Effective financial planning and pensions are crucial for expat teachers, with offshore pension bonds offering significant benefits.
Last time I spoke about the needs of oil and gas workers. Teachers overseas are in a similar position in some ways but in a different situation in other words. The following points were made about oil workers but also applies to education:
1. Health Insurance
Your employer should provide this. However, almost all insurers for expats, won’t cover pre-existing conditions at a reasonable rate if you haven’t already been insured through them. In other words, if you have a contract in 2018 and are insured by AXA through your company, if you lose your job in 2020 and got cancer or a heart attack in 2019, you won’t be able to easily get insurance to cover those conditions unless you are part of a group scheme. So spending 1%-2% of your insurance on your own health insurance makes sense.
2. Income protection due to ill health
The average age for expats claiming illness insurance is 43-44 in Asia, not 54 or 64! Oil and gas has it’s stresses just like all jobs, but also some specific threats to your health. Like on health insurance, protecting your income if a disability or serious illness occurs, can be incredibly cheap, provided you don’t already have pre-existing conditions.
3. Life cover.
If you have kids or dependents such as elderly relatives or a partner who doesn’t work, you need life insurance. Insurance though is dead money if nothing happens. Therefore, it makes sense to get as many benefits as possible, for the lowest possible price. If you can get your income, life and health insured for 5% of your income, it is a non brainer and helps you sleep at night .
4. Income
If you are 55+ and are thinking about retirement, you should think about how your investment portfolio (which is hopefully relatively big by now) will fund your retirement. What income options exist?
5. Property at home or abroad
This is part of estate planning and inheritance, but depend that, investing in property doesn’t always make sense. It can do, depending on the area, whether you can find a buyer and so on. Expat mortgages can be reasonable and arranged.
6. Your current pension or savings
How well is it performing? Do you have too much money in the bank earning close to 0% or an underperforming portfolio?
In addition to the above, teachers have additional considerations, including the below:
1. Teaching isn’t the most lucrative occupation, but back home the pension benefits are substantial. It isn’t usual for a teacher to get a pension of 17,000-20,000GBP, in addition to the state pension of around 10,000 pounds. To put that in perspective, a teacher earning 27,000-30,000GBP in retirement would need a retirement post of over $1M if they did it privately.
2. Teachers overseas in international schools usually have bigger salaries, but less pension benefits. This makes saving, and saving from a young age, important, to ensure you have parity or better with your peers back home. If you are 30, investing $500-$800 may be enough to provide you with a good retirement come 60-65. If you have left it until age 45, in comparison, you may need to invest $1,500+
3. Unlike expats in certain functions in oil and gas, teachers can often get at least part-time work at 65 or even 70. An expat teacher who is 65 needs to carefully consider how they will fund retirement, including part-time income. Nobody knows when their health will go, so this shouldn’t be an excuse for a younger expat to delay, but if you are in this unfortunate position, you need to see much your current pot could be worth on a monthly basis and then decide how many hours you need to work.
adamfayed@iamgltd.com – for more questions about this article.
