Retiring Abroad: The Implications For Your Pension

Wise
22.09.15
4 minute read

Whether you are moving abroad to be nearer family, or just wanting to spend your retirement soaking up the sun, your pension and how it is affected by your move should be uppermost in your mind.

Individual situations vary dramatically and a reputable independent financial adviser will be able to discuss your position in more detail, but our guide will give you a good overview of what to expect and the options open to you.

What Happens To Your State Pension
The good news is that you can claim your state pension even if you are retiring outside the UK. The current basic state pension stands at £115.95 a week for a single person who has made a minimum of 30 years worth of National Insurance contributions. You should receive a letter from the International Pension Centre (IPC) three months before you reach pensionable age - if you haven’t then you need to contact them directly to check your eligibility.

Once you are eligible, you can claim your pension wherever in the world you live during your retirement. The payments can be paid into your UK bank account, or into your new bank in the local currency. If you decide to get it paid into your UK account, then use Wise to avoid hefty bank transfer fees.

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You have choose to have it paid into your account every four or 13 weeks. If you are already receiving your pension and considering moving abroad, you need to fill out the International State Pension claim form IPC BR1 and send it to the IPC.

If you are moving abroad a little while before you retire, and are planning on working in your new country for a few years, there is a possibility that you might be entitled to some percentage of the state pension from your new country. If this is the case and you are moving to an EU country, or a country with which we have a reciprocal agreement, you will be entitled to the same pension increases that UK residents get on your UK pension. If you don’t (and this includes Australia, Canada and New Zealand) - you won’t.

What Happens To Your Private Pension?
The chances are that your private pension will continue to be paid, as normal, into your UK bank account, in sterling. The main challenge therefore is to find the cheapest way possible to transfer it to your new country - again, a system like Wise allows you to beat the bank charges normally accrued when doing an international transfer.

Should I Take A Lump Sum For My Pension?
Moving abroad comes with a raft of expenses - and it can be very tempting to take a lump sum from your pension to offset them. You will normally be offered a lump sum option when starting to have your state or private pension issued. It is a tax-free payment, making it even more tempting. To get a lump sum from your state pension you normally have to defer taking any payments for 12 months (and this option is due to be removed after April 2016).

Taking a lump sum from your private pension is even more straightforward - you can normally just take 25% of your pension value, and then look into other options with the rest, such as income drawdown, taking the rest subject to tax, or arranging an annuity.

The pros of taking a lump sum:

  • It’s a tax-free sum of money, perfect for paying off a mortgage or for moving costs
  • Investing it could mean more money than you would have got if you’d left it in your pension - but obviously that comes with a risk

The cons of taking a lump sum:

  • Your retirement income will be lessened and your monthly income could be affected drastically
  • The different options make confusion easy. Consult an independent financial adviser to discuss the best mix for you

It can be head-spinningly complicated to retire abroad, with so many things to think about Take a look at our practical guides, designed to help you understand the implications of retiring abroad on your general financial situation, and your taxes.

Need your money to be flexible? Wise Borderless multi-currency account could help
The Wise multi-currency Borderless account is a neat solution for people who need their money to be flexible. You can hold your cash in any one of dozens of different currencies, all within one account, and see your balance at a glance. Then, when you want to convert money between currencies, you can do so.

When you choose to switch your cash between currencies, Wise always gives you the same exchange rate that banks use when they trade currencies between themselves. That’s the rate you’d find on Google, and the only real exchange rate. And it’s the only fair rate.

While many banks and money transfer services say that they’ll exchange your cash for free, or for a low fee, they nearly always hide their profit in a poor exchange rate, which means you pay more than you have to. With Wise, you can be sure you’re getting the best available rate - with a transparent upfront charge, and without any nasty surprises.

Now you can get your own bank account details for a couple of currencies. Get paid in EUR, GBP, USD, HUF, NZD, and more and receive money like any local would!

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This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.

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