Where can you live in luxury on a state pension?

MalaysiaEye Ubiquitous/Press Association Images

The cost of living in the UK is reaching astronomical levels. According to the Joseph Rowntree Foundation, we now need more than £1,600 a month in order to maintain even a basic standard of living. However, under proposals for the new flat-rate state pension, we'll be looking at a monthly income of £607.

Clearly life in the UK is going to be incredibly hard. However, a magazine has unearthed several places around the world where you can live in luxury on these sums. So where are you going to have to live?
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International Living magazine compiled its list of five possible retirement destinations, where you can live a good standard of life on the cheap. These may sound slightly unusual choices, but when you consider that many of them throw in things like air conditioning, a maid, entertainment, and health insurance, they start to seem worth a second look.

Nicaragua

Top of the list was Nicaragua, where you can live well on £609 a month. However, you need to balance the fact that you could live with a great deal more luxury than in the UK with the fact that this is an incredibly poor part of the world.

The Foreign and Commonwealth Office (FCO) warns of threats from a number of diseases, including TB and Swine Flu. There is also the rainy season to contend with, and the fact that since Christmas there have been significant gas and ash eruptions from the San Cristobal Volcano.

Malaysia

Second is Malaysia, where you can live on £612 a month - which is only just outside your budget and includes things like a mobile phone and internet. A couple on just over £1,227 could live a life of relative luxury.

Add in the beaches and the relaxed way of life and it may be highly tempting. However, the FCO warns that there are some additional risks. There is a kidnap risk in Eastern Malaysia, general terrorism risks, and threats from scams, bag snatching, and drink spiking.

There are also serious questions about human rights, so, for example, public gatherings which did not have prior police permission have been known to trigger reactions from the police including tear gas and water canons.

Ecuador

Third is Ecuador, where a luxury lifestyle costs £867 a month. However, this luxury needs to be balanced against a large number of FCO warnings.

These include recommendations not to travel to a large number of areas where armed gangs operate, and volcanoes to avoid because of volcanic activity. It also says that armed robbery is on the increase (it calls it a constant hazard), and recommends that Britons traveling to these regions don't wear expensive jewellery or walk alone in many areas. It also says that armed gunmen regularly hold up buses, and that you shouldn't travel by road at night.

Panama

Fourth is Panama, where luxury costs £1,142 a month (including a full-time maid). There are risks here too, particularly street crime (where the FCO recommends never carrying anything valuable), and serious hazards in the areas surrounding the border with Colombia. However, away from the more dangerous areas you can live a modern lifestyle in comfort.

Mexico

Finally, Mexico is fifth, where a luxury lifestyle is possible on £1,304 a month. You have to contend with natural threats from hurricanes and volcanoes. There are also some no-go violent areas, and a risk of car-jacking in some areas, including the border and Pacific Highway.

The FCO says you are recommended not to drive at night, and avoid travelling off the beaten track. It also warns of street crime risks, and that express kidnappings are a problem - particularly in urban areas - where you are taken by a gang and forced to withdraw cash before they will release you.

Clearly you have to take the rough with the smooth when you're living in luxury on a tight budget. So what do you think? Would you live in any of these places? What's the alternative?


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Where can you live in luxury on a state pension?

If, like many Britons, you have failed to save the cash you need to maintain a comfortable standard of living in retirement, one option is to sell your home and downsize to a smaller property, using the money leftover to cover your living costs.
If moving out of the family home is too much of a wrench, however, the good news is that equity release schemes allow you to stay in your house or flat while still using the equity built up in it to provide some extra cash. The downside of the schemes, which work a bit like mortgages, is that you may not have much left to pass on to any children or other relatives.
But that's a small price to pay for a reasonable standard of living. For more information, try Age UK on 0800 169 6565.

Choosing the right annuity can have a significant impact on your retirement income. And as with most pensions, you automatically have what's called an 'open-market option' (OMO), you can scour the market for the highest annuity rate.
It is worth checking what your pension provider is offering first, though, as some companies offer guaranteed rates for existing customers that are likely to beat those available elsewhere. The Pensions Advisory Service on 0300 123 1047 is a good place to get some free advice.

On retirement, most people convert their pension fund into a guaranteed income annuity that pays out the same amount every month for the rest of their lives.
However, you can also choose an increasing annuity that pays out smaller amounts in the first few years but offers larger payments further down the line. This may prove a wise move if the rate of inflation remains at over 2%.

It is now easier to work later in life because the "default retirement age" has been scrapped.
People approaching retirement age and worrying about money can therefore choose to work for a few years longer - potentially transforming their financial situation. Other than the extra income from working, these people can look forward to higher state pensions, and higher annuity rates due to their greater age.
They can also benefit from bigger tax allowances and the fact that they no longer have to pay National Insurance contributions. Check out this nidirect website for more details.

You could get a much better rate with an impaired-life annuity if you have a medical condition that is likely to reduce your life expectancy.
Incredibly, even snoring, which is a common symptom of Sleep Apnoea could have an impact.
According to figures from MGM Advantage, a man with this condition could receive an extra £12,000 retirement income over the course of their retirement - or £571.44 extra money each year. Click here to find out more.

To maximise your retirement income, it is vital to ensure that you are receiving all the benefits to which you are entitled. These include the basic State Pension, and in some cases, the additional State Pension.
If you are on a low income, you could also qualify for the guaranteed element of Pension Credit, while those with some savings may get the savings element of this benefit. For more information about these and other benefits such as the Winter Fuel Payment, click here.

Many older couples rely on the pension income of one person - often the man. Should that person die first, the other person can therefore be left in a difficult position financially.
One way to prevent financial hardship for the surviving person is to take out a joint life annuity that will continue to pay out up to 67% of the original payments to the surviving partner should one of them die.
The disadvantage of this approach, however, is that the rate you receive will be lower. Again, the Pensions Advisory Service on 0845 601 2923 is a useful first port of call if you are unsure what to do.

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