Undertaking what is required takes a great deal of thoughtful consideration
You’ve always dreamed about living aboard, but how do you make that a reality? The first practical step is to think about where you are in your life and weigh up which options are available to you. Factors like your age, financial situation and skill set will come into play as you consider where to explore long term. More open borders and the need to find work in the wake of the financial crash mean more people live outside the country they were born in than ever before.
An estimated 6 million British people live permanently abroad, almost one in 10 of the UK population[1]. If you’re thinking about moving abroad, it’s important to know how your pension and any benefits you receive will be affected and how you will access healthcare and other services.
Already currently living abroad
Six out of 10 Britons who are already currently living abroad have vowed never to permanently move back to the UK[2]. The survey findings show that 62% said that they would never relocate back to Britain, 11% said they would consider it, while 27% said ‘maybe.’
Despite the majority of respondents saying they would not consider returning to Britain, 70% still regularly send money back to the UK and 81% were able to save more in their overseas location.
Financial links with Britain
The survey also shows that 44% relocated from the UK primarily for work or career reasons and 70% haven’t severed all financial links with Britain.
It will surprise many observers that despite the global coronavirus (COVID-19 ) pandemic and rising economic, political and social tensions in many countries around the world, for many the ‘pull’ factors of overseas living far outweigh those of the UK.
Rewarding and fulfilling experience
Indeed, the UK’s ‘push’ factors, such as fears over a no-deal Brexit, political issues, the cost of living, high taxes, low interest rates, a weak pound, the scrapping of some age-related benefits, quality of lifestyle, crime concerns and the weather, have encouraged people to relocate.
Millions of Britons living abroad, according to the survey, say it is a positive, rewarding and fulfilling experience for many reasons. These include more lucrative career opportunities, lower cost of living, higher quality of life, high-quality childcare and education, lower crime levels and good weather.
Financial planning considerations if you are planning to move abroad
Cross-border tax planning
Investment structures and trusts
Currency of investments
Pension arrangements, including your options for transferring
Planning your legacy for your heirs
Moving your pension pot abroad
If you live abroad, or plan on retiring abroad and have a defined contribution pension in the UK, you can either leave your pot in the UK and take your money from abroad or move your pension pot abroad, or mix these options.
If you leave your pension pot in the UK and take your pension from abroad you have the same UK pension options. Alternatively it may be possible to move your pension abroad. You need to make sure you transfer the money into a qualifying recognised overseas pensions scheme or there’ll be a tax charge. These schemes meet the same standards as those in the UK.
Tax in the country
where you’re resident
Transferring your pension could change the amount you get when you retire and you could have less choice about what you can do with your pension pot than if you left it in the UK. You may also have to pay more charges.
You might have to pay UK tax on your pension when taking your pension abroad and potentially have to pay tax in the country where you’re resident. If that country has a double taxation agreement with the UK, you might not have to be taxed twice in the UK and abroad. You can also receive your State Pension abroad if you qualify.
Utilise the tax-efficient opportunities available
If you are planning to retire abroad you must inform HM Revenue & Customs so that you pay the right tax on your pension. Moving abroad before you start taking your pension may mean that overseas tax laws prevent you from taking anything tax-free.
It’s important not to wait until you are a resident in the new country before seeking tax planning advice. Leaving it too late can eliminate some of the most tax-efficient opportunities available.
Source data:
[1] http://news.bbc.co.uk/1/shared/spl/hi/in_depth/brits_abroad/html/default.stm
[2] The deVere Group – 754 respondents residing in Australia, New Zealand, the UAE, Oman, the Philippines, Thailand, Indonesia, China, Hong Kong, Italy, Switzerland, Spain, France, Portugal, Hungary, Germany, Mexico, Russia and Zimbabwe – 26 May 2020
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