So says a report from the Institute of Public Policy Research, and a clutch of surveys from Age Concern, Saga and the ONS back up their findings.
Why this seemingly mass exodus of elderly Brits? There appears to be three main reasons:
1. We’re a healthier and wealthier population who are living longer and retiring earlier.
2. Property costs in many overseas countries are still at levels far lower than we’re used to on British shores.
3. Low-cost airlines have made air travel more accessible and the world seem smaller.
And, as a UK resident, moving to any of the fellow European Economic Area countries (those with full EU membership plus Iceland, Liechtenstein and Norway) is relatively straightforward.
Mutual residential rights mean that as a UK citizen you can live in any of these countries. What’s more, it’s possible to collect your UK state pension in the local currency, and it’ll increase annually just as it would here.
Planning to retire to a non-EEA member country is more complicated, however, and would require discussion with the Foreign and Commonwealth Office about the particular regulations of that country.
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Jon Jones is one of the thousands of Brits enjoying an early retirement overseas.
Living in Oliva in Spain’s Costa Blanca for the last seven months, his first and foremost advice for fellow Brits considering a similar move is "research, research, research".
"You’re not coming on holiday when you come here and you have a whole new set of rules and regulations to adhere to," explains Jon. "There’s a long list of things you need to do if you want to live here worry-free legally. Luckily we have nice Spanish neighbours who have helped us.
"Best recommendation is that if you’re not sure then rent over here for a year and look around," he continues. "That way you get a good idea of what the place is like all-year round in all weather, and also what the locals are like."
Jon also suggests checking out some of the ex-pat forums on line, where you can seek advice from people who have already made the move overseas.
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These sentiments are echoed by Gordon Lishman, Director-General of Age Concern, who comments: "Retiring abroad can be a great experience for many but the key to a successful move is knowing what to expect.
"Thinking ahead about your situation changing and what health and social care services and benefits will be available may help people to avoid potential problems."
Pensioners tempted by the prospect of retiring abroad should research the following five areas before boarding the plane and bidding goodbye to Blighty: pensions; tax; health; property; and coming home if it all goes wrong.
• You can get a forecast of your state pension entitlement from the HM Revenue & Customs (HMRC) or The Pension Service.
• UK residents retiring in any EEA country will receive full state pension including annual increases.
• Most countries outside the EEA freeze pensions at the level of first claiming – this includes Australia, New Zealand and Canada.
• Private pensions should be payable worldwide but check with individual companies as some won’t pay into non-British bank accounts.
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• Each country’s tax laws – and therefore how much tax you’ll pay - vary widely so do your homework: the HMRC lists the tax rules for many countries.
• Research the regulations governing income tax, inheritance tax, wealth or capital gains tax, gift tax, and if there are any extra taxes that you are liable for.
• Make sure you are classed as non-resident in the UK as this can have bearing on how much tax you’ll pay. Generally, to establish this with the HMRC, you have to spend less than 91 days per year in the UK, averaged over a period of four years.
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• Once you have non-resident status, you will be exempt from paying UK tax on income earned outside the UK but still liable on income generated in the UK e.g. from letting out a property.
• Tax matters tend to be very complex so it’s best to seek professional advice.
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• The International Pension Centre (IPC) in Newcastle deals with queries about UK benefits for overseas customers.
• Once you arrive in your new country, register with the local authorities regarding welfare and health entitlements.
• If you are of pensionable age, ask the IPC for an E121 form which allows you the same healthcare entitlements as the locals - this usually involves paying for some if not all of your treatment so it’s best to also have private medical insurance.
Pre-retirees will need an E106 form which entitles you to two years healthcare; after that you will need private medical care until either you or your partner reaches retirement age.
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• And, as a general rule of thumb, if you were receiving benefits such as disability allowance or widow’s pension in the UK, you will still be entitled elsewhere in the EEA, and in some non-EEA countries.
• When it comes to wills, it is advisable to do this in your new country of residence as one drawn up in the UK could be dearer and liable to tax disadvantages.
• Again, the best way of doing this is to seek professional advice from a lawyer specialising in your particular country’s regulations.
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The main options for buying your overseas house are:
1. Buying outright – if can afford it, this is the simplest method.
2. Remortgaging your existing home – if you have enough equity in your British home and don’t mind holding on to the property, this is a good option.
3. Equity Release – generally suitable for older homeowners – minimum age is usually 60 – and allows you to release the equity in your home.
Various schemes are available so seek advice to find out which may be suitable for you, and check with the HMRC if the income released is taxable.
4. Foreign Mortgages – taking out a foreign mortgage may be an option for younger retirees.
It’s becoming more common to secure a foreign mortgage in the UK which prevents language problems.
If organising a mortgage in the country where you’re purchasing, hire an international broker and an independent lawyer who speak English.
5. Alternatively, you could rent or arrange a home exchange initially which gives you a taste of the lifestyle as well as time to house-hunt.
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Of course, for some people the reality of living abroad doesn’t live up to their expectations and they choose to return home.
Age Concern’s Gordon Lishman comments: "Retiring to another country is very different from holidaying there.
"Different customs and the strain of being away from family and friends are common complaints that cause many older people to re-pack their bags and return home."
But what many people returning to the UK don’t realise, however, is that if they have been out of the country for more than two years, they may have to sit a Habitual Residency test if they want to claim benefits.
Everyone, including retirees, is eligible to sit this test, but the reality is that it depends how thorough your local benefit office is whether or not you’ll be tested.
Although it doesn’t apply to people claiming state retirement pensions, it does affect housing and council tax benefits, and pension credits.
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So, there’s no denying that there’s a lot of red tape and research to wade through before you reach the sun and sangria stage of overseas retirement.
But if it’s all beginning to sound like too much hassle, here’s how newly retired Jon Jones describes his Spanish lifestyle:
"We can more or less depend on the weather, eat out for as little as eight euros each for a menu del dia, enjoy fresh fruit, fish and salads instead of frozen foods, and there’s nothing like having a stroll along the beach at the end of the day before popping for a few beers at the local bar."
Which, you have to admit, sounds rather more appealing than bingo, bowling and battling against the inclement British climate.
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Jocelyn Beattie
Useful Websites:
Age Concern
Counsel and Care
Saga
HM Revenue and Customs
The Pension Service
Foreign and Commonwealth Office
British Expats
Expat Focus
