Could you retire abroad in 2019? All the evidence suggests that an active retirement in the warmth and sunshine of our favourite overseas destinations will give a boost to your health, wealth and happiness. Here we outline the key considerations for making a successful move abroad, from raising the money to sorting out your pension.
Selling your UK home
You may take the option of selling your UK residence to fund your new home and life in the sun. There’s certainly something to be said for going for it, all in. Or you may be planning to rent abroad first.
If you’re going for the first option, as we approach optimum buying season in the UK, this is the time to get the place ready to sell; sprucing up the outside for maximum kerb appeal, or maybe considering putting in a new kitchen. If it’s been your family home for decades, selling up may be a wrench. But it is generally worth doing a bit of titivating if it adds a few thousand to the value.
Is 2019 the year you retire to the sun?
This is also the time to do your sums so you know what the proceeds of your UK sale will get you in your chosen overseas destination. Crucially though, be sure to factor in the additional buying costs (agent’s commission, transfer tax and fees for your notary and lawyer) that come with a foreign property purchase.
Also consider exchange rates. Speak to Smart Currency Exchange about forward buying currency to minimise your exposure to exchange rate movement and all other currency related matter. Download their guide, the Property Buyer’s Guide to Currency.
Other options
As a UK home owner, and to avoid selling the family home, why not consider using equity release? This will only normally apply if you are staying in the UK home for at least half the time. There are many variations on it, depending on whether you wish to continue making monthly payments. If you’re buying in Spain, read our new guide, How to Pay for a Spanish Property. The equity release section in the guide is just as applicable if you are raising finance to buy in other countries.
If you’ll be renting abroad and plan to let your UK home, the same considerations and more will apply to getting a good price. So how ready is your property for the UK rental market? Rental homes must meet strict safety standards, of course, and losing a good tenant due to maintenance problems may be costing you thousands each month. So make a start as early as possible on getting it into shape to rent out.
Don’t forget there will UK tax implications from rental income to consider too. Similarly, if you decided to sell a UK property after moving abroad and no longer living there, check and take necessary steps to eradicate your liability to potential capital gains tax.
Day-to-day living costs
I know, from talking to and helping hundreds of fellow British property buyers overseas, that we are a rather special group of people. Why? Because we have been sensible during your working life! We have worked hard and saved from an early age. We paid into a pension when our colleagues were still spending it all! We listened to good advice and bought our homes at a relatively young age. And now we can look forward to retirement years ahead of others, with our mortgages paid. We can take our pension pots abroad and take advantage of cheaper living costs, paying little or no tax and national insurance contributions.
Bearing this in mind, research what your typical monthly outgoings might be in your new country. As well as essential groceries, you’ll have utilities to pay, council tax (typically significantly less in Europe than the UK) and perhaps community fees if you’re on an urbanisation or resort-style community. Thankfully, life on the Mediterranean (and Portugal, the US, Caribbean and most of our favourite destinations) remains more affordable than in the UK.
You’ll be able to afford those things that used to be occasional luxuries and now seem to be everyday treats, like eating out every day for less than £10, or strolling along a beachfront promenade in evening sunshine.
Ready for your State Pension?
Anyone reaching UK State Pension age this year will need to have made 35 years’ worth of National Insurance Contributions to be able to claim the new State Pension in full, currently £164.35 a week. Bear in mind that at the end of 2018 State Pension age became 65 for women, putting it on a par with men. Note too that the Government is slowly upping the State Pension age, with the intention of making it 66 in October 2020 and 67 by 2026.
Be sure to factor in these points if your retirement plans span this year and the next. Contact the Department for Work and Pensions to check your State Pension record and National Insurance history, or the International Pension Centre for information about claiming your pension from abroad.
Any other pensions?
You may also have a personal (also known as ‘defined contribution’) pension plan. These include stakeholder and workplace pensions, as well as SIPPs (self-invested personal pension). It’s not uncommon to have a collection of workplace pensions set up by different employers at different stages in your career, sometimes in different countries. If this is the case, seek guidance on how to maximise their value as an expat.
Unlike with State Pensions, holders of personal pensions can usually access the funds from the age of 55. Typically, you have four options. The first is taking the whole fund as cash, with 25% coming tax-free in the UK. Second, making cash withdrawals when you want, again with 25% free of UK tax each time. Thirdly, taking regular income through ‘flexible drawdown’, while the rest stays invested. And lastly, buying an annuity and receiving a secure, regular income for life.
If you are fortunate enough to have a defined benefit or final salary pension, be sure to talk to a financial advisor about your options for these before you move abroad – there are some attractive .
Whatever your situation, you need to be sure you are satisfied the overall value of your pension fund(s) and how you will use it will be adequate for your overseas retirement plans. How and when you draw money from a pension pot can make a difference to your tax bill!
Not forgetting savings and investments
Consider any ISAs, shares, bonds and other types of savings you have and what you will do with them once you’re abroad. Are you due a windfall at any point this year – in which case, it would be worth waiting to benefit from it.
Be aware of large cash balances held in the UK – moving cash deposits offshore to free up UK tax allowances could be an option. As a non-resident of the UK, it is unlikely you will be able to continue to contribute to an ISA. In tune with this, it is important to notify HMRC about a departure from the UK, not only as a formality but because it could result in a tax rebate! Even after leaving the UK, you may need to complete a UK tax return.