The overseas retirement hotspots: why?

Spanish park

A new study has revealed that the most popular place for Britons to retire overseas is Spain. This has held onto the top spot for yet another year, pushing France into second place and Australia into third. Meanwhile Ireland was fourth and Cyprus and the US joint fifth.

So what draws us to these spots, and what do we need to know in order to have a happy retirement overseas?
%VIRTUAL-SkimlinksPromo%

Most popular

Spain and France clearly benefit from the fact so many of us have fallen in love with parts of the country when we were on holiday. We like the pace of life and the better weather, and we feel that things are familiar and close enough to the UK to feel like home.

They are also cheaper places to live than the UK, with cheaper property, which is a big attraction for those on a fixed income who want to trade down and release some capital.

Andrew Tully from MGM Advantage commented: "Thoughts of better weather, cheaper living costs and potentially cheaper property than the UK can prove a strong draw."

However, to have a successful retirement here it's essential to consider the effect of currency movements. According to Caxton FX, the number of people sending their money overseas to Spain has fallen 31% recently, as people put off retiring overseas or return home. It's important to factor currency variations into your calculations when working out where you can afford to retire overseas.


Further afield

Australia and the US, meanwhile, appeal to those who have been hankering after a complete change of life. Those who want a great deal more sun, and a completely different life on the other side of the world will find it here.

However, again, to have a successful retirement here, you need to understand the financial implications. Tully explains: "You could find your UK state pension frozen at the point of retirement if the country you choose to retire to does not have a reciprocal agreement in place with the UK. For example, if you retired to Canada ten years ago, your UK state pension would now be worth 42% less than if you had retired across the border in the US. Many retirees have found this has hit them hard."

If you retire to any EU country or Switzerland, your pension will rise with inflation. If you retire elsewhere some countries, such as the US, have agreements which will mean the value of your state pension will rise (although each country has a slightly different arrangement). However, some popular retirement hotspots have no agreement, so state pensions are frozen at the point you retire. Australia is one of these countries, and if you plan to retire there it's essential you factor this into your planning.

7 PHOTOS
7 ways to improve your retirement
See Gallery
The overseas retirement hotspots: why?

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.

HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE

Steps to success

Wherever you plan to retire overseas, MGM Advantage has produced a number of steps which will help smooth the process.

1. Start with your finances. Get an estimate of your state pension here. Check what reciprocal agreements are in place with the destination country regarding your UK state pension, other social security benefits, and welfare rights. It's also worth getting some advice as to whether your plans are affordable.

2. Do your homework on the cost of living in the country you want to move to, and keep an eye on the exchange rate.

3. Tell HM Revenue and Customs that you are moving overseas. This allows them to let you know of any UK tax liability you may have even though you are living overseas. And more importantly can allow any UK pension you have to be paid gross (no tax deducted) and taxed in your country of residence - if the country you live in has a double taxation agreement with the UK.

4. Check the cost of healthcare in the country you are thinking of moving to, and consider some form of medical insurance.

5. If you decide to keep your property in the UK you will need to let your mortgage provider and insurance company know if it will be rented or remain empty.

6. Notify utility companies, financial institutions and your local council when you are leaving. You also need to contact the electoral register, and arrange for mail forwarding via the Post Office.

6 PHOTOS
Seven retirement nightmares
See Gallery
The overseas retirement hotspots: why?
Figures from charity Age UK show that 29% of those over 60 feel uncertain or negative about their current financial situation - with millions facing poverty and hardship. Even though saving for retirement is not much fun, the message is therefore that having to rely on dwindling state benefits in retirement is even less so. To avoid ending up in this situation, adviser Hargreaves Lansdown recommends saving a proportion of your salary equal to half your age at the time of starting a pension. In other words, if you are 30 when you start a pension, you should put in 15% throughout your working life. If you start at 24, saving 12% of your salary a year should produce a similar return.
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.

Around 427,000 households in the over-70 age groups are either three months behind with a debt repayment or subject to some form of debt action such as insolvency, according to the Consumer Credit Counselling Service (CCCS).

Its figures also show that those aged 60 or older who came to the CCCS for help last year owed an average of £22,330. Whether you are retired or not, the best way to tackle debt problems is head on.

Free counselling services from the likes of CCCS and Citizens Advice can help with budgeting and dealing with creditors.

Importantly, they can also conduct a welfare benefits check to make sure you are receiving the pension credit, housing and council tax benefits, attendance and disability living allowances you are entitled to.

.

The average UK pensioner household faces a £111,400 tax bill in retirement as increasing longevity means pensioners are living on average up to 19 years past the age of 65, according to figures from MetLife. And every year in retirement adds an extra £5,864 in direct and indirect taxes based on current tax rates to the costs for the average pensioner household. You can be forced to go bankrupt if you fail to pay your taxes, so it is vital to factor these costs into your retirement planning.It is also important to check that you are receiving all the benefits and tax breaks you are entitled to if you want to make the most of your retirement cash.

The cost of a room in a care home in many parts of the country is now over £30,000 a year, according to figures from Prestige Nursing and Care. So even if the prime minister announces a cap on care costs - last year the economist Andrew Dilnot called for a new system of funding which would mean that no one would pay more than £35,000 for lifetime care - families will still face huge accommodation costs. Ways to cut this cost include opting for home care rather than a care home. Jonathan Bruce, managing director of Prestige Nursing and Care, said: "For older people who may need care in the shorter term, home care is an option which allows people to maintain their independence for longer while living in their own home and should be included in the cap." However, the only other answer is to save more while you can.
Older Britons are often targeted by unscrupulous criminals - especially if they have a bit of money put away. For example, many over 50s were victims of the so-called courier scam that tricked into keying their pin numbers into their phones and handing their cards to "couriers" who visited their homes. It parted consumers from £1.5 million in under two years. Detective Chief Inspector Paul Barnard, head of the bank sponsored dedicated cheque and plastic crime unit (DCPCU), said: "Many of us feel confident that we can spot fraudsters, but this type of crime can be sophisticated and could happen to anyone." The same is true of boiler room scams that target wealthier Britons with money to invest, offering "once-in-a-lifetime" opportunities to snap up shares at bargain prices. Tactics to watch out for include cold calling, putting you under pressure to pay up or lose the opportunity for good, and claiming to have insider information that they are prepared to share with you.
HIDE CAPTION
SHOW CAPTION
of
SEE ALL
BACK TO SLIDE


More stories

Read Full Story

FROM OUR PARTNERS