Dreaming of Retiring Abroad? 🍹
Retirement is a season of life that many look forward to, and for some, it brings the exciting possibility of living abroad. If you're considering this option, it's crucial to understand how relocating overseas may affect your financial situation, particularly your pension.
Personal and Workplace Pensions
Good news! Generally, choosing to retire abroad won’t affect the payments from your personal or workplace pensions. Here are some key points to keep in mind:
Your pensions should continue to be paid in full.
You are usually entitled to any pension increases, regardless of where you live.
Checking the Details 🔎
Even though your pensions are secure, it's crucial to iron out a few details with your pension provider before packing your bags:
Confirm if your pension scheme can transfer funds directly to an overseas bank account, as some workplace pensions might only make payments to UK banks.
Check if your annuity provider charges fees for overseas payments. These costs can add up, so it's worth investigating!
State Pension: UK and Abroad 🏛️
If you're eligible for a UK State Pension, you’ll be pleased to know that you can still receive it when living abroad. However, annual increases depend on where you reside:
If you live in a European Economic Area (EEA) country or a country with a social security agreement with the UK, you are entitled to yearly increases.
If not, you might not receive these increases while you are abroad.
Important: Frozen State Pensions ❄️
If you retire to countries like Australia, Canada, New Zealand, or South Africa, your State Pension will be "frozen"; it won't increase annually and will lose value to inflation over time. This affects over 500,000 UK pensioners worldwide.
Before you pack… 🧳
Retiring abroad can be a fulfilling experience, and with a bit of planning, your financial affairs, including your pensions, can be managed smoothly. Remember to review the specific terms of your pension arrangements and consult with your pension provider if you have any concerns.
How does this work with my Penny Pension?
Some pension schemes allow you to transfer your funds to a (QROPS) Qualified Recognised Overseas Pension Scheme if it meets certain conditions.
What is a QROPS? - QROPS are overseas pension schemes that meet specific UK government requirements, allowing you to transfer your UK pension abroad without immediate tax penalties. They can offer benefits such as local currency payments and potentially favourable tax treatment in your new country, but transfers are complex, with strict rules and potential charges. Always seek specialist financial advice before considering a QROPS transfer, as it's not suitable for everyone and the decision is usually irreversible.