Could picking the wrong retirement location cost you financially?

 

Retirement Location

Retirement in the sun – the retirement goal for hundreds of thousands of taxpayers. But the latest government statistics are showing that over half a million people will not receive the state pension they’ve been paying for due to where they live.

Over the last decade, the number of Britons taking their retirement overseas has increased by 26 percent. Those expatriates in countries such as Australia, New Zealand and Canada have found themselves missing out on up to £50,000 over their retirement due to being exempt from “triple lock” state pension protection. This has been done to save the treasury over £3bn over five years.

The “triple lock” protection, as explained in our UK state pension forecast, increases the state pension a person received in line with average UK earnings, consumer price index (CPI) inflation or 2.5 per cent.

There have been renewed campaigns for the government to end a policy that ensures thousands of expats lose out on a great deal of retirement funding, simply because of where they choose to live.

For many that choose their retirement to be abroad, this could mean the difference between a comfortable retirement and a struggle to keep afloat.

The government so far has shown no sign of giving reprieve to those affected and continues to focus on those that retire in the UK and the EU, which is good news for those living in EU member states.

EU states such as France have seen a 49 percent increase in UK pensioners over the last decade.

Yet with a no-deal Brexit on the horizon, the financial pit that those outside of the EU face with their pension could quickly become a problem for EU residing pensioners too.

Those still in the EU have some security with their state pension up until 2019-20. Beyond these years, increases will depend on deals struck with the EU or individual member states.

The no-deal Brexit panic has affected the number of Britons living in EU member states however, seeing a fall overall of 6,110 in the last year alone. This fall has been driven by citizenship and fears of security in residency during the Brexit transition or a no-deal outcome.

With currency fluctuations and state pension fears looming, buying a home and managing to make ends meet abroad has become increasingly difficult when paid in sterling.

Sizable private pensions are usually the key to retiring abroad, low-interest saving accounts and cash ISAs will not get one very far. The best ISAs offering interest significantly less than inflation at 1.5 percent offer very little. Researching Innovative Finance ISAs may present a way forward, offering interest rates of up to 7.28 percent on investments of £10,000 or more.

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