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GUIDE TO RETIRING ABROAD

IMPORTANT INFORMATIONThe information provided in this guide should only be used as a summary of issues to consider when retiring abroad; it is not personal advice. Please be aware taxation and local laws can frequently change in each country and we suggest you seek professional legal, tax and financial advice before moving abroad. Pension and tax rules change, and their benefits depend on your individual circumstances.

The information is correct as of July 2019 unless otherwise stated, but could change following any developments in the UK’s exit from the EU.

Hargreaves Lansdown Currency Service is provided by Hargreaves Lansdown Asset Management Limited which is a wholly owned subsidiary of Hargreaves Lansdown Plc, One College Square South, Anchor Road, Bristol, BS1 5HL. Company registered in England & Wales No. 1896481. It is authorised by the Financial Conduct Authority (FCA) as a Payment Institution under the Payment Services Regulations 2017. The Firm Reference number is 115248. You can look this up on the FCA register website. 0120

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Thank you for requesting our Guide to Retiring Abroad. We hope you find the information useful and that it helps you enjoy a long and happy retirement overseas.

There are many brits who have chosen to retire abroad and have their state pensions paid overseas, and it’s easy to see why. Warmer climates, healthier lifestyles and lower cost of living has attracted many to move abroad.

Of course, choosing the right destination is about more than just delicious cuisines and the number of sunny days in a calendar year. There are other more important factors you should consider before making the decision to retire overseas.

In this guide we highlight some key factors that you might want to think about:

• Pensions

• Tax

• Healthcare and other benefits

• Buying a property abroad

• Converting currency

Although it may not be the most exciting part of moving overseas, you should spend plenty of time doing your research. Otherwise you could be faced with high exchange rate costs, unnecessary tax charges and expensive healthcare fees.

INTRODUCTION

DAVID REITHHead of HL Currency Service

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After working hard to save and build your pension fund, you’ll want to make sure you receive as much as possible when you retire.

In this section we’ll give you essential information about state, personal and occupational pensions to help you receive the maximum value.

STATE PENSIONIf you are eligible to receive the State Pension, it’s still possible to collect this abroad. But there are a couple of factors you need to consider.

1. If you live in the UK, the amount you receive will increase every year by the greater of earnings (percentage growth in average earnings), inflation (CPI) or 2.5%. At the moment this has been guaranteed until 2020, but could change after.

You’ll be entitled to this increase if you move to:

• Countries in the European Economic Area (including France, Italy and Spain)

• Switzerland

• Some of the countries with a social security agreement with the UK (see below)

PENSIONS

• Barbados

• Bermuda

• Bosnia- Herzegovina

• Jersey

• Guernsey

• Isle of Man

• Israel

• Jamaica

• Kosovo

• Macedonia

• Mauritius

• Montenegro

• The Philippines

• Serbia

• Turkey

• USA

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However, if you retire to some other popular retirement destinations, such as Canada, you will not be entitled to the annual increases.

2. You can choose to have your State Pension paid into your UK bank account or directly to an overseas account in your local currency. As the UK government converts your currency along with many other expats, the exchange rates you receive are likely to be competitive.

It could be worth contacting the International Pensions Centre for further information on how moving abroad might affect your pension.

OCCUPATIONAL OR PERSONAL PENSIONSYour occupational or personal pension(s) will usually be paid in sterling into your UK bank account. You will, therefore, need to arrange for a company to convert and transfer this to your overseas bank account for you.

Currency specialists, such as Hargreaves Lansdown, usually offer much better exchange rates compared to using your bank which could make a big difference to the amount you receive. More on this later in the guide.

QUALIFYING RECOGNISED OVERSEAS PENSION SCHEMES (QROPS)You might also have the option to transfer your UK pension to a QROPS. A QROPS is a pension scheme based in a jurisdiction outside the UK but which is broadly similar to a UK registered pension scheme. Transferring could give you more control over your pension while you’re abroad. There are various tax and regulatory implications you might want to consider before transferring to a QROPS, so we would recommend you contact a financial or tax adviser for more information.

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Even when you retire abroad, you might still be liable for UK tax. Your residency status is normally the main factor used in determining your tax liability once you’ve moved abroad. You can find more information about residency status on the government’s website. You must tell HMRC if you are leaving the UK to live abroad permanently.

In this section we’ll provide general information about some of the taxes you may want to consider before moving abroad, based on our current understanding of the tax issues you might face. It would be wise to contact a tax specialist prior to retiring overseas to get a complete understanding of your individual tax situation. Tax rules change and their benefits depend on your individual circumstances.

INCOME TAXYou will normally have to pay tax on any UK income you receive, even if you’re not a UK resident. This could include your pension, rental income, savings interest and any wages from the UK. You can find more information here.

CAPITAL GAINS TAXGenerally, you’ll only be charged UK capital gains tax on assets sold while a resident overseas if you used to be a UK resident and you return to the UK within five years of

leaving, or you make a gain on a UK residential property. Other countries will often have their own versions of capital gains tax which you’ll want to be aware of before moving abroad.

INHERITANCE TAXMost countries will have some form of inheritance tax and we suggest you consult a tax adviser before relocating, to ensure you understand what the rules are. The government’s website provides more information on this.

DOUBLE TAXATION AGREEMENTSAs well as paying tax in the UK, you may also be taxed in the country where you have chosen to retire. If this country has a double taxation agreement with the UK, you may be able to claim tax relief or a tax refund in the UK to avoid being taxed twice.

TAX-EFFICIENT INVESTMENTSSome of the tax-free investments available in the UK might be affected when you move abroad. For example, you will be unable to contribute to some tax-efficient investments such as ISAs if you become a non-UK resident. There may be other tax-free investments in your new country of residence which will offer tax protection. Again, you may wish to consult a tax specialist for more information.

TAX

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Many people move abroad to enjoy warmer climates and a stress-free lifestyle. However, before you commit to moving abroad you might want to look carefully at the level of medical care available in your new country of residence.

In the UK, we are fortunate to enjoy free healthcare from the NHS, but this is not always the case in other countries. You may want to ask yourself the following questions:

Spain, Italy, Canada and New Zealand have broadly comparable healthcare services to the NHS. Other popular destinations, such as France and Australia, have good healthcare systems too but you may need to pay for a percentage of the costs.

You can contact the British Embassy in any country to get more information.

HEALTHCARE AND OTHER BENEFITS

• What quality of healthcare can I expect to receive?

• Which medical treatments are free and which will I need to pay for?

• Will I need additional medical insurance?

• Will I have to pay for medication?

OTHER BENEFITSOther than the State Pension, the other main benefit you might be interested in when retiring abroad is the Winter Fuel Allowance. If you’re eligible, you could get up to £300 a year.

This is currently available if you live within the European Economic Area or Switzerland.

However, expats in seven EEA countries (Cyprus, France, Gibraltar, Greece, Malta, Portugal and Spain) are unable to receive the benefit. These countries have a warmer climate than the UK so it has been deemed an unnecessary benefit for the UK government to provide.

To receive the benefit, you must be able to demonstrate you have a “genuine link to the UK social security system”.

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BUYING A PROPERTY ABROADBuying a property can be a stressful experience. Purchasing overseas can present even more challenges.

To help you through this, we’ve put together a 10 step checklist:

1. Plan your finances. What can you afford?

2. Do your research. Where do you want to buy? What kind of property and how much should you expect to pay?

3. Find your perfect location. It may seem obvious but you should visit the country you’re moving to at different times of the year to get a good understanding. It could be completely different in the winter to the summer.

4. Get an independent lawyer. Find a lawyer fluent in both languages, with local knowledge and no ties to the vendor.

5. Do your background checks. Can you build on the land, if that’s your plan? The role of a lawyer differs across countries and they don’t always provide these checks.

6. Open a local bank account. This will give you easy access to your money in the local area.

7. Find a currency specialist. A good currency specialist could save you a considerable amount.

8. Arrange a deposit. This should mean your perfect property will be taken off the market while all the paperwork is finalised.

9. Exchange contracts. Sign the contracts to finalise the deal. You’ll also need to insure your property.

10. Organise removals. And consider how your possessions will cope in a different climate. For example, a leather sofa may not last long in a humid country.

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CONVERTING CURRENCYOne of the main factors often overlooked by those retiring overseas is receiving the best exchange rates when sending money abroad.

The foreign exchange market is constantly moving and a poor exchange rate could ultimately determine whether it is financially viable for you to retire abroad. It could also affect the amount you get in living expenses if you’re sending money over from the UK.

Who you choose to make your international payments is an important decision. Even a slight change in the exchange rate offered by your provider, or their transfer fees, could have a big effect on the amount you get.

Currency specialists, like Hargreaves Lansdown tend to offer much better exchange rates and lower transfer fees than high street banks. Turn over to see how .

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HOW MUCH FURTHER COULD YOUR MONEY GO? To make sure you get a great exchange rate, we check our exchange rates against high street banks every month. These quotes were obtained from seven high street banks on 2 January 2020 for a transfer of £20,000 to euros.

Currency markets move constantly, so the rate you’ll receive will be different from this example. For a personal quote just call our friendly team on 0117 311 3257 (Mon-Fri, 8am-6pm). We charge a small fee on low value transactions.

Interbank rateThe interbank rate is the rate that banks and large institutions buy and sell to each other and is the rate you’d see quoted in the news. Ours is taken from Proquote.

Less margin applied by providerMost providers make money by adjusting the interbank rate and offering you a less favourable rate. This is why the exchange rate offered is less than the interbank rate.

Hargreaves Lansdown Average high street bank

Interbank rate 1.179 1.179

Less margin applied by provider 0.85% (£170) 2.75% (£551)

Exchange rate offered 1.169 1.147

Transfer fee £0 £10.13

Total received € 23,386.09 € 22,937.26

Total saving using HL: €448.82

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WHAT DOES IT COST

BY TELEPHONEIf you’re using our telephone service, there’s a £10 fee for transfers under £7,500

ONLINEYou’ll pay a £5 fee for transfers under £3,500 through our online platform

REGULAR PAYMENT PLANSRegular payment plans cost £7 for transactions under £500

You won’t pay a fee for transactions above these levels.

FIX AN EXCHANGE RATE FOR PEACE OF MINDMany people protect themselves from exchange rate movements with a forward contract. The concept of a forward contract is simple; you fix a rate today for up to two years ahead.

Forward contracts could be especially useful if you’re buying a property abroad, or making regular payments to another country.

BENEFITSA forward contract gives you peace of mind as you will know exactly how much a future conversion will cost you.

It also allows you to shelter against any negative movements in exchange rates and lock in a good rate.

DISADVANTAGESAs the rate is fixed, you won’t benefit if the rate subsequently moves in your favour.

Forward contracts can’t be amended once set up. If you need to cancel, you will incur additional charges.

HOW DO I SET UP A FORWARD CONTRACT?Forward contracts are typically offered by currency specialists, such as the Hargreaves Lansdown Currency Service, rather than high street banks. They are easy to set up with a simple phone call. If you have any questions we will be happy to explain in more detail.

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When you retire abroad, you’ll probably need to convert your sterling into local currency. You might even need to send money back to the UK.

When you do, consider the Hargreaves Lansdown Currency Service. We’ve got over 13 years’ experience of saving our clients money on their international payments.

You could benefit from:

Bank-beating exchange rates – see p12 for details

Low transfer fees

No minimum transfers

Option to fix an exchange rate or target a specific rate

You can transfer at the click of a button through our website or over the phone with our dedicated currency specialists. Join the 100% of currency clients who rate our service as good, very good or excellent.*

Just call us on 0117 311 3257 (Mon-Fri, 8am-6pm) or visit www.hlcurrency.co.uk

*HL survey – May 2019, 47 responses.

HARGREAVES LANSDOWN CURRENCY SERVICE

Hargreaves LansdownOne College Square SouthAnchor Road Bristol BS1 5HL

Issued by Hargreaves Lansdown Asset Management. Authorised and regulated by the Financial Conduct Authority.

0117 311 3257hl.currency@hl.co.ukwww.hlcurrency.co.uk