Retiring abroad: What does Brexit mean for your plans?
Chris Broome – Chartered Financial Planner
For many, retiring abroad is a dream. Enjoying your golden years in a sunnier country and experiencing a new culture certainly has an appeal.
But with many retirement hotspots in Europe, Brexit could derail some plans and make moving to a new country far more difficult.
Almost half are reconsidering retiring abroad due to Brexit
The UK voted to leave the EU back in 2016, but it’s been a slow process and there’s still a lot of uncertainty about what it means. The UK left the EU at the beginning of this year, but 2020 has been a transition period to allow negotiations to take place. However, there is much still to be decided despite the UK leaving the single market on 1st January 2020.
For retirees hoping to move to an EU country, it means uncertainty. So much so that according to research from Canada Life 46% of over-50s who planned to retire abroad are now reconsidering where they will retire. With lifestyle goals often driving plans to move abroad, Brexit could have a larger impact than simply where you spend retirement. The top reasons for retiring abroad are:
- Better weather (68%)
- More desirable lifestyle (63%)
- Cheaper living costs (45%)
If you’d hoped to move to somewhere in the EU to spend retirement, it’s important that you understand the implications Brexit could have.
5 things to check if you hope to retire in the EU
If you still hope to retire in the EU, there are many things you need to consider and check, including these five things:
1. Visas and right to live in the EU
It’s been many years since Brits needed a visa to visit other EU countries thanks to freedom of movement. However, it’s unlikely to be as easy to settle in an EU country post-Brexit.
As a result, you’ll likely need to obtain a visa. To secure one, you’ll probably need to demonstrate your income and assets to show you are self-sufficient. As a result, getting your finances in order before you apply is advisable. Visas may also give you the right to live in a country but without the right to work, for some hoping to work in some way in retirement, this could affect plans.
2. Reciprocal agreements
A reciprocal agreement is an arrangement between states about certain benefits, including National Insurance, benefit entitlement and healthcare. Where an agreement is in place, a UK national may be able to claim certain benefits whilst living in the reciprocal agreement country from that country’s government. It’s an agreement that can provide security in retirement even if you move abroad.
Despite the importance of reciprocal agreements, just a quarter of those planning to retire abroad know which countries have these in place.
3. Income requirements
It’s important to carefully assess where your income will be coming from and what your requirements are. In some cases, you may be able to change your income so it’s received in Euros or another currency, which can help you manage finances. You should take advice before doing this. Changing your pension, for instance, could mean losing other benefits and it’s important that you choose the right product for your circumstances.
4. Currency exchange rate
When living abroad, how the value of the pound changes can affect you and your income. During your retirement, fluctuations are to be expected. You need to consider how the exchange rate will affect your income and the steps you can take to provide some security. Again, this is an area we can help with.
5. State Pension increases
When claiming your State Pension in the UK, it will rise each year. This helps your income keep pace with inflation and maintain your spending power.
However, if you’re living abroad, this isn’t automatically the case. At the moment, retirees in the European Economic Area benefit from State Pension rises, but we don’t know if this will continue to be the case as negotiations are still ongoing. If these arrangements aren’t maintained, it could have a significant impact on your income over the long term.
Retiring abroad at any time comes with complexities and challenges but Brexit adds a new layer. Taking advice before you move plans forward is essential.
Canada Life’s Technical Director, Andrew Tully said: “To help navigate the complexities around retiring abroad, it’s important to seek professional advice. This could make all the difference between living the retirement people have worked long and hard for, or falling victim to the potential retirement risks.”
More changes expected as Brexit negotiations continue
As Brexit negotiations are ongoing, further changes and agreements are likely. If you plan to move to the EU, keeping abreast with these announcements is crucial, they could affect your income, security and lifestyle.
Working with a financial planner can help ensure your retirement plan considers the latest information available and that your retirement is secure. For instance, it was recently revealed that UK banks would shut thousands of British ex-pats’ accounts. Ex-pats now need to open new accounts and if they’re not aware of this, it could affect their income and access to assets in the coming months. A financial planner can help ensure you’re aware of the changes that may affect you.
Can you afford to retire abroad?
Brexit isn’t the only thing you need to consider when moving abroad in retirement. It’s also important to assess if it’s feasible with your finances in mind.
To start with, you should assess the initial costs of moving. From shipping your items to purchasing a property, there are a many aspects to consider. These costs can take a sizeable chunk out of your savings.
You also need to look at the day-to-day costs. The cost of living may be very different from the UK. In some cases, you may get more for your money, but in others, everyday costs will be higher. On top of this, you may want to factor in flying home to visit loved ones regularly. It’s also important to plan for the unexpected. Would you have to pay for healthcare if you fall ill, for example?
Next steps
If you’re hoping to spend your retirement outside of the UK, we’re here to help.
It’s a big decision that requires careful financial planning, but taking the time to understand your finances means you can start the next chapter of your life with confidence.
Please contact us to discuss your retirement plans.
Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation which are subject to change in the future.
