Written by Karen Bryan
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A lower cost of living may be one of the reasons for retiring abroad. That could be spending less on food, lower heating bills if you live in a warmer country, cheaper property and/or lower taxes. You can enjoy a much higher standard of living on a lower income in countries such as Panama and Nicaragua.
The UK State Pension will increase annually if you live in certain countries such as member of the EU or the USA. However, being a resident in some countries like Canada or Australia means that your state pension will be frozen.
There is the possibility to transfer your corporate, stakeholder or personal pension into an offshore Qualifying Recognised Overseas Pension Scheme which can offer tax benefits, but you’d need to carefully investigate the tax implications with a specialist Independent Financial Advisor.
Currency fluctuations may affect your income if you receive any payment in UK pounds which need to be converted to the currency of the country in which you live. For example if the UK pound falls in value against the Euro and you live in a Eurozone country, your UK pension will be worth less after the conversion into Euro.
This can be a challenge for us British, as we are very lazy about learning to speak other languages. While being able to speak the langauge is maybe not so crucial for retirees who won’t be looking for a job, it’s still going to limit socialisation if you can’t speak the local language. Quite a few people seem to deal with this issue by socialising with other British (or English speaking) ex-pats.
Distance from Family & Friends
If you retire in a European country, you won’t be too far from family and friends and regular visits will be possible. If you move to Central America or Australia, the high cost of flights is likely to reduce the frequency of contact, compared to say retiring to Spain.
A more pleasant climate is probably one of the main attractions of retiring abroad. Winters in the UK seem very long and grey and if there’s a bit of snow, the country appears to grind to a halt. While more sunshine sounds appealing, it may not be that pleasant if Summer temperatures hit 40 degrees Celsius and/or there’s high humidity. You could end up spending as much on air-conditioning as you did on heating in the UK.
You need to look into the cost of healthcare in any country to which you’re thinking of relocating. Is there a free at the point of use national health service, will you have to pay for private healthcare and will there be any exclusions?
Personal Safety & Security
While acknowledging that there is a fair amount of crime in the UK, many of the countries offering the highest standard of living at the lowest cost, e.g. Mexico, do have major security issues. This is a serious concern to me. I like the fact that I feel relatively safe going about my business in the UK, e.g. it’s highly unlikely that I’ll be victim of armed carjacking when I’m out in our car.
It’s very hard to know what it’s going to be like living in another country until you do it for at least a few months. It’s very different from being on holiday there. There may be an element of the grass being greener on the other side.
It could be wise to give yourself a trial period before you commit to a permanently move abroad. You could initially rent out your UK property for 6 – 12 months, so you have a home to which you can return if you change your mind about the move. However, other people may argue that you have to leap whole-heartedly into retiring abroad, to give it your best shot instead of hedging your bets.