy
What do you mean "vest you" in a pension after 5 or 10 years?

-joe30
The way I see it the difference between savings and a pension is that no matter how the markets do a pension from a good solid stable country will be reliable. And as Psyguy says it will be there even if you live longer than you thought you would. Savings and investments can be wiped out but a state pension can't (unless things got really bad!)
hallm
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Re: Countries to start to work late in career for a pension?

Post by hallm »

Another option to consider... QSI has full pension after 20 or 22? years of employment. It's almost 100% of your final salary too.

Not bad if you're willing to stay with one company for the lifetime of your IT experience.
PsyGuy
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Post by PsyGuy »

@TeacherGal

Vested is a period of time (often measured in years) that when reached you obtain "ownership" of the plan/pension benefits (benefits can still change). In a 401K for example you contribute a portion and your employer contributes a portion as well, but the contributions of your employer dont "vest", meaning you own them until a certain service point, maybe a year for example. If you leave the job before the 1 year "vested" time than the plan manager (whoever manages the 401K portfolio) returns the employer contributions to the employer, if you work for at least the one year than those employer contributions become yours, you own them.
This is the same for most public and private pension programs. You must have so many years of service as required by the pension plan, once you have accumulated those years of service you own whatever benefits the plan provides (assuming you reach the eligibility age or conditions to begin collecting those benefits). Often this is a lifetime monthly payment (typically tax free, or at a reduced tax rate) and a group health care program, that in most of the EU is assumed by the national healthcare program of the region. You may also be eligible for housing subsidies or other benefits.

In summary, vested is the point in your service where you own the pension benefits.

@hallm

Still kind of long, 20-22 years, however it is a valuable and uncommon benefit at that tier of IS. There is some debate though whether its a pension or an investment product (thats a combination of IRA, securities portfolio, insurance annuity), and how that programs security and stability will mature with time. Its not to say that countries are immune (look at Greece), but social programs tend to have the best security and stability.
joe30
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Re: Reply

Post by joe30 »

@PsyGuy

I meant the UK is 30 years to get the full pension. You start building up pension income after 1 year of contributions (at least you do if you're a UK citizen, not sure about foreign workers), but it'll be proportional (i.e. work for 15 years in the UK, and you'll get half of the maximum pension amount).

Thing is, the state pensions aren't really worth a ton, even at the maximum amount (few IT's are going to spend so long at one school to get the maximum payout in any country). Yes you'll get 'something' after 10 years, but that something will only be a few hundred dollars a month. Not enough to fund a comfortable lifestyle - you need to be saving on top of just paying your state pension scheme contributions in Western Europe.

Don't know why any IT would specifically want to go to Western Europe though. Average salaries, high taxes, high cost of living. I'm getting into teaching to escape the place! Give me Bangkok over Berlin any day.
PsyGuy
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Post by PsyGuy »

@joe30

I understand the UK general pension scheme. It has the advantage that you get to collect upon reaching eligibility without having to vest a certain amount of time. There are additional pension and retirement options offered by various independent ISs and DSs in the UK in addition to the general pension.

The UK general pension isnt great I agree, as I discussed above though there are countries with far more generous pensions. Switzerland and several NE counties have more generous prescribed benefits (its why their taxes are so high). The UK general pension is not a very good example of a strong WE pension strategy.

However even in the UK there are opportunities for a very comfortable retirement, look at the pension and retirement options available at Eaton College. While I will grant thats also an outlier, there are a number of upper tier ISs and independent DSs that easily provide comfortable retirement opportunitys.

Looking at your attribute claims of the WE:
Yes taxes are high and they are highest in those regions that provide very secure and stable pension programs that you can retire comfortably on.
Average salary is only average in DE, of course those salaries set the average they account for a very high proportion of the compensation schemes in education. Most ITs have compensation packages that are better than the average, and they further benefit from OSH packages that include benefits such as housing, tuition, etc. (when they are offered).
COE (Cost of Living) is highly subjective, you can spend a lot more in Asia than you would in the WE or western countries trying to maintain the same lifestyle you would in the west. A 1000 m/sq. flat in Japan will cost you much more than you would pay in England, and Singapore would be even more than Japan. Thee are a lot of trade offs, advantages and disadvantages in comparisons between any two regions COE.
joe30
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Re: Reply

Post by joe30 »

@PsyGuy

Just did some quick research on the pension scheme in Switzerland, since that seems to be one of the places everyone wants to get to.

https://www.ch.ch/en/retirement-benefit ... illar-oasi

"To receive the full pension, you have to have contributed in full. This means you and your employer have made payments without interruption from the time you were 20 until the time you reach retirement age.

The level of the pension you receive then depends on your average annual income. The minimum and maximum levels are as follows:

You will receive a pension of CHF 1,175 per month if you have paid OASI contributions without interruption and your average annual income did not exceed CHF 14,100.
You will receive a pension of CHF 2,350 per month if you have paid OASI contributions without interruption and your average annual income was at least CHF 84,600."

So...pretty much no IT is going to get the maximum (i.e. contributions from age 20 to age 65). If you work 10 years in Switzerland, it looks like you'll get 10/45ths of the maximum amount. Assuming you're at one of the top schools and earn over CHF84,600 a month, that would be (10/45)*2350 = 522CHF a month. CHF and USD are around equal.

So a shade over 500 bucks a month after 10 years work. Yeah, it's 'something', but I'm sure you'll agree much more is required to live a comfortable lifestyle. Yes, there's private pension schemes that you can pay into with your own cash, but you can do that with savings anywhere in the world, so that's not an advantage of Western Europe per-se.
Helen Back
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Re: Countries to start to work late in career for a pension?

Post by Helen Back »

[/quote]To begin with a pension isnt just a monthly salary payment once you retire, its access to potentially subsidized housing, but more importantly its medical/health care as well. Your savings isnt going to last very long if you have to pay for treatment for any chronic or major medical conditions that develop.[quote]
PsyGuy
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Post by PsyGuy »

@joe30

You didnt read all the way. Switzerland has a three component system that comprises your pension and retirement program. You were accurate when discussing the 1st component, there is some context however to the first component. Everyone pays it from the age of 20 to retirement age. There isnt a way for Swiss nationals to escape it in country. What you neglected was the second component which is occupational pension contributions which you contribute when you first start working in the country. It is this 2nd component that will make up the bulk of an ITs pension plan (the third component is private personal retirement programs, that offer tax savings benefits). In addition there is a minimum retirement benefit that is made up from other allowances and types of social insurance. So if you work in Switzerland long enough to gain citizenship (10 years) you will qualify for a pension when you reach retirement age.

You may also want to look into other advantageous NE countries such as Denmark, Sweden, etc..
joe30
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Re: Reply

Post by joe30 »

@PsyGuy

Surely occupational pension contributions (i.e. the second pillar) aren't really country specific? There's schools in Asia that pay into a retirement fund too.

Might be more common among the European schools, but the exact benefits you're going to get are going to depend on the school you work for, not the country.

In any cash, these things all have a cash benefit i.e. employer pays x amount into a retirement scheme...this could also be achieved by paying in yourself, if you had a higher salary in a different region.
PsyGuy
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Post by PsyGuy »

@joe30

Different regions organize their pension scheme differently. Some group it all into one scheme, some into different components.

Sure there are some Asian regions that have pension schemes, Japan recently lowered theres from 25 years to 10 years to be vested, but its a pittance.
Are there ISs in Asia that provide private retirement plans, yes, but they arent pensions, they are retirement programs based on a portfolio of investments. You can find the same programs at equivalent tier ISs in the WE as well, and thats in addition to your social insurance pension.

Thee is more significant variation in region than there is in an IS, many of the elite and 1st tier ISs that provide a private retirement program are all very closely grouped around similar portfolios held by slightly different managers. Compare one ISs program to another and the name of the manager changes but the contents of those portfolios are very similar (one has Google, one has Microsoft, one has Apple, but they are all large cap tech stocks).
What really matters is 1) your comp package, how much you make, how your OSH benefits provide more discretionary income, and what private retirement program if any you have access to and the costs, and 2) What social program your taxes are buying, and much of this depends on the social pension program you are paying into.

In this specific example Switzerland wins, but thats because its the overall EU winner. Switzerland has the highest average salary in Education overall, and has the highest concentration of wealth in IE. Its one of the few locations an IT can make 6 figures, and the highest income potential in the EU. The UK in contrast pays below the global average and below the national salary average in education.

No they dont have a cash equivalent, my earlier post on vesting requirements address this. If your funding your own retirement than thats investing, its not a pension.

Many ITs have very congruent discretionary compensation.Different factors tend to compensate for differences between factors. High salaries are countered by high COE (and no housing in the OSH) and high taxes. Low cost of living, low salary.
You commented that youd much rather live in Thailand, and Id agree its a very exciting and fun place, especially if your a single guy (or married guy whose bored with his marriage). What is Thailand going to give you? Nothing There is no national health and medical program, there is no regional pension scheme, the majority of old age care is passed on to the family. If you are at an elite tier IS you will have access to a retirement program. Thailand (less so BKK) has a low COE thats why so many expats on western pensions and retirement relocate there. You are otherwise just saving your own money, go somewhere like Switzerland or the ME (work for Aramco or BAE), save more money and then go to Thailand, Myanmar, Philippines, Indonesia or CSA.

The UK has a poor retirement and pension scheme, but the UK is not the EU, there are better places, and there are much better places that are still in Europe, and its why ITs either enter IE with a pension already or they eventually need to get to the EU for a pension and a health system that wont leave them to die.
joe30
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Re: Countries to start to work late in career for a pension?

Post by joe30 »

@PsyGuy

It's an interesting discussion, because I've really just been working off the basis that I'd have to fund my own pension. Basically, given most places outside Europe offer free housing, I'd take the money I would have spent on housing, and instead put that into savings, which would become my retirement fund in the end.

A European school offers better retirement benefits, but no housing, so maybe it all evens out in the end? Of course, the onus is on the guy with free housing not to blow his extra discretionary income on living the high life.

Doing some research into the Swiss scheme, for an IT who works 10 years in Switzerland starting from age 55, does this sound about right? We'll assume a $100k salary (top of the range, cos this guy has presumably got 20+ years exp under his belt already).

10/45ths of the 2350CHF per month maximum = 522CHF a month = $532 a month. Multiplied by 12 gives $6384.

From age 55, contributions to pension have to be 18%. Employers must contribute at least the same as employees, so that's 9% each. Or $18,000 a year in total contributions. Over 10 years that'll be $180,000, and the current conversion rate is 6.8%, which would provide a $12240 pension each year.

$12240+$6384 = $18624 per year. Does that sound about average for 10 years working?

One notable thing about the Swiss system is it seems much better to work there later in life than earlier, since if you work there in your 20s or 30s the contribution rate is 7-10%, not 18%.
TeacherGal
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Re: Countries to start to work late in career for a pension?

Post by TeacherGal »

-Joe

$12240+$6384 = $18624
I could live off of $18624 per year in someplace very cheap and hot. I've lived in countries where $1000 a month would be fine for rent, utilities, food, etc. And I figure by the time I'm ready to retire I won't have expensive tastes such as traveling, nice clothes, nice car. I'll want to sit back, relax, take it easy. But I'm still hoping to work in some way in my old age and bring some extra money in.
PsyGuy
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Post by PsyGuy »

@joe30

I dont know if thats average for 10 years of employment, the scenario is such an outlier, "average" doesnt have much meaning.

Looking at your savings plan, you reason that your IS provides you housing so you will bank that and make it your retirment. Assuming the average IT salary of $30K a year and assume your housing value that you save each month is $500, thats $6K a year and represents 20% of your salary. Assuming you save for 30 years thats $180K at the end of thirty years. If you withdraw $18K a little less than the CH benefit, your saving will last 10 years, which works if you retire at 65 and pass at 75, and have no major medical issues. Compare that to the CH pension and you worked thrice as long (30 years vs 10 years) and contributed twice as much (20% vs 9%), and if you live to 85 will have gotten twice the benefits (20 years vs. 10 years). In addition you will have high quality medical care.

I dont see how that "evens out".

@TeacherGal

Yeah you could live on that in a lot of Asian and CSA regions, youd have a similar lifestyle as an ET in the region. This also assumes your making this $100K CH salary (closer to $50K after taxes and social insurance) for 10 years without any salary increases, and you dont do anything else as far as investing or private retirement planing. Your monthly salary would be $4.1K/month you could put 25% of that into a private retirement program, possibly even a separate/additional matched program offered by your IS and even at conservative rates of return have around an additional $130K to supplement your pension.
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