Have you ever thought about retiring overseas? It is a dream for many to enjoy their golden years under a sunnier climate, in a cheaper country, or closer to family (in the case of foreign workers). Before you take the plunge and pack your bags, you should think about several aspects of your overseas retirement.
Retiring overseas, things to consider
Where will you retire? The list of heavenly destinations is long, but what country suits you most? Will you speak the language or be willing to learn? Make a list of your priorities, such as proximity to an airport, a supermarket, a library, the need for a car, and so on. What are your non negotiable? How far off the beaten paths do you want to live? You may be looking for some sun but can you bear real heat for months at a time? How about immigration or banking?
You can find lots of expat forums to inquire about the cost of living, renting or buying a place, healthcare, food, domestic help and other expenses. Remember to consider the time difference with the UK if you want to keep in touch by phone on a regular basis, as well as the cost of a flight if you would like to come back once in a while.
The cost of local products can be very low overseas compared to the UK, while other things like internet service, imported foods, healthcare… could be higher. You need to determine the overall budget to make sure it fits your pension allowance. Once you take into account the cost of flights, some European countries may actually end up cheaper than places like Turkey or Egypt.
Talking to a few people who already live there can be enlightening, as they will have an in-depth knowledge of the area, something that is difficult to get if you visit for a week while on holiday. Ask about the seasons, the political situation, the health system… and how expats blend into the local community.
Local expats are also a good source to tell you where to get a first flat or house, the neighborhoods to avoid and the price you should expect to pay. Having a temporary home for the first few months allows you to search for the perfect place without stress. You could ship your belongings, generally with a tax exemption if you are a resident in your new country, or just bring the minimum with you and furnish your new place locally.
A few UK credit cards will let you withdraw money abroad without a commission, apply for one of those before you leave so you can get money while you set up a bank account in your new country.
The next step to consider is how to get the best value of your pension pot.
Transferring your pension abroad with a QROPS
QROPS means Qualifying Recognised Overseas Pension Scheme. It is a pension scheme approved by HM Revenue and Customs, that allows you to transfer your pension benefits overseas without any penalty. For this you need to decide to retire abroad, in a country of the UE or any other country that has a double taxation agreement with the UK, like Thailand, the USA or Zimbabwe. You can receive part of your pension as a lump sum, but 70% of the nest egg need to be invested to produce a lifetime allowance. To be worth the move, you would need a pension nest egg of over £25,000.
Qrops information is available online, to make sure you get the most of your UK pension. This is a popular scheme for expats since your pension pot will not be taxed under UK law, but in your country of residence. There are also no lifetime allowance caps or age limit to purchase an annuity. Your UK pension scheme administrator will take care of the transfer and make sure it complies with HMRC requirements. This scheme does not apply to your state pension.
Have you ever considered retiring abroad? Which country has your preference?