This content is for information and educational purposes only. It should not be taken as financial advice or investment advice. To receive tailored, regulated financial advice regarding your affairs please consult us here at Hanson Financial Services (financial advice in Liverpool).
The UK is facing many challenges at the moment. Rising inflation, supply chain issues, energy shortages and the continuing presence of COVID-19. Even setting these aside, however, many are drawn to the idea of retiring overseas. Other countries can offer a slower pace of life, lower cost of living and opportunities for travel, cuisine and personal enrichment that are not readily available in the UK.
In this article, our team at Hanson Financial Services (financial advice in Liverpool) outlines the key considerations involved with retiring abroad in 2021-22, including advantages and risks. We hope you find this content useful and invite you to get in touch if you’d like to discuss your own retirement or financial plan with us.
Can I take my State Pension?
When retiring, most people rely on their pensions to fund their lifestyle. When moving abroad, you need to be confident that you can take this income with you. Fortunately, the State Pension can still be taken when you retire overseas (provided your National Insurance record has at least 10 “qualifying years”). Your State Pension income can be paid into a local bank account in your country of residence. Or, it can be paid into a UK account which you can then withdraw from (e.g. at an ATM).
Here, your main considerations will need to be exchange rates, international transfer fees (i.e. when moving money from the UK) and the “triple lock”. The first two will, naturally, erode the buying power of your State Pension payments (received every 4-13 weeks), and can be lowered somewhat by finding a good banking provider. The “triple lock” is the UK system that ensures your State Pension payments rise each year, to help cover the rising cost of living (currently suspended for one year). This is only available to UK residents and EU residents (until March 2023), so those retiring in other countries will likely see their spending power slowly decrease.
You will likely have other pensions that need thinking about – such as workplace and personal (private) pensions. In some cases, you might be able to transfer these to your new country of residence using the Qualifying Recognised Overseas Pension Scheme (QROPS). However, this is not always the best option and is only available in certain countries. A financial adviser can help you discern the right path for your goals and situation.
Do I need to pay tax?
A common misconception is that, one you move abroad, you no longer need to pay UK tax. This is not strictly true. Typically, you do not need to pay UK tax on your pension(s) if you are classed as “non-resident”. However, it is likely that you will need to pay UK tax on your rental income if you rent out a property in the UK. Also, remember that any income you receive may be subject to tax in your new country of residence. Be careful not to assume that you have escaped from inheritance tax (IHT) by moving abroad. Most UK expats are still deemed “domiciled” for UK tax purposes, which makes their worldwide estate subject to IHT in the UK. For “non-domiciled” people, only their UK assets will be liable to IHT in the UK.
What about housing and healthcare?
The older we get, the more likely we are to need medical assistance and (possibly) long term care. In the UK, the NHS provides free healthcare at the point of use to residents. However, this kind of system will not be available in other countries. You should check the quality of local care and health infrastructure and consider whether you might need to go private. In which case, you will need to factor the cost of this into your retirement plan (e.g. the monthly premiums). Certain countries may not have the facilities for certain conditions, which may require you to be airlifted to a hospital in a nearby country – e.g. should you have a serious accident.
Housing will also be an important consideration. Many desirable retirement locations overseas are densely-populated cities, where the most realistic accommodation will be apartments. Here, you should think about whether this would suit you now – as well as in the years ahead, when you may be more frail and wanting a quieter, “greener” place to live. Some countries do not let foreigners buy local property, which may require you to rent for many years in retirement. This cost also needs to be factored into your retirement plan.
Finally, make sure you think about your options if “everything goes wrong”. Sometimes, people need to return home to the UK due to unforeseen circumstances (e.g. a global pandemic!). If this happens, it can help immensely to still have assets in the UK, such as your pension(s) and a property, which you can fall back on. If you transfer your pension(s) overseas and sell your home, this could make things more difficult for you if you ever need to repatriate.
Conclusion & invitationAre you interested in talking to a financial adviser about your financial planning needs? We’d love to assist you here at Hanson Financial Services.
Please contact us to arrange a consultation with our team – free and without obligation – to gain more clarity and peace of mind over your financial plan.
You can call us on:
Liverpool Office: 0151 708 7616
Manchester Office: 0161 401 0991
Chester Office: 01244 960 039Or email via: [email protected]