Spain is the favourite country for British people retiring abroad but those lucky enough to fulfill their dream of doing so might not be as well off as if they stayed at home, a new study shows.
France is the second favourite place for retiring expats followed by the US, Canada and Ireland, the survey from Standard Life reveals.
The company though warns those looking to retire abroad that the UK state pension might not rise in the future so those staying in the UK might enjoy double the level of state pension after 20 years.
Andrew Tully, senior pensions policy manager at Standard Life points out that if an individual moves abroad permanently any increases in their UK state pension will only apply if they are living in an European Union country or a country with a reciprocal social security agreement with the UK.
Where the individual is living outside these countries, the amount of UK state pension they will receive each year is frozen at the amount initially paid when first claimed or if the pensioner emigrated more than one year after payment began, at the rate in force when emigrating. Popular retirement countries outside these reciprocal agreements include Australia, Canada, New Zealand and South Africa.
‘Retiring abroad is a dream for many people but without careful planning and advice, things can potentially go wrong very quickly. One significant consideration before you move is to think about your state pension and what, if any, reciprocal agreement is in place,’ Tully said.
‘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,’ he explained.
His top tips before moving abroad include seeking independent financial advice before making plans about future pension provision or transferring your pension overseas and checking what reciprocal basic state pension agreements are in place with the destination country, if any. This can be done through the Department for Work and Pensions.
You should also inform your social security office, HM Revenue and Customs, and the Department for Work and Pensions when you move and provide your contact details abroad.
You can get a forecast of your state pension by completing a BR19 form or if already overseas, complete form CA3638 or call The International Pensions Centre on 0191 218 7777.
It is also worth checking your state pension age (SPA). For women, the SPA is rising from 60 to 65 between 2010 and 2020, with further rises to 68 currently expected to take place by 2048, although the coalition government may accelerate these changes.
Other tips included finding out about welfare rights abroad as some UK benefits are not payable outside the UK, others apply only in the EU or in countries that have agreements with the UK.
And tell your bank, building society and any other financial institution that you have a policy or agreement with them and are moving abroad and find out more about healthcare costs in the country you want to move to.