What do I need to know before retiring abroad?

Holly Thomas / 21 November 2013

Better weather, cheaper living costs and potentially cheaper property than the UK can prove a strong draw for retired couples looking for a change of lifestyle.

A new study ranks Spain as the most popular destination, followed by France, Australia, Ireland and Cyprus and USA equal fifth most popular destinations. South Africa and New Zealand are also very popular thanks to gentle climates.

But choosing where to live is more than just looking at the place with the best beaches and highest numbers of days with sunshine.

Without the right planning and advice, you can quickly get caught out by local tax laws, exchange rates and other financial arrangements.

It is crucial to do your homework looking at pensions, currency, health and tax – and how to avoid being caught out by exchange rates. 

Specialists predict sterling is going to weaken which means it is more important than ever to get things right.

Here’s what you need to know:

State pension

Around 1.2 million people are claiming their state pension from overseas - but not everyone is getting the same deal. 

Countries that aren't in the European Economic Area (EEA), or countries that don’t have a reciprocal agreement with the UK, don't grant state pension increases to people who have retired there.

These countries include Australia, New Zealand, Canada and South Africa – all appealing destinations for retirees looking for better weather and potential cheaper property than the UK. It will be increased in EU countries.

The amount of state pension you receive will fluctuate with currency movements, too.

You'll probably be hit with transfer charges if you get your pension transferred from a UK bank account to a foreign one. This can be avoided by setting up an international bank account and you can even set the exchange rate by using a currency broker.

HiFX for example, runs a regular payment service to enable British people who have emigrated or retired abroad to manage their currency payments via direct debit, and als protect themselves against currency fluctuation by fixing exchange rates for between six and 12 months. 

Buying property

You can also use a similar service to lock in rate when it comes to buying your property. During the weeks or months it can take to complete the purchase, currencies can fluctuate.

A “forward contract” with a currency firm will secure a rate for a future purchase. Always get advice from a local tax expert when you buy a property abroad. You may be liable for foreign taxes such as purchase tax. 

Plus, the Government is seeking to withdraw state pension payments to expat spouses. They will continue to receive a state pension for National Insurance contributions they have made themselves, but not for contributions made by their spouse. These changes will only affect new claims made from 2016.

Read our tips for buying property abroad.

Healthcare and benefits

In theory, pensioners living in EU countries such as France, Spain and Italy receive free healthcare, but in practice it can be more complicated. 

There are various restrictions and you may get stuck when you need help the most. Although we have free universal healthcare from the NHS in the UK, this isn’t the case in other countries – so make sure you know what the situation is. 

In the US and Cyprus, for example, there is no free healthcare, so you’ll need to make your own provisions.

It might be worth buying private medical cover. It is often cheaper than in the UK but it might be better to buy a UK policy that offers consumer protection from the regulator, the Financial Conduct Authority in the event something goes wrong. 

Take care over any pre-existing conditions which will only be covered if you pay extra.

Cut-backs on expat benefits will reduce pensioner income for those living abroad. Expat pensioners, for example, face losing their £300 winter fuel allowance. 

A total of 115,000 expatriates living in seven countries – Spain, France, Greece, Portugal, Malta, Gibraltar and Cyprus – will be affected from 2015. 

At present, pensioners over 80 get £300 while under 80s get £200 - tax free.


Different countries have completely different tax systems which means it is up to you to familiarise yourself with them, especially if you’re planning to work at all.

But before you go, you should tell HM Revenue & Customs (HMRC) if you move abroad. 

If you're not required to fill in a tax return, you'll have to complete form P85 Leaving the UK - getting your tax right. 

HMRC will use the information on the form to send you any tax refund you're owed and work out if you'll become non-resident. 

Considering a move to France? Read our guide to buying French property.

The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.