Life in Britain just isn’t what it used to be and falling standards of living in the UK are being blamed for the rising numbers of British pensioners who are giving up on living in the UK and looking to retire abroad.
Recent changes to the law now mean that British pensioners can take their pensions overseas and current figures provided by the Foreign and Commonwealth office (FCO) estimate that a total of 1 million UK passport holders have done exactly that.
According to the FCO, Spain is the most popular retirement destination for UK retirees with over 800,000 being based there in 2010. Australia and the USA were also named as common choices for those looking retire overseas. However, while Spain may be desirable for its pleasant climate, people who are considering relocating there should be aware of what they could be letting themselves in for; FCO figures indicate that 50% more Britons were arrested in Spain than the USA last year and more than five times as many Britons were hospitalized in Spain and a total of 1,786 died there, compared to 148 in America.
The clear message that living abroad and vacationing overseas are two different things and thorough research is required before taking the plunge and retiring to a new country. Speaking in a press release, John Lawson, Head of Pensions Policy at Standard Life commented: “Retiring abroad is a dream for many people, but does require careful planning and advice. Many people think living abroad is cheaper than living in the UK, but this isn’t always the case.
“Doing your homework in advance of moving, matching your retirement income and expenditure, and making the appropriate decisions around purchasing an annuity or using income drawdown are key considerations. Your retirement income could also be subject to exchange rates and currency fluctuations, as well as local tax laws.
“You also need to think about your state pension and what, if any, reciprocal agreement is in place. A reciprocal agreement entitles you to any increases in the UK state pension, paid for by the country you retire to. However, if there isn’t a reciprocal agreement in place, then you need to be very careful your retirement income is sufficient to cover your living costs over a long period of time. Over a 20 year retirement, your basic state UK pension could halve in real terms if a reciprocal arrangement is not in place.”
Understanding Your Pension Entitlements
Before relocating overseas all British pensioners are reminded of the need to thoroughly understand the impact that a move overseas would have on their pension entitlements. When a UK citizen moves abroad, any increases in their UK state pensions are only applicable if they live in an EU country or an alternative country that does have a reciprocal social security agreement in place with the UK. If an individual chooses to retire to an alternative country, their pension payments will be frozen at the amount they were when they relocated and all future payments will stand at the rate that was in force when emigrating. Popular retirement countries outside these reciprocal agreements include Australia, Canada, New Zealand and South Africa.
For a full list of countries that have a reciprocal social security agreement with the UK, see our free guide to the UK Social Security System and Living Abroad.