A place in the sun no more: Brexit uncertainty and Covid give aspiring expats second thoughts over retiring overseas
- Some 46% of over-50s who intend to retire abroad are reconsidering
- And 44% are wondering whether to drop their plans altogether
- Smaller percentages are rethinking because of Covid-19
- State pension rises and healthcare rights may be affected if you move after 2020
- All depends on what kind of Brexit deal is struck
Nearly half of over-50s who want to retire abroad are rethinking their plans due to Brexit, new research reveals.
Around one in three would-be expats are having second thoughts because of the Covid-19 crisis, as the pandemic looks to be worsening again in many countries, according to the survey by Canada Life.
But those who want to retire within the EU need to move there soon to be sure of receiving annual increases in the state pension and retaining existing healthcare rights.
Expat destination: Costa Brava in Spain is popular with UK tourists and people retiring to places with a sunnier climate
The withdrawal agreement under which the UK left the EU on January 31 provided certainty on these issues for current expats and those who move before the end of 2020, but from January their continuation will depend on what kind of Brexit deal is struck.
People who move to EU countries between now and the end of 2020 will get the same guarantee that state pension increases for UK pensioners – of at least 2.5 per cent a year under the current triple lock system – will apply to them too.
The same goes for people living in Switzerland, and countries which are in the European Economic Area but not the EU – Iceland, Liechtenstein and Norway.
People who move to the EU or the countries above after 2020 might end up in the same boat as the 550,000 retirees around the world whose state pensions are currently frozen. See the box below.
However, you will still get your state pension uprated if you are a UK or Irish national and move to Ireland.
Canada Life found 46 per cent of over-50s who intend to retire abroad are reconsidering where they might move to due to uncertainty over Brexit, and 44 per cent are wondering whether to drop their plans altogether.
Concerns about the coronavirus pandemic are making 39 per cent rethink where they will go, and 37 per cent if they will leave the UK at all.
Canada Life carried out a survey in early July of 1,000 older people who plan to retire abroad. Some 68 per cent are seeking better weather, 63 per cent think they will have a more desirable lifestyle, 46 per cent want a higher standard of living, and 45 per cent cheaper living costs.
The top 10 retirement destinations were the same as a year ago, with Spain topping the list for the eighth year running. New Zealand moved up a spot to sixth place, while Australia dropped from sixth to eighth in the ranking.
There was no background information on those trends, but New Zealand has enjoyed much positive publicity for getting coronavirus under control early.
Australia did so too initially, until a more recent Covid outbreak, but its devastating bushfires were in the headlines for months earlier this year.
Retiring abroad: Top destinations and the percentage of would-be expats who would consider moving to them (Source: Canada Life)
Andrew Tully, technical director at Canada Life, says: ‘Whether in search of better weather, a more desirable lifestyle, or cheaper standards of living, retiring abroad remains a popular option for the over-50s.
‘However, with Covid-19 dominating the global news agenda this year and a second wave anticipated, it’s surprising that Brexit concerns come out on top and could indicate that longer term legislative fears are greater than shorter-term health and safety for soon-to-be retirees.’
What should you consider before retiring abroad
Canada Life offers the following tips.
1. Get an estimate of your state pension here.
2. Seek independent financial advice before you move – you can search for experts on expatriate finance.
3. Tell HMRC that you are moving overseas. This allows them to let you know of any UK tax liability you may have even though you are planning to live overseas. And more importantly can allow any UK pension you have to be paid gross (no tax deducted) and taxed in your country of residence (only applies if the country you live in has a double taxation agreement with the UK).
4. Check what reciprocal social security agreements are in place with the destination country regarding your UK state pension [including whether it will be increased or frozen] and other benefits
5. Find out about your welfare rights while abroad
6. Keep an eye on exchange rates as state pension and other income is likely to be paid to you in pounds and you will then need to convert to the local currency which may mean your income fluctuates
7. Check the cost of healthcare in the country you are thinking of moving to, and consider some form of medical insurance
Scenic Wellington : New Zealand has enjoyed much positive publicity for getting coronavirus under control early
8. If you decide to keep your property in the UK you will need to let your mortgage provider and insurance company know if it will be rented or remain empty
9. Do your homework on the cost of living in the country you want to move to
10. Notify utility companies, financial institutions and your local council when you are leaving
11. Contact the electoral register, and arrange for mail forwarding via the Post Office
12. If you plan to keep an account at your UK bank, contact it and ask if you will face any new rules or restrictions after moving abroad.
Will you get state pension rises if you retire abroad?
If you move to the ‘wrong’ country, whatever amount the state pension is set at when you leave is what you will continue to get throughout retirement, unless you move back to the UK.
This affects people living in certain countries, such as Canada, India and Australia, but not in others, including the US, Philippines and Israel.
Some 550,000 British pensioners living overseas miss out on annual state pension hikes, while others get the usual increases received by retirees in the UK.
It means some expats who retired when the basic rate was £67.50 a week in 2000 still get that, rather than the £134.25 now received by others who retired that year.
This is because the Government has struck individual deals with some countries but left around 150 others out in the cold.
Read more here about the frozen state pension trap, and see the full list of countries affected below.
Where are state pensions frozen? Whether an expat’s pension is frozen or not depends entirely on where they move (Source: International Consortium of British Pensioners)
Source: International Consortium of British Pensioners