As research from the Standard Life pension provider reveals that Spain is the number one choice for pensioners who decide to move abroad to retire, John Lawson, the head of pensions policy for Standard Life, warns people who are thinking about retiring overseas to plan carefully and seek out good financial advice.
It is estimated that over 1 million British passport holders have chosen to retire overseas.
Standard Life research has revealed that Spain is the top choice for people who are thinking about retiring overseas, followed by Australia, America, France and Ireland.
A recent survey by Aon has indicated that 57% of 7,500 respondents do not consider the UK as their preferred location to spend their retirement years. Some experts suggest that falling standards of living in the UK and the prospect of better weather will see many more Brits choosing to emigrate for their retirement.
Mr Lawson indicated that retiring overseas is a dream for many people, believing that the cost of living is much cheaper overseas. However, he warned that this is not always true and people should take steps to ensure that they thoroughly plan their finances before moving.
People retiring and moving from the UK need to be aware of how their state pension is affected – this can vary from country to country. If you qualify for a British state pension and choose to retire abroad, you can still claim it, but you need to make arrangements with your local authority.
However, it is important to note that if you decide to emigrate to a country outside of the European Economic Area (EEA) your state pension may not be eligible for a yearly increase.
Other than countries within the EEA, there are 16 more countries such as America, Turkey and Jamaica where expats do receive the annual uprating to their pension.
Retiring to many other countries including Australia and Canada, both part of the British Commonwealth, do not allow for increases to the state pension. In these cases, your pension is set at the weekly rate you had when you first moved to the country.
People who are considering emigrating need to investigate local tax laws in the country they are moving to. Exchange rates and currency fluctuations can also have an impact on your retirement income.
Risks associated with exchange rates and costs can be addressed by considering moving your pension fund into a Qualifying Recognised Overseas Pension Scheme (QROPS). These approved overseas pension funds have the benefit of investing into your new countries currency, remove your fund from UK regulations and can possibly come under better tax arrangements. However, some guarantees may be lost and the transfer may incur further costs.
Oliver Rowlands, from Aon Consulting, has echoed the financial concerns raised by Mr Lawson, adding that healthcare benefits also vary for expats. He said: “Cheap air travel and the communication tools available over the internet means that retiring overseas doesn’t necessarily mean being completely absent from your family’s life, making the prospect of emigration to other countries on an previously unseen scale a real possibility
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