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Investment planning should be a continuing process to ensure your investment aims are still right and your investments correctly aligned with those objectives.

It's never too late (Non-Habitual Residence (NHR)) - Published Oct 2018 by Raoul Ruiz Martinez

Are you under the Non-Habitual Residence (NHR) scheme or looking to apply?  Are you a habitual resident who feels they have missed out on a window of opportunity to benefit from this 10-year tax holiday on pensions?  As far as private pensions are concerned, whether non-habitual or habitual resident, you can still enjoy some generous tax savings in Portugal. 

However, many individuals “near to”, “at, or even in a “post” retirement phase have built up their wealth or long-term savings in the shape of bricks and mortar, other tangible assets or even investments in other non-pension vehicles that fall out of the “pension” world.  In fact, many NHR applicants with “non-pension” assets are finding they are being taxed as much as any habitual or normal tax resident.

Tax is a feature of long-term financial planning instilled by governments and politicians but tax, on its own, should not be the primary driving force. 

It’s never too late to sit up and act by placing those assets in a pension-friendly environment.  Destination for retirement (which drives many to spend the later years in the sunny Algarve), self-insuring for health cover and independence from the need for public or State support are some of the fundamental and primary driving forces.  In any event, your financial adviser should be incorporating robust tax planning in any pension planning.

For those at pre-retirement, i.e. everyone from those who have left school to those nearing retirement, are likely to question why they should bother setting up a pension or some form of long-term savings for a life event that is potentially years or decades away.

Rather than bore you with the reasons why, take a look at the latest study forged by a not-for-profit consortium (including Mercer, the American global human resources and related financial services consulting firm) produced the 2018 Melbourne Mercer Global Pension Index (MMGPI) whose objective is to compare retirement income systems from 20 countries across the globe.  The index identifies common challenges for many countries and compares retirement income systems across the 20 countries based on their adequacy, sustainability and their integrity based on the provision of old-age income security. 

Maintaining pensions in a world where life expectancy continues to rise and savings are attacked by financial anomalies such as crisis and inflationary pressures is treacherous.  Even if you are not working or saving because you either perceive yourself to be too young, or due to the fact that you have already retired, don’t be fooled into thinking you are excluded from this equation.

What comes across in the study as rather enlightening is that evolving systems in emerging market economies such as, for example, Chile, still makes the UK system look unsustainable by comparison.  The overriding message is that we all must grasp the importance of the security and availability of our livelihood in old age even when we have been living and working in a “tier one” developed and affluent society. 

I expect few are keen to break down and analyse the socio-economic fabric of the UK versus Chile, but it is never too late to look at your own personal pension resources, or even review your plans with retirement to Portugal in mind.

This article is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific course of action. 

Raoul has a weekly radio feature (Raoul’s Rant) on the Owen Gee Solid Gold Sunday Morning Show as well as the Money Minute programme on the weekly Si Frater Breakfast Show, both on KissFM Portugal.