1 Your guide to retiring abroad Retirement. Your biggest adventure yet?
2 Your guide to retiring abroad Retirement. Your biggest adventure yet? Inside this guide: Planning for success Picking the right destination Taking care of healthcare Funding your new lifestyle Taxes for international retirees For many people, retirement is all about spending more time at home, surrounded by familiar things and familiar faces. And there s nothing wrong with that. But for others, retirement is a once-in-alifetime opportunity to do something bold and make a fresh start overseas. Retiring overseas is a complex project, so we ve created this guide to cover some of the other areas you should think about and plan for, too. Throughout this guide, we have shared external websites to help you with further information on certain topics. Zurich is not responsible for the content of these external sites.
3 Planning for success Living the dream (and avoiding a nightmare). Try before you buy It s almost impossible to over research such a big decision. So why not spend extended periods in your desired destination to really get a feel for the place? Talking to people who ve already made the move will give you a realistic perspective on the future you re building. It s a great way of forming a new social network, too. Choosing to retire overseas could be the best decision you ever make. But it s not always plain sailing for everyone. By doing your research and thinking things through properly, you ll give your big move the best possible chance of success. So even before you start reviewing potential destinations, ask yourself this: exactly what kind of retirement do I want? Is it all about sun, sand and relaxation? Would you be happier in the city or in the countryside? How important is a busy social life for you? What about culture? And if you re a couple, what are the things that would make your new life a happy one for both of you? Being clear about the lifestyle you want to achieve will give you a set of criteria you can then apply to all the potential destinations out there. Once you ve narrowed the choices down to a shortlist, you can look at other key factors like language barriers, cultural differences, cost of living and transport connections.
4 Picking the right destination Where in the world? United States It s certainly not a cheap option especially factoring in the costs of healthcare but the US remains a destination of choice for many UK retirees. Malta The holiday island that s also a great place to make a new home. Malta s Mediterranean climate is a big attraction so is the fact that English is widely spoken here. Greece A relaxed lifestyle and a perfect climate have always made Greece a top retirement spot. The recent economic troubles have made it more affordable than ever. Portugal There are more than 100,000 resident expat retirees in the Algarve alone. And no wonder. The weather and the food are hard to beat, while the cost of living is very low. Spain Culture, weather, history, food for many people, Spain offers the complete package for retirement. Falling house prices have made it even more affordable. Thailand More than 40,000 expats enjoy the great weather and low cost of living offered by Thailand. Importantly, healthcare is affordable and high quality, too. Barbados Over 27,000 UK expats have made this Caribbean island their home. language barriers, virtually free healthcare and average temperatures of 26C help to explain why. Jamaica Poverty and crime are real problems in places, but that s not the whole story. Many retirees find a peaceful corner of paradise here, with great weather and fantastic scenery. Australia The strength of the Australian dollar has made it a less attractive option in recent years. But Australia combines the familiar and the exotic in a way that few other places can match.
5 Taking care of healthcare Your wellbeing. Make it priority number one. EEA countries Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, the UK. For anyone retiring abroad, the new country s healthcare system should be one of the biggest considerations. After all, even if you don t need it right now, chances are you will one day. And it s not just about the quality of the system, either. Cost is important to think about. In the UK, private medical insurance isn t essential because we all enjoy free healthcare from the NHS. But that s far from the case everywhere. So whichever country you re thinking of relocating to, make sure you research the healthcare situation there as thoroughly as possible. Are you covered by the UK? If you receive a UK pension and you live in the EEA or Switzerland, you may be covered for healthcare paid by the UK. Be aware, though: you won t be covered if you choose to defer your state pension. So you ll need to make your own arrangements until you do claim. Where do you need private cover? Medical insurance is essential in the United States and South Africa. Where do you need to make provisions for healthcare payments? In France, Spain and Italy the state system provides most medical care at a greatly reduced cost. Expats retiring from the UK should obtain an S1 form before leaving. However, top-up medical insurance is still recommended, as you ll often need to pay a share (around 30%) of the cost of treatment and medicines. If you need medical treatment, you re expected to pay at the end of each consultation, but you can claim the money back from your insurer. Where is healthcare treatment similar to the NHS? The table below shows where you can access universal healthcare benefits in a range of popular retirement destinations. We also show where a visa is needed to live in the country. Australia Canada Cyprus France Germany Ireland Italy Jamaica New Zealand South Africa Spain United States of America Source: Which.co.uk Universal healthcare? Visa needed?
6 Funding your new lifestyle Just how far could your pension go? Reciprocal agreements (for pensions) with the UK Barbados, Bermuda, Bosnia- Herzegovina, Jersey, Guernsey, The Isle of Man, Israel, Jamaica, Kosovo, Macedonia, Mauritius, Montenegro, The Philippines, Serbia, Turkey, USA. For more and more retirees, it s a no-brainer. Why stay in the UK when you could retire to a better climate, a better lifestyle and a better cost of living elsewhere? After all, you ve worked hard for years and now is the time to enjoy the fruits of your labour. Retirees can receive private and state pensions anywhere in the world, as well as getting income from any savings and investments. That makes retiring abroad a distinct possibility for many of us. But there are still all sorts of important details to think about first. Claiming the state pension overseas Currently, everyone who has made National Insurance contributions for at least 30 years can claim a week. The state pension can be paid anywhere in the world, either into a UK bank account or into an overseas account in the local currency removing transfer fees and bank charges. You can choose to be paid every four or 13 weeks (but if your state pension is under 5 per week, you ll be paid once a year in December). If you ve worked abroad for a number of years, it may be possible to receive the state pension from more than one country. But you won t be entitled to any increases that people living in the UK receive, unless you are moving to a country in the European Economic Area (EEA) or one that has a social security agreement (commonly called a reciprocal agreement ) with the UK. The UK doesn t have a reciprocal agreement with New Zealand, Canada and Australia. To illustrate the difference this can make: somebody who retired to Canada 10 years ago would today find their state pension is worth 42% (or 1,742 a year) less than if they had retired to the US. Claiming a private pension overseas In most cases, private pensions are paid in sterling into your UK bank account. The amount can be transferred to your foreign bank account, or you can have a currency broker convert the funds into the local currency of your new country of residence, which is often less expensive. In addition, you can establish sterling and euro bank accounts with the same international bank to avoid transfer charges. A currency specialist can determine a fixed exchange rate that will allow the rate to be established up to one year ahead of time. This will give you some protection from currency fluctuations. The Financial Services Compensation Scheme does not cover currency brokers. Therefore it s important to choose a currency broker that s an FCA authorised payment institution, rather than selecting one that s just registered with the FCA. Authorised payment institutions must use a separate account for each customer s money, ensuring its safety. What happens if I m taking early retirement abroad? If you re retiring early, or have yet to start drawing a pension, there are two important issues to think about. Consider moving your pension pot overseas: You can do this by transferring it to a Qualifying Recognised Overseas Pension Scheme (QROPS). These can be based in the new country you are moving to, or set up on an offshore basis. The income from QROPS may also be taxed favourably in your country of residence. Consider the implications for any lump sums you may take: In the UK, you are permitted to withdraw up to 25% of your retirement savings tax-free. It should be fine if this occurs before you leave, but not all foreign tax regimes have the same rules (e.g. France and Spain).
7 Taxes for international retirees It could be more taxing than you think. The good news for retirees is that you no longer pay National Insurance when you reach state pension age. Other kinds of tax, including income tax, are a different matter though. So it pays to be prepared and do your research. Some countries don t have agreements with the UK, so you may be liable for tax both in the UK and overseas. It s obviously a good idea to check if this is the case for your chosen destination. You may still be liable for taxes on UK rental incomes or investments, although your tax liabilities accompany you to your new country. Once you ve made the move overseas, you must declare your total income from every single worldwide income source, even if some of it is from UK investments. However, double tax relief is available where the income is taxable in both countries. The UK has these double taxation agreements with all the most popular retirement destinations, such as Australia, France and Spain. Pension taxes when retiring overseas Pension income is normally taxed in your country of residence. It is not taxed twice, but may push your other income into a higher overseas tax band. Income tax rates vary considerably around the world. Most countries allow you to keep an initial sum tax-free and then charge tax at escalating rates, depending on which band your income falls into. Savings taxes when retiring overseas As with tax on your pension, income from your savings is usually taxed by your country of residence. Be aware that National Savings & Investments accounts and cash ISAs are tax-free in the UK but are not sheltered overseas. Income from these is taxed like everything else. Depending on where you live, there are local tax-free equivalents that may be worth investigating. In France, the Livret A is an instant access savings account that pays interest tax-free. You can hold up to a maximum of 22,950 in a Livret A account and a couple can have one each. In Canada, residents can invest up to $5,500 a year in a Tax-Free Savings Account (TFSA). Like an ISA, this can be held in cash or stocks and shares. Capital gains tax when retiring overseas Once you become a resident in another country, you may be liable to pay capital gains tax. However, some countries have specific exemptions: Your family home is excluded from capital gains tax in France In Spain you are exempt if you are aged 65 or above and have lived in the property for three years or more Your main residence is also exempt from capital gains tax in Australia, Canada, Ireland and South Africa In Germany your home is exempt so long as you have lived in it for 10 years or more In the US, capital gains of up to $250,000 are excluded from tax if they result from the sale of your main home In Cyprus a limit of 85,430 applies on a similar basis In Italy, the gain on the sale of your main home is exempt as long as the proceeds are reinvested in another main home within one year of sale New Zealand does not charge capital gains tax
8 Taxes for international retirees Your moving abroad checklist Council: Have you contacted your local council and given them a forwarding address? Pensions: Have you contacted the International Pension Centre? This is the specialist part of The Pension Service that deals with overseas retirees. Tax: Have you informed HMRC that you re retiring abroad? Voting and citizenship: You can usually vote in UK elections if you move or retire abroad. Your UK citizenship will not be affected if you move or retire abroad. If you re a UK citizen, you have the right to live and work in any European Economic Area (EEA) country. Work: If you re considering working in another country, it s always good to contact their embassy for more information. Inheritance tax when retiring abroad It may seem a long way off now, but one day your estate will be passed on as an inheritance. The rules for inheritance tax can vary considerably from country to country, so it s worth thinking ahead and planning accordingly. The country you settle in can make a big difference. For example, in French law you cannot leave your entire estate to your spouse, because your children will enjoy an undisputable claim. Moving to Italy may prove beneficial to your surviving loved ones while retiring in Spain would be more expensive unless you take specific action to protect your estate. It s also important to note that retiring abroad and paying taxes to another country will not ensure the safety of your estate from HMRC. In fact, the UK government may be able to claim your estate if you are still considered a legal resident there. The regulations vary considerably from country to country. But in most cases, you ll be charged an inheritance tax above a specific threshold based upon your entire estate. France Transfers between spouses or civil partners are exempt from inheritance tax. Children have an allowance of 100,000 each. Above this, inheritance tax is payable at different rates depending on who is inheriting and how much is involved. For children, the rate escalates from 5% to 45%. Brothers and sisters are taxed at the rate of 35% for sums up to 24,430, and thereafter at the rate of 45%, after an allowance of 15,932. Spain Inheritance tax is determined by the number of beneficiaries and their relationship to the deceased. The taxable sum is reduced by at least 15,956 for each descendant and 7,993 for other related beneficiaries. Partners and spouses are required to pay inheritance tax, but 95% of the value of the family home is exempt, up to a certain limit, provided the spouse, children or parents of the deceased inherit it and continue to own it for a further 10 years. Where inheritance tax is levied, it is payable at between 7.65% and 34%. The rates and allowances can vary significantly in the regions. Italy Inheritance tax is low, varying according to the relationship of the beneficiary to the deceased. For the spouse and any children there is a nil rate band of 1m each. Above this, tax is levied at 4%. For siblings and other close relatives the rate is 6% and each sibling is given a 100,000 allowance. USA and Canada In the US, inheritance tax is charged at rates ranging from 18% to 35%, but only on estates worth more than $5,250,000. In Canada, assets are not taxed if they are passed to a surviving spouse or partner, but they re treated as additional income or capital gains if left to anyone else. Australia and New Zealand These countries don t charge inheritance tax. Zurich Assurance Ltd, authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales under company number Registered office: The Grange, Bishops Cleeve, Cheltenham, GL52 8XX. Zurich is a trading name of Sterling ISA Managers Limited. NP (07/15) RRD Sterling ISA Managers Limited is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales under company number Registered Office: The Grange, Bishops Cleeve, Cheltenham, GL52 8XX.