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Retiring abroad? PDF
Saturday, 30 October 2010 21:30

While we're on the subject of pensions, I came across this useful advice from a UK pension fund:



Retiring abroad?

Source: Merseyside Pension Fund

According to figures collated in a survey conducted by the Institute for Public Policy Research, in 1981 there were 250,000 British retirees living abroad, in 2005 there were one million living abroad and it is estimated by 2050 there will be a staggering three million British retirees enjoying their retirement overseas.

As a UK resident you have numerous choices if you wish to move abroad when you retire. If you want to remain fairly close to family and friends in the UK, there’s the obvious choice of remaining within the EEA (European Economic Area). These countries include favourites such as France, Germany, Netherlands, Greece, Italy, Spain and Portugal, amongst others.

If you prefer an English-speaking country, you may want to consider retiring to somewhere like Australia, New Zealand, Canada or the USA. For these countries there are increased difficulties with obtaining permanent residency, but it can be done. Often you are required to prove that you have enough income to sustain your new life without a need to claim benefits. Also, you may need to make a substantial financial investment as a guarantee that you can afford to retire there. If you are considering this move, it is best to obtain independent legal advice from a good migration agent or solicitor.

Money, Money, Money…

Money is the number one reason why people fail when they move overseas, resulting in them falling on hard times and/or having to return home.

Moving abroad is an expensive undertaking. For the majority of people, it involves a house sale in the UK and a house purchase abroad - or at least a re-mortgage and finding tenants for the UK house and then buying or renting overseas.

Then there are the additional hidden and unknown expenses - some things you can budget for and others you just can't.

When you have a shortlist of countries that sound attractive to you, you need to begin digging beneath the surface to see how much it will cost to live there, based upon the following criteria:

1 Healthcare
As we age, so our need for access to medical facilities generally increases. What’s more, inflation in the healthcare industry runs far higher than in the ‘real world.’ This means that in a nation where you have to have insurance or pay as you go, a lot of your monthly income could be eaten up in medical costs. Factor this potential cost in as a high priority – you do not want to be left high and dry when you really need healthcare.

2 Housing
One of the reasons why so many of us can consider retiring abroad is because we have accrued impressive amounts of equity in our principal residence that will allow us to sell up and buy a property in a cheaper location. However, if you’re renting instead, then a proportion of your monthly income will be taken in rent payments. If you do buy, you will also still need a certain amount to pay for the maintenance of your home each month.

3 Food
What is the day-to-day cost of food in your chosen country? Can you live and shop like the locals in markets and from local suppliers to keep your costs down?

4 Utilities
Everything from fuel for your car to fuel to heat and light your home has to be factored in. What does electricity cost, what will your water rates be, is there a council tax equivalent?

5 Taxation
Talking of council tax, what about income tax on your pension if you remit it to the nation you live in? What about inheritance tax and the laws of succession too? Think about all of these realities when you look at each country in turn.

6 Leisure
The whole point of retirement is having the time on your hands to do all the things you have always wanted to do during your working life. So make sure you have enough cash in the bank to do the garden how you want it, to join the golf club, to have satellite TV or to be able to travel and explore your new country.

7 Travel
Will you be able to afford to have and run a car? And what about a flight ‘back home’ every so often to see the grandchildren? Factor these likely costs in from any country you consider.

8 Insurance
You may need health insurance depending on where you want to live, you will also perhaps need building and contents insurance, earthquake insurance, indemnity insurance and maybe even life insurance if you have an outstanding mortgage.

9 Events
No matter how well and how carefully you plan, something will inevitably come along and knock you off course. You need to factor in that unforeseen bills will arise – and you’ll need to save towards such events.

10 Visas
Will you have to pay a yearly or regular fee to maintain a visa to live in the country you have chosen? This is a reality in Northern Cyprus for example, and something often overlooked by us Britons who are sometimes under the mis-apprehension we can live anywhere for free.

If you find a country where you can afford to live on the pension income you have determined you will have to work with each month – you will have found your ideal retirement destination abroad. In other words, you will have found the cheapest country to retire in for you personally.

Occupational Pension

This should be paid irrespective of where you live.  Merseyside Pension Fund, for example, currently pays benefits to over 400 pensioners who live abroad.

If you move abroad, payment of your occupational pension will be processed in the normal way and be converted into the local currency, thus avoiding foreign exchange costs. Any account at a bank or financial institution that accepts direct deposit payments can receive pension payments.

State pension

While the lure of sea, sand and sangría is a powerful one, what happens to your State Pension? If you retire abroad, you will still be able to receive your State Pension. You may be entitled to the annual increase to your State Pension rates if you live in an EEA country*, Switzerland, or a country that has a reciprocal social security agreement with the UK**. If you live abroad in any other country you will not receive an annual increase.

*The EEA countries are Austria, Belgium, Bulgaria, Czech Republic, Cyprus, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. The UK is also part of the EEA. UK means England, Scotland, Wales and Northern Ireland. Gibraltar is treated as another EEA country by the UK. Other EEA countries treat Gibraltar as part of the UK.

**The UK has reciprocal social security agreements with other countries that may help you to be paid benefits abroad. Non-EEA countries covered by reciprocal agreements are Australia, Barbados, Bermuda, Canada, Isle of Man, Israel, Jamaica, Jersey & Guernsey, Malta, Mauritius, New Zealand, Philippines, Switzerland, Turkey, USA and the former republics of
Yugoslavia. However, this does not apply to index-linking: in Australia, Canada, New Zealand and South Africa, your pension will continue to be paid at the level it was at the time of retirement.

On the other hand, if you live in: Barbados, Bermuda, Bosnia-Herzegovina, Croatia, Guernsey, Israel, Jamaica, Jersey, Macedonia, Malta, Mauritius, the Philippines, Sark, Switzerland, Turkey, other former republics of Yugoslavia and USA, index-linking will apply.

Your State Pension can be paid directly into a bank or building society account. You can use a bank or building society in the UK, or a bank in the country in which you live. In most countries, the money will be automatically converted into the local currency. Where the country does not have the facilities for direct banking, you can receive your State Pension in the form of a cheque in UK currency.

If you decide to retire abroad, you should let the Pension Service know your new address as soon as possible. The International Pension Centre deals with all enquiries regarding the payment of State Pension for those living abroad. Their contact details are:
Telephone: +44 191 218 7777
Text phone: +44 191 218 7280

© Paul Whitelock

Tags: Retiring abroad, Institute for Public Policy Research, EEA, European Economic Area, Occupational Pension, state pension, Merseyside Pension Fund, reciprocal social security agreement, Pension Service, International Pension Centre, Paul Whitelock,


Paul Whitelock

Paul is a Joint Honours graduate in Spanish and German, a qualified teacher (PGCE) and has a Member of the Institute of Linguists (MIL) qualification.

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