Moving overseas for your retirement

According to Elena, taking her pension in Spain was relatively simple, she chose to keep her British bank account and have her pension paid into that and then transfer it into her Euro bank account in Spain. By doing this, she currently benefits from a favourable exchange rate, with the weaker pound.

If you decide not to keep a UK bank account, consider using an overseas payment service, such as the one we use offered by Citibank called the Worldlink Payment Services, so your pension can be delivered straight to an overseas bank account. For more information please read our working or retiring overseas factsheet.

However, depending on where you retire, not having a UK bank account can cause issues as there are restrictions relating to certain countries. *

Another thing you need to consider when retiring abroad are the tax implications. If you become a resident outside of the UK for tax purposes, depending on the treaty agreements with the UK, you may be subject to tax only in the country where you are tax resident. For more information please visit the UK government website.

While the tax liability can be higher in Spain for pensioners, Elena points out that the living costs are often lower. Elena said:

We’re paying less than half for our energy bills than in the UK because the government caps the limit in Spain. We are also planning to install solar panels and mini wind turbines, which will result in our monthly bill being less than 50 Euros.

When Elena took her USS pension, she took no lump sum, instead taking her maximum pension income. In Spain, if you take a lump sum from your pension it’s taxable, unlike the UK where you can usually draw down up to 25% of your pension as a lump sum without paying income tax.

At 62 years old, Elena, who is a Spanish citizen, is also working and paying into the Spanish pension system, which she plans to do for another three and a half years, so she can maximise her pension in retirement. As she has also built a UK State Pension, she’ll be eligible for this too. Elena said: “I’ve built up the maximum of 35 years for my UK State Pension and will be able to take this when I’m 67 years old.”

So, there’s a few basic things to think about when retiring overseas, particularly related to how you receive your pension, what your tax residency status is and what the tax liabilities are, but once you’ve thought about those it is relatively simple.

Elena added: “Since returning to Spain, I’ve become self-employed and plan to undertake work through The Open University, between now and taking my UK State Pension in five years’ time.