Brits dreaming of retiring abroad have been warned that moving to certain countries could eventually leave them more than £3,200 a year worse off. Retirement specialists Standard Life said that while people can usually continue receiving their UK State Pension overseas, whether it increases each year depends on where they decide to live.
Pensioners living in countries including Australia, Canada and New Zealand do not currently receive annual increases to their UK State Pension. Instead, their payments are frozen at the rate they were receiving when they moved there or first became entitled to the pension.
How frozen pensions add up
The difference can add up significantly over the course of retirement. Standard Life gives the example of someone receiving the full new State Pension of £179.60 a week in 2021/22 who then moved to a country where their payments were frozen. They would still receive £9,339.20 a year today.
Someone who remained eligible for annual increases would now receive £241.30 a week, equivalent to £12,547.60 a year – leaving a difference of more than £3,200 annually. Standard Life estimates this would amount to more than £9,500 in missed State Pension income when compared with someone receiving all annual increases between 2022/23 and 2026/27.
Where increases still apply
Brits can still claim their UK State Pension while living abroad if they have enough National Insurance contributions to qualify and inform the Department for Work and Pensions (DWP) of their move. Those living in the EU and countries including the United States currently continue to receive annual State Pension increases.
Emma Furlonger, managing director for Workplace Pensions at Standard Life, said: "Returning home after a good summer holiday can make the idea of living abroad particularly appealing, and for some people that dream will eventually become reality."
She added: "However, one thing many people don't realise is that where you choose to live can have a direct impact on your retirement income. While your UK State Pension can still be paid overseas, people living in certain countries won't receive future annual increases. Over a long retirement, missing out on those increases could make a significant difference to your income."
Check rules before moving
Furlonger also said: "Private pensions also bring their own considerations, from whether you can continue contributing to how you access your savings and the tax you may pay. Understanding the rules before you move can help avoid unexpected surprises later."
People considering retiring overseas are therefore being urged to check the rules for their chosen destination before making the move, as missing annual increases could make a substantial difference to their retirement income over time.
