Retiring Abroad – Checklist and Destinations

Today’s post is about retiring abroad – how practical is it, and where is the best place for us?

What do we want?

After Jeremy Corbyn’s surprisingly good showing in the June General Election raised the prospect of what would be to all intents a communist government in the UK, I promised to look into the practical aspects of moving abroad to avoid such a regime.

• This is my first stab in that direction.

Let’s start by imagining an ideal bolt-hole – what properties would it have?

• I’ve come up with twenty things to look for, which I’ve grouped together below.

Financial considerations

1. Access to our SIPPs and ISAs and DB pensions.
2. Access to the UK state pension.
3. Low cost of living.
4. Low taxation (lower than current UK) on the amounts we would spend
5. Double-taxation agreement with the UK so that any income taken in the UK (eg. pensions) won’t be taxed twice.
6. Sensible inheritance tax rules (repatriation to UK, passing property between spouses on first death).
7. Permanent residence options, or a second passport.
8. Stable currency, or the ability to use a stable currency ($, £, €)

Culture

1. English-friendly, with ideally a lot of English speakers.
   • I am prepared to learn a language, but it would make things easier at the start if we could get along in English.
   • And we will need to get along with / depend on our neighbours, so it would be good if they don’t hate the English.
2. It would also help if our driving licences were acceptable locally.
   • Outside Europe, I think this means getting an International Driving Permit.
3. Similar arrangements for pet passports would also be useful, in case we need to bring pets over.
4. Cultural sophistication as close to London level as possible.
   • For me, this includes a local football team, as I will be giving up my 20+ matches a year.
   • Though we would probably come back to London several times a year, so this can be worked around.

Amenities

1. Weather at least as good as London, and ideally a bit better, but still a temperate climate.
2. Seaside that looks more like Cornwall or Amalfi than Torremolinos.
3. Properties suitable for retirement / ageing.
4. Political stability, with rule of law and good private property rights.
5. Low crime and particularly violent / gun crime.
6. Good broadband access / mobile phone coverage.
7. Affordable healthcare / health insurance / social care of an acceptable quality.
8. Travel time and cost for visits back to the UK (London).
   • This includes good internal travel links within the country.

These 20 items are not necessarily arranged in order of importance at this stage.

When do we want it?

Ideally, never – I’d still much rather spend my time divided between London and the English seaside (Cornwall, Devon or Dorset).

• So a necessary condition would be that a hard-left Labour government was in power.

A second consideration is the mother-in-law.

• She’s in her 80s and not up to a move.

So we will stay in England for at least as long as she lives.

We also have a couple of cats that can be expected to live for another five years.

And the Brexit negotiations will introduce their own delay.

Grouping the destinations

Regular readers will know that I’m no fan of the EU.

• But I do like Europe.

So – without doing any research yet – places like Italy, France, Spain and Portugal would be top of my list.

• I’d also consider Malta and Ireland.
• But Cyprus and now Greece are too politically unstable for me.

Pre-Brexit, moving to these countries would have been relatively straightforward.

• Post-Brexit, who knows?
• We’ll just have to wait and see.

I can’t see us moving to the Americas (apart from the Caribbean or Hawaii), Asia (with the possible exception of Japan) or Africa.

• I guess New Zealand and Australia are remote possibilities, but the distance is very off-putting.

This rules out popular¹ locations like:

1. US (apart from Hawaii)
2. Canada
3. Panama
4. Malaysia
5. Thailand
6. Ecuador
7. Belize
8. Dominican Republic
9. India

Voting

It seems that we keep our UK voting rights for 15 years after leaving the UK.

• This would give us the chance to help vote a hard-left party out of government.
• And it might also provide the opportunity to influence the level of support and services offered to UK expats.

We also get to keep UK citizenship, which will be handy if we decide to come back.

State Pension

State Pension continues if you move abroad, and can be paid to a UK bank account or to an overseas account in the local currency.

• You have to tell the International Pension Centre (part of DWP?) that you plan to leave the country.
• We’d also have to tell HMRC, obviously (form P85).

The snag is that only certain countries qualify for annual pension increases:

• Gibraltar or Switzerland
• The European Economic Area
• A country that has a social security agreement with the UK (like the USA)
• Popular retirement destinations like Canada and Australia don’t have such an agreement
• Gov.uk has a full list of countries where you get the increase.

I’m a few years of NIC contributions short of the maximum State Pension, so I imagine I would also need to make my voluntary contributions before I left.

DB and DC pensions

Workplace and personal pensions can be paid to you wherever you live.

• And you should be entitled to any annual increases as if you were in the UK.

There is also the option to transfer UK pensions into a local foreign scheme via the QROPS scheme.

• My understanding is that the UK government has made such transfers less attractive recently.
• More research would be needed here closer to the time.

FX rates are another consideration, but with a globally diversified pension portfolio, things should even out in the long-run.

• A Euro crisis and / or the ejection of some of the Southern euro states might challenge that assumption.

Tax

The biggest consideration with DC pensions will be the tax-free lump-sum.

• If we haven’t taken this before we leave, it could be taxed as income in the new country.

At present, I am using UFPLS to access my pension.

• My other half (OH) qualifies for her pension in November, but we won’t decide on a strategy until we know whether she wants to / will be able to carry on working.

So we would most likely take the lump sums before moving abroad.

The income we draw would be taxed in the UK.

• I’m not clear if that means that I can mitigate the tax by investing in VCTs and EISs.
• Nor is it clear whether we would be entitled to a UK personal allowance if we were non-resident.

This means that it might not be worth becoming non-UK-resident for tax purposes.

• Which would in turn mean that we could spend more time in the UK each year.
• The limit is 182 days in the UK for non-residents.

I understand that being in the UK for more than that would also restore the annual increases to the State Pension.

A further consideration are wealth taxes, which have recently been introduced by Spain and France (and Greece).

• These taxes could rule out these countries as destinations to retire to permanently.

Bank accounts

There might be charges for paying pensions into an overseas bank account, so keeping a UK account might be a good idea.

• We might need an Expat / offshore account as well.
• And no doubt we’ll need a local account

We will probably hang on to a pied-a-terre in London, so a UK account should be possible.

• We probably wouldn’t rent out the pied-a-terre.

ISAs

You can’t put money into an ISA whilst abroad, but what about getting money out of it?

I presume that when you need some cash, you just ask for a transfer out into a UK or local bank account.

• Does anybody know any different?

Healthcare

At the moment, we would get local-equivalent healthcare in Europe.

• Post-Brexit, we’ll need to wait and see.

It appears that the UK also has special agreements with a number of countries, though I haven’t been able to find out which these are.

When we hit State Pension Age (SPA), we can complete form S1 from the International Pensions Centre.

• This should enable us to access the same level of care abroad as a local pensioner.

And it’s important to remember that we can’t come back to the UK for free care on the NHS (other than A&E care).

Conclusions

We’ve only dipped our toe into the water today, and we’ve generated as many questions as answers.

One thing that has emerged is that it might well be best from a tax point of view to remain UK resident and simply live abroad for half of the year.

• Which is quite a big change to the idea of retiring abroad full-time.
• And somewhat defeats the original objective of avoiding Corbyn’s clutches.

The next stage will be to do more detailed research on our top six potential destinations (Italy, France, Spain, Portugal, Malta and Ireland) to see if we can shorten the list a little.

• I have a feeling that wealth taxes mean we can rule out France and Spain already.

And I might also look into the pros and cons of moving money offshore.

Until next time.

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