What to do with your pension as a Digital Nomad?

One of the things that we digital nomads get a bad reputation for is when it comes to planning ahead. This is especially true regarding planning and saving for the future. However, a lot of digital nomads were forced during the pandemic to go back to their old jobs or to get even more creative and resourceful and therefore, face the inevitable question ‘what’s next?’ and ‘what does the future hold for me?’ and ‘how will I manage my finances later on in life?’

Obviously, managing your finances and saving for your retirement is much easier when you are living your entire life in one place, working in the same job or industry decades upon decades. In this case, you would be fully part of a country’s system and if you live in a high taxing Western country chances are that you don’t have to worry too much about it. However, negative interest rates, inflation, and indebted Western countries have proven again and again that pension savings might not be as reliable anymore as we thought they were going to be. On top of that, the system itself wasn’t really designed for nomads that have cut ties with their home countries and aren’t contributing to social security funds anymore. So, we’re forced to look for alternative solutions.

So what should be done about retirement plans for digital nomads?

State pension plans like the one in the UK provides that a percent of your wages is deducted and invested in a pension fund with similar contributions from the employer (6% in the UK) and the employee alike. Similarly, if you are registered as self-employed in the UK, then you are required to invest in national insurance contributions, which will provide you with a pension after your retirement.

The majority of countries around the world have such a social security contribution scheme where you can park your money in a government-managed fund and get a pension and other retirement benefits. The most attractive benefits of such funds are that they are tax-deductible contributions and the capital gains generated from such investments are also tax-free.

However, as a digital nomad or a location-independent business owner, you might not be eligible to receive such benefits.

Alternative Solutions

As mentioned above the current trend of indebted Western countries, low-interest rates and uncertain future for social security contributions due to an aging society has already pushed many individuals to draw out their pension funds (if it is accessible to them) and instead put them into real estate or other investments that provide them with bigger returns than the national pension funds do.

So, the same logic applies to digital nomads. Many digital nomads seem to be by nature more risk-averse and are, therefore, happy to invest their money into equity markets. The problem with these investments is mostly that starting with your investing journey in equity markets requires a bit of financial knowledge. Unfortunately, we’ve seen many location independent business owners and digital freelancers that do have the technological know-how but simply lack the time to invest to do their proper research and dig into how the equity market works.

But for the long-term, it pays off to pay a professional financial advisor, or fund manager, who helps you decide where to put your money so that you come out with bigger gains.

Self-invested Personal Pension

Alternatively, if you don’t feel like putting your money into the equity market you can start investing in a self-invested personal pension. The benefit of such SIPPs is that you can design them according to your own needs and there is a lot of flexibility in terms of investments and contributions. There are a lot of ELSS i.e. equity-linked saving schemes run by banks, mutual funds, and other financial institutions, that also come with tax benefits similar to those available for national pension funds.

If you begin to invest in a SIPP, even with a small amount, at a young age, it will definitely strengthen the backbone of your financial positions hugely when you come to your retirement age. Albert Einstein quoted that compound interest is the eighth wonder of the world, he who understands it, earns it while he who doesn’t understand it, pays it. A $100 monthly investment started at the age of 20 will be of far more value than a $200 monthly investment started at the age of 40, due to the magic of annuity compounding.

The first thing that you should do, which is applicable to everyone whether nomad or not, is to determine the amount you can save monthly. Account for all your expenses, make a budget and determine a percentage that you are able to save every month.

This can be difficult for digital nomads due to the inherent unforeseeable nature of their lifestyle and business, but the better you budget yourself, the more you will save and the earlier you can retire. Have a long-term vision in mind. There are a lot of return calculators available online to calculate the amount you need to save based on the expected rate of return and the number of years you can invest for any retirement amount. Use them properly and set an achievable monthly target.

In order to be able to manage your SIPPs better, you need to have some knowledge about the basic rules of long-term investing.

1. Do not hold more than the necessary amount in your savings bank account.

Only keep a reasonable amount of liquidity in your savings accounts as they tend to give negligible returns. Set a working capital amount and whatever excess you have should go to your investments.

2. Diversify your investments

Keeping all your eggs in one basket is a sure way to burn your hard-earned money. Fix a specific amount to be invested in each segment i.e. equity, debt, shares, etc. After that in each segment, fix a specific percent to be invested in different sectors and industries such as small-cap, mid-cap, etc. Do not park a large amount in one single stock, no matter how appealing it looks. Long-term investment should be treated differently from short-term trading.

3. Invest in index funds and exchange-traded funds

Index funds are linked with market indices such as Nasdaq. These funds are far safer to invest in compared to small-cap funds, as they will grow at the same level of the related index. ETFs or exchange-traded funds are better for people who might need liquidity in the future as these funds can be bought and sold at the exchanges at any time.

The relevant cost and tax benefits in investing in such funds should also be compared in order to get maximum long-term benefits.

4. Do not fall for the psychological, behavioural aspects of short-term gains

As stated above, short-term investment is different from long-term investment. Any variation in the portfolio should be done in accordance with long-term goals only. For example, as you start reaching your retirement age, start increasing the percent of risk-free assets in your portfolio. Do not let fear of missing out on a particular short-term gain affect your long-term plans.

5. Save as much as you can in your better days

Digital nomads have a tendency to blow their money during times when their earnings are high. However, those are the times for saving, especially with the unexpected nature of your work. Maybe the next month will not be as fruitful as this one, better to save and then spend, instead of spending and then save.

ISA – Individual savings account

In the UK for example, you can open an ISA account if you are not confident enough to manage your portfolio on your own. ISA accounts are managed by banks, building societies, or other providers, in which you can invest up to £20,000 every year tax-free. They will invest your money into different areas depending upon the type of ISA you have chosen. Various types of ISAs available are Cash ISA (for cash savings), Help to buy ISA (save to buy your first house), Lifetime ISA (Retirement savings). Stocks and shares ISA (invest in shares without paying tax on returns), etc.

The main advantages of ISA over pension funds are their professionalism, flexibility, more options along with tax benefits. Unlike pension funds, you can use ISAs for medium-term investments too. You can also select a combination of different types of ISAs in your £20,000 allocation. The returns earned from ISAs are tax-free which gives them a huge advantage over SIPPs.

Similar ISA accounts are available in various other countries you just simply need to find out the specific name in your country.


We are by no means investment managers who tell people where and how to invest. However, we’ve had the pleasure to work together with quite a few individuals who are living a nomadic life and are living 100% from their investments, and who are happy to help others within this community. If you want to speak to someone who is an investment expert be sure to reach out to us.

Once you start digging a little bit more into the different options available for your investments you’ll quickly realize that there are also many brokers out there one of the most globally ones known being Vanguard or Fidelity. Some popular indexes to consider could be S&P500, MSCI World, iShares Core Global. But again, what you decide on investing in really depends on your available funds, your risk appetite (hello cryptocurrencies), the trends that you follow and your age too. So, get yourself some professional advice.


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We hope you have enjoyed this article. If you have any further questions please leave us a message below and we’ll get back to you as soon as we can.

    NOTICE: The content of this article is not to be considered as a legal opinion or tax advice. Wanderers Wealth does not hold itself out as a legal or tax advisor. If you want to receive a legal opinion or tax advice on the matter in this article please contact us directly and we will refer you to a legal practitioner.

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