Lifestyle, weather and cost of living are key reasons for considering retiring abroad

• Thoughts of better weather and lifestyle drives decisions around retiring abroad
• The cost of living crisis has positively impacted the willingness to retire abroad
• Spain again tops the poll as the most popular overseas retirement destination

New research¹ from Canada Life today reveals that for the over 50s who aren’t yet retired and who are looking to retire abroad, 64% would do so for the better lifestyle, with the same doing so for the better weather, very similar to last year. A further 54% would like to retire abroad for the cheaper cost of living, which is up from 45% in 2021.

The cost of living crisis has made more than half the over 50s (51%) thinking about retiring abroad more likely to actually make the move in the future, with fewer than one in ten (9%) less likely to do so due to rising living costs.

For the last decade, Spain has topped the poll as the most popular overseas retirement destination. In a reversal of fortune, Portugal pips France into second place.

With many retirees considering moving abroad for a cheaper standard of living, the average monthly income needed is thought to be £1,430. Perhaps unsurprisingly, retiring in the UK is considered to be more expensive than retiring abroad, and on average the over 50s thought it would require a monthly household income of £1,931.

For those considering retiring abroad, it’s important to consider the impact of reciprocal social security agreements. Countries in the EU - as well as many others - have these agreements with the UK, which means the State Pension will increase each year in the same way as retirees living in the UK - but it’s important to understand whether the agreements are in place further afield². Currently³, of the State Pensions which are paid overseas, 43% are frozen.

The research revealed, however, that one in four (23%) weren’t aware of such agreements while just one in five (20%) know which countries had reciprocal payment agreements in place.

Andrew Tully, technical director, Canada Life commented:

“The dream of retiring abroad is alive and well, despite the economic headwinds and global pandemic. The thought of a better lifestyle and weather, coupled with a cheaper way of life drives many over 50s to have a desire to extend the dream holiday to a permanent situation. The cost of living crunch, if anything, has made it more likely people will jump ship from the UK.

“Retiring abroad is not a step to be taken lightly though. The financial considerations are vast, such as thinking about the impact of currency exchange rates, local tax rules, and whether State Pensions will keep pace with the cost of living.

“Offshore bonds can play a role in expatriate financial planning as they can be left to grow almost free of tax with no restrictions on how much can be invested. They can also be a vehicle for additional savings without the hassle of dealing with complicated pension regulations. The choice of country is important as when money is withdrawn the taxation rules of the country in which the client resides will apply.

“To help navigate the complexities around retiring abroad, it’s important to seek expert advice from someone who specialises in expatriate finance.”

Impact of Brexit and the pandemic

Half (53%) of the over 50s who are thinking about or planning on moving abroad when they retire are reconsidering where they might retire to due to Brexit. A further 48% say Brexit is making them reconsider their plans altogether. When asked about the pandemic, a third (33%) of the over 50s say Covid-19 has made them rethink where they might retire to, while a further 29% say they are thinking about whether to retire abroad at all.

Top tips for retiring abroad

1. Get an estimate of your state pension here.
2. 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
3. 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 planning to live 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).
4. Check what reciprocal social security agreements are in place with the destination country regarding your UK state pension [including whether it will be increased or frozen] and other benefits
5. Find out about your welfare rights while abroad
6. Keep an eye on exchange rates as state pension and other income is likely to be paid to you in pounds and you will then need to convert to the local currency which may mean your income fluctuates
7. Check the cost of healthcare in the country you are thinking of moving to, and consider some form of medical insurance
8. 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
9. Do your homework on the cost of living in the country you want to move to
10. Notify utility companies, financial institutions and your local council when you are leaving
11. Contact the electoral register, and arrange for mail forwarding via the Post Office
12. If you plan to keep an account at your UK bank, contact it and ask if you will face any new rules or restrictions after moving abroad