Over 6m Brits want overseas retirement; is it all it’s cracked up to be?
Perhaps one of the most popular visions for retirement is relaxing under the sun atop a cruise ship or on a sandy beach, cocktail in hand, as the stress of decades at work slips away into rose-tinted nostalgia. Whether it’s the lure of cheaper living or better weather, the desire for a life outside of the UK is so strong that, according to research by MGM Advantage, more than 6 million Brits intend to emigrate when they leave the office behind.
Of the 6.4 million that would pack their bags and move, 3.2 million would remain in Europe and 3.2 million would head further afield. The USA is the most popular destination outside of Europe, and the top 10 list includes Canada, Italy, India and Portugal.
Considerations when retiring abroad
There is a certain obvious appeal to a ‘permanent vacation’, especially to people currently raising children, paying a mortgage and car payments, and doing the daily grind of a 9-5.30 job. But it won’t be a permanent vacation, and there will be big factors to consider and issues to iron out – adjusting into a new country and culture may be very difficult, and it may take time to find your routine.
You will need to think about a number of factors, such as:
- Exchange rate
- Healthcare costs
- What to do with your existing property
There’s also the controversial issue of your state pension, as it is frozen in some countries but increases with inflation in others. For example, if you retired to the USA ten years ago, your state pension would be worth 42% more than if you had retired to Canada. You can find out how much state pension you will receive, and then determine if it will be uprated in the country you are hoping to retire to.
This ties into one of the most important considerations: cost of living. The price of goods in your chosen country is important, but so is how far your money will go once it has been converted. If the exchange rate is in your favour then you could enjoy a very comfortable financial situation; on the other hand, if there is a poor exchange then you may struggle more than you had anticipated. You may also want to always have a fund for travelling back to the UK to visit friends and family.
Freedom of movement means that setting up a new home in an EU country is relatively straightforward, but you may find it an extensive and lengthy process trying to move to a non-EU country like Australia or America. Plan ahead and start early, factoring in potential delays so your retirement plans are not affected by the process of obtaining a visa.
Avoiding pension poverty
Money may not buy happiness, but it can provide options and flexibility. In order to retire abroad, you need to be able to afford it – adequate savings will be especially important if your state pension is going to be frozen in the country you are looking to settle.
One of the best ways to ensure a comfortable retirement is to maximise your pension savings. If you have extra disposable income then contributing should be easier, but you may find ways to cut back on outgoings by monitoring your spending – maybe you spend a lot on clothes, for example. Remember that you receive tax relief on contributions into a pension, boosting your fund value. If your employer offers a workplace pension scheme, you should try and join – the tax relief and employer contributions are free money and can increase your fund value by double, or more. Bear in mind, though, that the tax relief you receive depends on your individual circumstances and may be subject to change in the future.
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The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section: https://www.portafina.co.uk/whats-new
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