Retiring Abroad – What You Need To Know
Those looking to retire abroad may find their retirement plans hampered by the UK’s exit from the EU. Depending on the terms that the government negotiate under Brexit, it is conceivable that UK citizens may lose the right to live or work in the EU without obtaining a visa.
Under the current rules, free movement of people means that immigrants from the EU can live and work in the UK, and that UK citizens can retire to places such as Spain. Free movement of people will be a major negotiating point in any deal agreed with Brussels.
Pensioners represent the biggest group of British expats living in the EU and their state pension income will be affected by the steep fall in the value of the pound that occurred shortly after the result of the vote was announced.
At present, anyone who retires within the European Economic Area – this includes members of the EU plus Iceland, Norway, Liechtenstein and Switzerland – has their state pension increased every year under what is called the ‘triple-lock’ system. This ensures that state pensions rise by the higher of earnings, inflation or 2.5%.
However, there is some speculation that this system could be set to change, although many people feel that the government will, at least for the time being, honour its former high-profile pledge to pensioners to keep this in place.
If annual state pension increases were to remain for UK nationals in the EU, the government would have to negotiate reciprocal agreements with EU countries, if not retirees could see the amount of state pension they receive frozen as is the case for those currently retiring to Canada, Japan, Australia or New Zealand, and other Commonwealth countries.
More than half of the one million pensioners living abroad don’t receive annual increases in their state pension, meaning for example that an expat who retired in 2000 would still be receiving £67.50, the rate paid at the time.