If you and your loved one have dreams to retire overseas there’s a fair amount to plan and research. Apart from things like securing your income stream there are other considerations including healthcare and tax related issues. The specific advice you require depends on factors such as if you are a home owner, already an expat and your desired age to retire.
1. How to best access your pension abroad
The first thing to consider is the most efficient way to access your pension fund when abroad.
If you take your UK pension in sterling and then transfer the funds to your chosen country you are can be negatively affected by currency fluctuations.
This can be avoided by transferring the whole pension to your new country however, this can raise additional tax charges, so all options need to have care and attention to weigh up the best way forward.
Qualifying Recognised Overseas Pension Schemes (Qrops) are utilised by many expats to efficiently transfer pension funds into the local currency. These have more recently been updated to coincide with the new 2015 Pension Reform.
2. Reducing the risk of currency fluctuations
When transferring money from one country to another over long periods of time there is always a risk in absorbing the fluctuations of currency exchange.
The UK pound is strong at present and has increased by about 10 percent in the last 12 months, which is a positive factor for most expats, particularly in the eurozone.
There are still pensioners who are struggling though and worse off financially than last decade. Those in the US, New Zealand, Australia, Canada and Thailand are amongst the countries most affected.
The key here is research to find the best exchange rates. And careful consideration of where to retire, if you are flexible.
3. Selling your UK property to buy overseas
Selling a property in the UK can be a sensible option to release equity to invest in your retirement home overseas. However, there are some other things to consider.
Many expats choose to keep a base in the UK as a safety net for later in life should they need to return to the UK for healthcare reasons.
Renting such a property in the UK can provide an income stream although inheritance tax issues come into play with this option.
Sufficient research needs to go into the property market of your retirement destination as many expats have bought a property in another country, only to want to return to the UK and realise that selling isn’t as easy as they had hoped.
The last thing you want to do is put pressure on yourself at a time in life when you are supposed to be relaxing!
4. Getting a new mortgage in your later years
The Mortgage Market Review (MMR) has tightened the belt on mortgage lending, meaning that there is a greater focus on monthly affordability and demonstrating that income can cover costs.
This has resulted in a problem for older borrowers to obtain a mortgage in later years, even if they have needed to extract cash from a UK property to invest overseas.
There may be the option to take a mortgage in your new country, depending on your age, the price and the mortgage regulations of that country.
As with all retirement planning, if you can start to make plans in advance then it makes things easier for you upon retirement.
5. Quality of life and cost of living
The UK is an expensive place to retire with the cost of living generally high. Other countries offer a significantly lower cost of living so consider how far your pension can go in your country of choice.
Expats have all sorts of reasons for retiring abroad and take into account factors such as transportation, healthcare, political and social environment and climate as part of the decision making process.
Ensure the quality of life and the cost of living will match your expectations and budget.