Retiring Abroad

A few years hence, one in five Britons are likely to spend their retirement years abroad.

Already more than a million over-50s have retired overseas, and more and more are opting to retire to the warmth of the Mediterranean or the wide expanses of America, Canada and Australia.

Partly that is because easier travel is making us more adventurous, and partly because of the belief that overseas living brings warmer weather, less crime, and a more relaxed way of life in countries where the costs of goods, services, food and property – and taxes – are lower.

And according to financial experts, there is a good chance that overseas governments will start competing to offer tax breaks to attract the wealth that today’s increasingly affluent pensioners bring with them.

It sounds good, and it can be just that, as long as you take steps to ensure that there are no financial shocks from the taxman.

Living overseas does not necessarily mean that you are free of tax obligations in the UK.

It is vital to sort your tax affairs out before you go if you don’t want to pay twice over. Accountants suggest that you start planning a year before your departure date to make sure you are in the clear. Stay in touch with the UK taxman and make sure you have consulted him or an accountant before you leave to make sure that you won’t hit pitfalls. You will probably complete a P85 tax form, which allows the UK authorities to keep a track of your tax status.

Inevitably, different countries have different tax systems. If you planned on living off a maturing life insurance policy in the United States or Canada you would find that it is taxed. And while you may not think of yourself as rich, a number of countries do have a wealth tax.

If you are on a company pension you should be able to get all the increases in benefits the scheme brings but there is a risk that you might have to pay tax twice on any private pension income you receive while abroad.

And if the country you move to does not have a reciprocal agreement with Britain your state pension and your Serps pension will be frozen and there will be no increases while you are abroad. Almost half a million Britons lose out in Australia, New Zealand, Canada, Zimbabwe and South Africa, where inflation hits their pensions.

Don’t forget healthcare costs, which are an inevitable part of retirement; the older you get the more likely it is that you will need some form of medical attention, even if it is only a visit to the dentist. The care that the NHS provides won’t always be matched in your future home and that could leave a big hole in your funding if you need help.

It is estimated that a couple retiring in Europe may need to allow up to £3,000 a year to make sure all their health needs are covered – and these costs are almost certain to rise as you get older.

Some countries, like Spain, will provide much healthcare free at a certain age, but remember the horror stories of costs run up by those who need treatment in the United States.

Lastly, if you have a UK bank, make sure that you can get in touch with it easily, through a website or a guaranteed telephone link. Trying to ring home is a nuisance if it is ‘out of office hours’ in the UK.