Spain remains the destination of choice for Britons hoping to retire abroad, but many are rethinking their plans due to Brexit and the pandemic, new research shows.
Nearly half of those over 50 who want to live abroad would choose Spain, while a fifth prefer France, which is in second place, followed by Portugal, Italy and southern European countries such as Greece and Cyprus.
That’s virtually no change from last year, except New Zealand dropped from sixth to seventh — perhaps because pandemic restrictions currently make it impossible to travel there — according to a survey by Canada Life.
View over Granada: Spain remains the favorite destination of Brits looking to retire abroad
But 50 percent of over-50s who are thinking of or planning to move abroad are rethinking where they might go because of Brexit, up from 46 percent when the survey was conducted last year.
Some 47 percent say uncertainty about Brexit is prompting them to reconsider, up from 44 percent in 2020.
This year, Canada Life also asked about the impact of the pandemic. The survey found that 42 percent were reconsidering which country they would retire to in light of the health crisis, and 39 percent were considering giving up on the idea of spending their retirement abroad.
When asked about their reasons for wanting to leave the UK, 69 percent say the weather would be better, 62 percent are looking for a more desirable lifestyle and 45 percent think it would be cheaper.
However, one in four are unaware of a major financial stumbling block to retiring abroad, depending on where you choose to spend your old age.
Why are state pensions frozen for some expats?
Whether an expat’s pension is frozen or not depends entirely on where you move to, as the government has made individual deals with some countries, but has left about 150 others out in the cold.
This has led to a historic anomaly, which started some 70 years ago, where people retiring in Canada, Australia, India, Africa and many parts of the Caribbean are missing out on increases in state pensions, while people living in EU countries, the US, Jamaica, Israel and the Philippines are getting their full blow.
Read more about the frozen state pension trap here.
If you move to the ‘wrong’ country, the amount of state pension you receive on departure will be retained throughout your retirement unless you return to the UK.
That means some expatriates who retired when the full base rate was £67.50 a week in 2000 are still getting that, rather than the £137.60 a week now received by others who retired that year .
In November 2020, about 1.1 million people were paid their state pensions abroad and nearly 490,000 were frozen, according to government data.
Only one in five people in the Canada Life survey said they know which countries have been affected – see the full list below.
People relocating to the EU, Switzerland and countries that are part of the European Economic Area, but not the EU – Iceland, Liechtenstein and Norway – will continue to receive an increase in state pensions through the post-Brexit schemes.
Sean Christian, director of Canada Life’s asset management division for Canada Life, said: “Despite Brexit and the ongoing global pandemic, many over-50s dream of a retirement with better weather, a more attractive lifestyle or cheaper standard of living than the UK.
“There are a number of important considerations when planning a move abroad, such as which countries offer reciprocal payment agreements? [on state pension increases], thinking about the impact of exchange rates and whether state pensions will keep pace with the cost of living.’
The company surveyed 1,000 over-50s who want to retire abroad.
Retire abroad? Here’s a handy checklist
Canada Life offers the following tips for a smooth retirement abroad.
1. Get an estimate of your AOW here.
2. Tell HMRC that you are moving abroad so that they can inform you of any UK tax obligations, even if you are planning to live abroad.
You can also allow any UK pension you have to pay gross (no tax deductions) and be taxed in your country of residence, but this only applies if the country you live in has a double tax treaty with the UK.
Where would YOU retire? Not much has changed from last year’s list, but New Zealand has lost a spot
3. Check what reciprocal social security agreements exist with the destination country regarding your UK state pension, including whether it will be increased or frozen, and other benefits. The government has more information here.
4. Find out about your social security rights in your destination country. Also check the cost of health care in the country you want to move to and consider some form of medical insurance.
5. Keep an eye on exchange rates, as your state pension and other income will likely be paid to you in pounds and you will then need to convert it into the local currency, which may mean your income fluctuates. Read more here.
6. If you decide to keep your property in the UK, you will need to let your mortgage lender and insurance company know if it will be rented out or left vacant.
7. Do your homework on the cost of living in the country you want to move to
8. Notify utilities, financial institutions and your municipality when you leave
9. Contact the electoral register and arrange for the mail to be forwarded through the post office
10. If you intend to hold an account with your UK bank, please contact your bank and ask if you will be affected by any new rules or restrictions after moving abroad.
Source: International Consortium of British Pensioners
Where are state pensions frozen? Whether an expat’s pension is frozen or not depends entirely on where they move to (Source: International Consortium of British Pensioners)
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