The basics of offshore pensions
In many high-tax locales retirement plans or pensions receive automatic tax breaks. Because of these tax incentives there may not be as large a differentiation between offshore and onshore financial advantages as there are with other kinds of investments. It is important for residents in these higher tax rate countries to research the advantages and disadvantages of moving offshore thoroughly as individuals could possibly discover more opportunity for financial gain by continuing to invest at home. If an investor from a high-tax country has no intention of relocating after retiring he should consider leaving his investment in his home jurisdiction to benefit from the standing tax breaks provided for retirement funds.
In countries where tax rates are high the government usually sets into place an assortment of methods to inspire the public to take financial planning for retirement seriously. This means creating incentives for those who make this a priority. Most often the encouragement to save is given in the form of tax-breaks. Initial contributions for retirement plans/pensions are often tax-free, sometimes an entire plan is partially or entirely tax free and commonly the gains from the investment are either tax-free or minimally taxed. Most of the time you do not find a plan that more than one of these rules applies for but on occasion you can find a plan that combines two of these incentives. Because there are so many tax incentives toward retirement plans available in high-tax jurisdictions it is not likely that you will be able to match the growth offshore once taxes are taken into account.
There are times when offshore pension investment for retirement can be beneficial. For expatriates who have no plans on where to settle after retirement it can be beneficial to consider investing specifically for that purpose. Since these types of investors cannot get the tax benefits of their nation of citizenship they will not lose from investing practically. This also allows some flexibility as they are not committed to one jurisdiction.
Investors planning to settle in another country after retirement can plan ahead to take advantage of the situation and make some investment decisions based on tax benefits. If a probably relocation is in the future you can plan in advance to build offshore capital growth assets which are rarely subject to taxation in the pre-retirement locale. When the investor converts the assets into cash income he will be residing in a low-tax jurisdiction.
Investors who already have a pension plan that benefits from tax-privilege in their country of residence should see what the laws are on that income when moving to a new location. In some cases the pension may not be taxable or at least may only require minimal taxation but in other cases you may need to plan for a different type of investment plan to avoid penalties. It is essential to seek out professional advice when setting up investments like this. You want to avoid any financial repercussions from the misunderstanding of tax and investment laws.