Living overseas is one of the most common goals that UK individuals have for their futures. In fact, according to figures published by MoneyWeek, as many as 79% of pension savers dream of retiring abroad in future.

However, while the idea of sunshine or an entirely new culture can be enticing, there are various issues and considerations that prospective expats may want to think about before they make a move. 

In particular, many of these relate to your finances, but there are also important emotional facets to factor in.

So, whether you are thinking about or even actively planning to retire abroad, read on to discover a few elements you may want to think about first.

You need to know that you have enough to live your dream lifestyle

To begin with, you need to be confident that you are financially able to move abroad. Without first reviewing your money with a fine-tooth comb, you could end up planning for a future elsewhere, and ultimately come to find that it is not really a possibility in your current circumstances.

Of course, this is not specific to retiring abroad. It is important to consider how far your wealth can go in later life, regardless of whether that will be in the UK or elsewhere.  

That said, there may be additional costs that you will need to consider when retiring abroad that might mean you need a little more in your pot than you perhaps initially planned. For example, you might want to factor in costs such as:

  • Shipping your possessions to another country, or buying new items such as furniture, a car, and anything else you will need when you arrive
  • Administration costs, whether that is in paying for a visa or residency permit, or even customs duty if you are bringing certain belongings into a country 
  • Flights to your new home country. You may want to consider setting money aside to go back and forth from the UK if you will still have family and friends here, too.

As you can see, these costs could quickly add up to make retiring abroad more expensive than in the UK alone. Thoroughly interrogate your finances and be sure it is viable before you start making concrete decisions.

It can be difficult and expensive to move your UK holdings overseas

While knowing that you have sufficient funds to live your desired lifestyle, it is also important to be aware that it can be difficult and expensive to move your money abroad.

With savings and investments, there may be charges when moving them elsewhere. Additionally, moving your money might expose you to currency risk. This is where fluctuations in the value of currencies could mean you receive less for your pound sterling when converting to the legal tender of your new home country.

As for your pension holdings, you may still have to pay UK Income Tax on your withdrawals in certain circumstances. Unless a country has a “double taxation agreement” with the UK, you may face tax when you come to withdraw these funds.

Moreover, some private or workplace pension schemes may charge a fee to pay your pension withdrawals into an overseas account. Some may also only pay this money into a UK account. 

In either of these circumstances, you may be exposed to currency fluctuations. This could mean you do not actually receive the maximum value of what you have saved in your pension fund.

As a result of these factors, it can be worth moving your pension elsewhere to make it easier to access. Make sure you take advice before doing this, as it can be a difficult and complex process.

Other tax and State Pension rules could depend on where you move to

Aside from moving your savings, investments, and personal pension, there are also considerations to make over other taxes, as well as your State Pension.

For example, while you typically do not pay Capital Gains Tax (CGT) when selling your main residence in the UK, you may face this tax if you are already a tax resident elsewhere when you come to sell up.

As a result, it may be sensible to sell your home first before you become a tax resident of another country. It might also be worth checking whether there are other similar taxation issues you may face.

Furthermore, if you have made sufficient National Insurance contributions during your working life, you will typically receive your State Pension if you live in another country. You will have to claim this when you reach State Pension Age, and you should also notify the Department for Work and Pensions (DWP) that you are leaving the UK to live abroad.

However, you may no longer benefit from the “triple lock”. This is the guarantee that you will receive more from the State Pension each year, as the amount paid rises in line with economic circumstances.

Certain countries do have agreements with the UK that mean your State Pension will increase in line with the triple lock. This includes countries such as:

  • Those in the European Economic Area (EEA) 
  • Turkey
  • United States
  • Gibraltar

Other countries may also have social security agreements with the UK, meaning you may be in line to benefit from increases to the State Pension each year.

However, if you move to a country without this provision, you may only receive your State Pension at a fixed level. This will be determined by how much you could receive at the time you first started claiming it.

Across the course of a 20-year retirement, this could represent a significant loss in guaranteed retirement income.

Remember to factor in the emotional side of leaving home behind

While these financial aspects of moving abroad are important, you should also pay close attention to the emotional side.

Leaving the UK could be a significant transition in your life. You might never have lived in another country, and so moving away could represent a notable milestone.

It can also be easy to become swept up in the excitement of moving, and so you may forget that it means missing out on your everyday life. 

Seeing friends and family, attending regular social events, or even simply going to your favourite coffee shop are all incredibly important activities that you might be giving up by moving.

This is not necessarily a bad thing. Change can be positive, and a life goal such as moving abroad may be important to you. Even so, it is worth remembering these emotional aspects and preparing for them alongside the financial considerations. 

Get in touch

If you would like help planning for your dream retirement, please do get in touch with us at DBL Asset Management.

Email or call 01625 529 499 to speak to us today. 

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. 

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

All contents are based on our understanding of HMRC legislation, which is subject to change.