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?
Most popularSpain 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.
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.
Steps to successWherever 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.
- Where can you live in luxury on a state pension?
- Are pensioners facing a debt time-bomb?
- Would you downsize for a tax discount?