Better weather, cheaper cost of living, a more chilled way of life – retiring abroad sounds great. But did you know choosing one country over another could reduce your state pension by almost half?
According to new research from retirement specialists MGM Advantage, someone who retired to Canada ten years ago would have received 42% less than someone who retired to the US.
That’s £6,726 less in pension payments.
State pension uprating
Why? Well, countries that aren’t in the European Economic Area (EEA) or countries that don’t have what’s known as a ‘reciprocal agreement’ with the UK don’t grant state pension increases to people who have retired there. A reciprocal agreement means that you’ll be able to receive various benefits that you’d get in the UK in that country, such as maternity allowance, sick pay… and the state pension.
When you receive your state pension in the UK, it gets uprated each year in line with inflation and the cost of living. In EEA countries or countries with reciprocal agreements, you receive the same increases as you would if you still lived in the UK.
Which countries won’t increase your state pension?
So you’d expect the most popular countries for Brits to retire to would have reciprocal agreements, right? Wrong. MGM Advantage’s research shows that three of the top ten won’t uprate your state pension if you retire there.
Australia, Canada and New Zealand – which are the third, eighth and ninth most popular countries for Brits to retire to – don’t have reciprocal agreements with the UK. This means that if you decide to move to either of these countries, your state pension will be frozen at the level it was when you left the UK. This means that there are a fair few Brits missing out on thousands of pounds of pension income.
Fortunately, the list of most popular countries for UK retirees includes others where you’ll enjoy such state pension increases, such as Spain (first), France (second), and Cyprus and the USA (joint fifth).
Still, estimates say that around 565,000 pensioners in 120 countries don’t get their state pension uprated. The International Consortium of British Pensioners is campaigning for all state pensions to be uprated, and the president of Canada is due to have discussions with the UK government soon – so watch this space.
Would you move to Australia or New Zealand despite missing out on state pension increases?