British pensioners planning to retire overseas this tax year could miss out on more than £77,000 in state pension income over 20 years if they move to certain countries due to the UK’s frozen pension policy, according to Rathbones.
Under the UK’s triple lock policy, the state pension rises each year by the highest of inflation, average earnings growth or 2.5%. However, Rathbones’ analysis shows for retirees who move abroad to several countries – including Canada, Australia and New Zealand – state pension payments are frozen at the rate first received, with no future increases.
According to the asset managers’ calculations, pensioners who move abroad to a country without an uprating agreement face rapidly escalating losses compared with those who remain in the UK.
A pensioner who lives overseas for 20 years could lose £77,585 in state pension income alone due to missed annual increases, and this loss of income could be even greater if inflation or average earnings growth exceeds the 2.5% minimum guaranteed under the triple lock.
The state pension will only increase each year for expats living in the European Economic Area (EEA), Gibraltar, Switzerland, and countries that have a social security agreement with the UK, apart from Canada and New Zealand.
Olly Cheng, a financial planning divisional lead at Rathbones, said: “Anyone planning to retire abroad should start by checking their National Insurance record to make sure they’re entitled to the maximum state pension, particularly if future increases won’t apply.
“It’s also vital to understand how much private income you’ll need to replace any lost state pension, as well as factoring in local tax rules, healthcare costs and currency movements, all of which can materially affect how far your money stretches overseas.”
