Earlier this year, The Guardian featured an article titled “‘We never got off the treadmill’: the Britons who can’t afford to retire.” In it are loads of statements and comments from people who are well into their retirement age but are still working for a number of reasons, the biggest of which are the housing crisis and the cost of living crisis in the UK. A shortage in the total number of homes in the UK, exacerbated by a very slow rate of new builds has caused property prices and rents to sky rocket, making it extremely difficult for people who don’t own their own homes to retire. According to The Pensions and Lifetime Savings Association (PLSA), the cost to comfortably retire went up by over 35% just in the last year. That’s £31,300 a year to enjoy a “moderate” lifestyle, up from £23,300 a year, just a year ago. The Guardian also mentions that to achieve this level of retirement, you need a pension pot worth a total of about half a million GBP.
Another contributing factor to it becoming so hard to retire in the UK, is the fact that the government effectively keeps shifting the goal post. Starting from the 1940s, the UK government has slowly but steadily continued to increase the State Pension Age. While it used to be 65 for men and 60 for women, the SPA for women was gradually increased from 60 to 65 from 2010 to 2020. In 2020 it was then changed to 66 for both men and women, with plans to increase it to 67 by 2026, and further plans to increase it to 68 in the future. In fact, there are a number of experts who believe the SPA in the UK will soon need to increase to 71 to be affordable! Can you imagine being promised a retirement by age 60 and then when you get there it slowly starts climbing and you end up trying to play catch-up with the SPA?
That’s exactly what happened to a number of people, many of whom chose early retirement at age 55 thinking they would get their state pension in 5 years, only to realize it would be another decade before they reach SPA. According to Research from the Pensions Policy Institute, women who retire in 2026 by age 67 would have collected an average pension of about £69,000 as compared to £205,000 collected on average by men. While they’re both a far cry from the half a million pounds required to retire with a moderate amount of comfort in the UK, the disparity between men and women pensioners is huge. This disparity is often caused by career gaps, lower pay, and childcare. What makes it worse is that women on an average live about 7 years longer than men and require more pension payments.
If you’re an Indian who’s lived and worked in the UK and has accumulated a pension, don’t wait till it’s too expensive to retire, move back home, bring your pension fund with you, and retire with more than a “moderate” amount of luxury!
QROPS FAQs
How much does it cost to transfer my pension from the UK to India?
Not only is the transfer of pension funds to approved pension schemes in India tax-free, but you also save money that would otherwise be spent on currency exchange rates and similar complications if you were to leave your pension in the UK.
Will I be able to invest my pension plan in the stock market in India?
In terms of investment opportunities, there are two basic categories for QROPS investors in India. The first one is fixed-income instruments where interest rates go up to 10.5% and returns are guaranteed. The other option is investing in equity where returns aren’t guaranteed but the sky is literally the limit. Investors looking to invest through a QROPS can invest in equity through ULIPS, which are basically equity funds ( largecap funds, flexicap funds, prime equity funds ).