The Pension Exodus Report
Researchers at Investing Reviews, in conjunction with the UK Department of Work and Pensions, have compiled a list of the top ten destinations for British retirees in their recent Pension Exodus Report.
Retiring abroad has always been a popular option among British pensioners – around a million of them currently live overseas. Traditional destinations include countries like Canada and New Zealand, English speaking nations where many Brits already have family, and in the case of some urban centres such as Vancouver and Christchurch, a little bit British in atmosphere. Closer to home, European destinations such as Spain and Portugal have also proved to be popular choices with retiring British expats over the last few decades.
Relocation Choices of British Pensioners Changing Post-Brexit
With bureaucratic issues caused by Brexit starting to kick in, and pension freezes causing difficulties for UK retirees abroad, British pensioners are beginning to look elsewhere, with some interesting choices shown by the Exodus Report. Relocation to some more classic destinations has been declining: the percentage of retirees moving to Australia has fallen by 7%, with a drop of 6.6% for the United States and a 10% drop for Canada.
However, the actual numbers of expats moving to destinations such as Australia is still considerable (there are currently 222,339 UK pension claimants living in Australia). The influx of pensioners to Ireland, Spain, Italy and Cyprus has also slowed down post-Brexit.
We ought to note that not everyone who features in the report will be a British national: overseas workers may be able to claim a UK pension if they have paid enough National Insurance contributions.
New Zealand and Portugal, which have been long-term favourites, remain solid choices for UK retirees, with a 2% and 7% increase respectively, but there are some newer nations on the list as well.
Old and New Favourites
The UK pension has risen since the end of the transition period, from £141.33 in November 2019 to £160.45 in February 2020 – an increase of 13%, which can make a significant difference to pensioners living in countries where prices are a lot lower than the UK. It is estimated by IR that in some countries, UK pensions have risen over 30% in value, as follows: Algeria (49%), Iran (40%), Syria (34%), Ascension Island (32%) and Guam (31%). In Tahiti, the average weekly UK pension has increased by 64%.
Post-Brexit, it looks as though Poland has become a popular choice among British pension claimants. Some of these will be long-term Polish residents of the UK who have chosen to retire back home, but there is a suggestion that some of these retirees will be Brits taking advantage of a cheaper cost of living in Eastern Europe. Relocation experts also cite the Slovak Republic and Lithuania as increasingly popular choices among British expats.
France has always been a top destination for British retirees, and the country is retaining its top slot, with a 3% increase in British pension recipients since Brexit.
One of the more unexpected choices, however, is Japan: there has been a 24% rise in the number of British pensioners moving there, with 1,310 Brits choosing to relocate to this Far Eastern nation. It is not known how many of these retirees are married to Japanese nationals. Thailand has also seen an increase in British pensioners moving there, around 16%.
Isle of Man Gaining Popularity
One destination soaring up the charts is the Isle of Man, which has seen a substantial increase in pension-claiming incomers since 2012. This is not surprising: research undertaken by the HSBC in 2019 showed that the island scored highly among British expats, for its safety, political stability, ease of employment (although you may need a work permit) and scenery.
92% of respondents told the bank that they felt safer in the Isle of Man than they had done in their previous place of residence. It was also the first port of call for many first-time expats – 64% of those who relocated to the island said that it was the first time they had lived outside the UK mainland. We may not think of the island as a separate nation, but it is often treated as one with regard to relocation: technically, however, it is an internally self-governing dependency of the British Crown and its people are British citizens.
One of the main appeals of moving to the Isle of Man is the tax situation: the island has no capital gains tax, wealth tax, or inheritance tax. You may find that 20% of your income will be tax free. However, financial experts warn that the tax situation is not quite as straightforward as it might initially appear, and you may find yourself liable for some forms of tax in some circumstances. Speak to a financial adviser who has experience of the island’s taxation system before you make your decision.
Numbers of British Pensioners in Popular Destinations
As we’ve noted, the overall decline of retirees relocating to certain countries listed above is in terms of percentages. These countries still hold the current top spots for the numbers of British pensioners:
• Australia (222,339)
• Ireland (128,854)
• USA (126,977)
• Canada (126,426)
• Spain (103,844)
• France (66,847)
• New Zealand (63,930)
• Germany (42,337)
• Italy (32,945)
• South Africa (30,345)
One of the concerns of British pensioners who are planning a move abroad is whether their pension will be transferable to a local scheme. In the case of Poland, for instance, it is not possible. However, there are other options, such as setting up a Self Invested Personal Pension (SIPP), which will be covered by some double taxation treaties and will allow you to hold your pension in local currency. In addition, it can give you some flexibility with regard to withdrawing lump sums and with investing. Wherever you are moving to, do take full advantage of the expertise offered to you by financial advisers with experience of the territory to which you are relocating.