More and more of us are planning to spend our retirement in a different country. The key attractions are usually the sun, the sea and an easier pace of living.
There can also be financial advantages too: Property may be less expensive, the cost of living could be lower and the taxes you pay might be less than in the UK (though tax treatment depends on the individual circumstances of each person and may be subject to change in the future).
If you are considering moving to another country, some of the key financial issues you ought to consider are:
- What happens to your State Pensions?
- Can your private or company pensions be paid overseas?
- Tax rates, cost of living, healthcare - how do these compare with the UK?
The last question suggests your choice is strictly rational: in practice, most of us are won over by the beauty of a country, the friendliness of its people and its climate. Whatever your motives, you should find out as much as possible about the implications of a move overseas, before you make a decision.
What happens to my State Pension if I retire abroad?
The good news is your State Pension can be paid anywhere in the world. Unfortunately, there may be bad news: State Pensions increase each year, but you’ll only receive the increase if you choose to live in another part of the European Economic Area or any country that the UK has an agreement with to allow increases.
How do I arrange for my private/company pensions to be paid?
Most private and company pensions can be paid into an overseas bank on request, but there may be extra charges to pay.
There is another approach: You may be able to transfer your pension into a special arrangement called a Qualified Recognised Overseas Pension Scheme. This route can be more advantageous in certain circumstances, but these schemes can be complicated and costly. That means it's important to take specialist advice.
What else should you think about?
This isn’t an exhaustive list, but it does cover some of the key issues you should think about:
- Tax rates. How do tax rates compare with the UK and how will this impact you?
- General costs of living. The cost of food, eating out, clothes and so on.
- Property prices. Many people are attracted by the prospect of cheaper property prices.
- Healthcare. What‘s free and what you have to pay for (and the likely costs)
- Other considerations. For example, some countries insist you invest money in the country often at low rates.
It’s important to take the time to consider all of these issues and others to make the right choice. Moving to another country to start your retired life can be an invigorating and rewarding experience, but it pays to do your homework first.