Many retired brits each year decide to relocate overseas in the post work years – but there’s one key thing need to do their research about.
A warning has been issued to older people looking to retire abroad (stock image) (Image: Getty)
Older Britons looking to retire abroad have been issued an urgent warning about their State Pension. Many retired brits each year decide to relocate overseas in the post work years for better weather, and in the hope that their retirement pot will go further there.
The triple lock commitment which ensures that the State Pension rises based on one of three measures: average earnings, inflation, or 2.5% – whichever is highest. The Prime Minister Andy Burnham announced at the Labour Conference this week that he plans to pass a law that will adjust the triple lock so the State Pension increases by at least inflation or 2.5% each year (but not average earnings as is currently the case) to raise money for his social care plan. However, it will also have a new link built in to keep pace with earnings over time, the GOV.UK website explains. But any change would take place after the end of the current Parliament, currently expected to be July 2029.
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And while the lock provides some protection for retirees against inflation and economic shocks for those living in Britain, it’s important to be aware of rules surrounding how much you’ll receive if you decide to relocate overseas.
Simon Hood, Executive Director of relocation firmJohn Mason International Movers, warns that you could actually end up losing thousands over the course of your retirement through failing to make one important check.
“Any British national who has built up enough qualifying years can claim their state pension while living anywhere in the world,” he explained. “However, we deal with several clients looking to migrate in their retirement, that aren’t aware of the frozen pension problem.”
Brits can move almost anywhere in the world and continue to collect their state pension, but whether it raises with inflation, average earnings, or the triple lock depends on where you retire and the terms of any “totalisation” agreement with the nation.
Mr Hood explains: “While the logistics for an individual moving abroad are complex, the tax and welfare entitlements become a nightmare for governments – that’s why they develop agreements between themselves, known as totalisation agreements.
“This makes sure people aren’t necessarily paying double contributions.” However, a totalisation agreement doesn’t always mean your pension will be uprated.
For example, the international agreement with Canada, a popular destination for British expats, covers some benefit entitlement but, crucially, not the uprating of pensions.
Mr Hood explains: “The agreement’s absence of uprating means the government isn’t obligated to increase pension payments in line with inflation – creating a frozen amount.
“It’s an issue parliamentarians and campaigners have long pointed out, it may not seem like a dealbreaker, but when considering the compounded amount over a 10, 20-year period of retirement – it could have a real knock-on effect later down the line.
“My recommendation to pensioners before moving abroad is to consult a relocation expert, research the DWP guidance on which specific countries see increases, or refer to the international pension centre.
“A totalisation agreement itself doesn’t mean your pension could be uprated, so to those considering retirement abroad – undertake thorough research before making decision on any single destination.”