- Spain tops the poll1 for most popular overseas retirement destination
- Reasons for considering retiring abroad include the prospect of a better lifestyle, cheaper living costs and better weather than the UK
- Spain has consistently been the nation's favourite retirement hotspot since 2013
Canada Life has revealed the nation’s favourite retirement destinations for 2018, with Spain once again ranked first.
The nation’s favourite retirement hotspots are (2017 rankings in brackets):
1st: Spain (1st)
2nd: France (2nd)
3rd: Portugal (3rd)
4th: Italy (=4th)
5th: South East Europe (=4th)
6th: America (7th)
7th: New Zealand (8th)
8th: Far East (6th)
9th: Australia (9th)
Andrew Tully, Pensions Technical Director at Canada Life, said: ‘Many people dream about retiring abroad, often hoping to enjoy better weather, a better lifestyle or cheaper living costs than back in the UK.
‘However, without the right planning and financial advice, you can very quickly find yourself fall foul of local tax laws, feeling the pinch because of currency exchange rates or other financial issues, even more so given the current uncertain climate.
‘As one example, if you retire to some countries, you will find your UK State Pension won’t increase every year like your peers who remained in the UK. As living costs inevitably go up over the years, you will need to have other sources of income to help maintain your chosen lifestyle.’
Countries in the EU, as well as many others, have ‘reciprocal social security agreements’ with the UK, which means the State Pension will increase each year in the same way as retirees living in the UK. However, countries including Australia, Canada and New Zealand do not currently have these arrangements in place, meaning the UK State Pension will not increase. This can have a dramatic effect on your retirement income.
For example, a single person who retired in 2008 to Australia (a country where there is no reciprocal social security agreement) would have seen their UK Basic State Pension frozen at £90.70 a week. Ten years later, it is now £125.95 a week (up 39%), which is worth an extra £1,833 income a year to a pensioner who remained in the UK.
As at September 2014, there were 1.24 million people in receipt of a state pension outside Great Britain. Of these, just under half – around 560,000 – were in countries where the state pension is not up-rated2. Most people with frozen overseas pensions live in Canada, New Zealand and Australia. The Government has estimated that uprating frozen pensions in payment to current levels would cost over £0.5 billion a year3.
Andrew Tully continued: ‘As part of the Brexit negotiations, reciprocal social security agreements will form part of any deal reached, but it looks like both sides are committed to honoring the current position. But it's worth keeping in mind how your financial position would be affected by changes to these agreements as well as how incomes currently paid in sterling would be impacted by currency exchange rates.
‘To help navigate the complexities of retiring abroad, it is vital people seek professional financial advice. There are a number of companies who have experience advising budding expats. Receiving the right advice could make all the difference between making a retirement dream a reality and avoid it potentially turning into a nightmare.’
Top tips for retiring abroad
- Get an estimate of your State Pension
- Seek independent financial advice before you move – to find an adviser go to www.unbiased.co.uk – you can search for experts on expatriate finance
- Tell HM Revenue and Customs that you are moving overseas. This allows them to let you know of any UK tax liability you may have even though you are living overseas. And more importantly can allow any UK pension you have to be paid gross (no tax deducted) and taxed in your country of residence (only applies if the country you live in has a double taxation agreement with the UK).
- Check what reciprocal social security agreements are in place with the destination country regarding your UK State Pension and other benefits
- Find out about your welfare rights while abroad
- Keep an eye on exchange rates
- Check the cost of healthcare in the country you are thinking of moving to, and consider some form of medical insurance
- If you decide to keep your property in the UK you will need to let your mortgage provider and insurance company know if it will be rented or remain empty
- Do your homework on the cost of living in the country you want to move to
- Notify utility companies, financial institutions and your local council when you are leaving
- Contact the electoral register, and arrange for mail forwarding via the Post Office
- Survey conducted by Censuswide between 4.7.18 and 6.7.18 of 1,000 over 50 year olds, who are yet to retire and would consider moving abroad. 2017 data: Survey conducted by Censuswide between 20.03.17 and 22.03.17 of 1,013 over 50 year olds who are yet to retire.
- Source: House of Commons Briefing Paper 9.3.18 page 11 section 1.4
- Source: House of Commons Briefing Paper 9.3.18 page 3 summary