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How will retiring in another country affect my finances?

Many people dream of retiring abroad and living out the rest of their days in sun, sea, and sand. If this if your retirement plan, you’ll need to think about how it could affect your finances before you take the plunge.

    Will retiring abroad affect my pension?

    State pensions

    Living abroad after your retirement shouldn’t affect your pension money or how it is paid. Once you qualify for the UK state pension you can claim it no matter where you live. Even if you intend to close your UK bank account and switch to an overseas account, the money can still be paid directly into your overseas account in the local currency.

    If you have worked in a foreign country and are eligible for a pension there too, it won’t impact your UK pension- you can receive both at the same time. However, depending on which country you live in, you may find that your pension becomes frozen at a certain rate or linked to the cost-of-living in that country.

    You should inform the Department for work and Pensions (DWP) before you move abroad to ensure there is no disruption to your pension payments.

    Private Pensions

    Similarly, where you live shouldn’t affect your private pension but it may be a requirement that is it paid into a UK bank account in sterling. If this is the case, you’d have to transfer this into a foreign bank account using a currency broker to avoid excessive bank fees. Keep in mind that conversion rates can go up and down so this may affect how much of your pension you actually receive.

    Additional benefits

    If you are receipt of any additional benefits such as pension credit, it’s highly likely that you won’t be eligible to receive them if you are living outside of the UK. However, there are some exemptions and you can contact the DWP for more information.

    Will I need to pay tax if I retire abroad?

    When you live abroad you are no longer classed as a UK resident, and therefore will likely be required to pay tax on your UK income. This includes private pensions, income from properties that you rent out, interest on your savings and investments, and any other similar income streams.

    Additionally, the country in which you choose to retire might also tax your UK income. However, check to see if the country has a double taxation agreement with the UK. If this is the case you can claim tax relief in the UK to avoid being taxed twice.

    If you haven’t started to take your pension before you move abroad, you might not be able to take a tax-free cash lump sum from your pension. The tax laws in the country you move to could mean that you’re required to pay tax on this amount.

    How will retiring abroad affect my UK assets?

    Many people who retire abroad do so without the intention of returning to the UK. Therefore, you might consider selling your home in the UK and using the profits to buy property abroad. However, this can cause difficulties if for some reason you do need to return to the UK. The differences in house prices and living costs can mean that it is not financially viable for you to return to live in the UK.

    Where possible we recommend keeping at least one property in the UK as a safety net should you need it. This property could be rented out whilst you don’t need it with the rental income providing further financial security.

    Cover yourself with the right financial advice

    In the United Kingdom, all financial advisors are required to have the following;

    • Level 4 or above of the national Qualifications and Credit Framework
    • A Statement of Professional Standing (SPS). This shows that the advisor has signed up to a code of ethics which requires them to complete at least 35 hours of professional training each year. SPS certificates should be renewed each year, so you’ll need to check that your advisor’s is up to date.

    At The Bateman Group, we’ve been providing financial advice for clients retiring abroad for over 40 years. If you’d like to discuss your retirement options, give our experts a call on 01926 405 883.

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