You'd be daft to retire abroad

Spain, despite its troubles, is still the top retirement destination for Brits abroad. But is heading overseas for your final years a good idea?

You dream of retiring abroad, don’t you? Go on, admit it. Given the summer we’ve had, and the economic gloom, who wouldn’t be planning a retirement in the sun?

Golden mornings. Easy-going locals. Beachfront bars. Lower heating bills. Cheaper shopping. Smug phone calls home to friends and relatives rotting in the rainy UK.

Of course you dream about it. Because you’re daft.

Daft as a brush

You’re not alone. Millions of Britons are just as daft as you. I also have my daft moments, when I dream of a retirement sipping ice-cold cerveza in the sun, rather than warm beer in the cold. Our number one retirement destination is Spain, and rightly so. It’s a fabulous country, despite its current troubles.

France is next, followed by Australia, Ireland and Cyprus, according to new research from retirement specialists MGM Advantage. They all have their charms.

We don’t just dream about retiring over there, we do it. Hundreds of thousands of us.

We’re that daft.

Living the nightmare

And lots of us come unstuck. Some Britons have seen their £350,000 villa in Valencia torn down in front of their very eyes, because their builder didn’t get planning permission.

Others have slapped down a deposit on an off-plan apartment block that was never completed, because the builder went bust halfway through.

Still more have been forced back to England by the collapse of the pound, and forced to rent miserable digs because they can’t offload their foreign home at any price.

Growing numbers are trapped in Spain and Greece by the downturn, and can’t claim local social security benefits. Spain has just introduced new laws demanding EU citizens supply proof of income if they want to live in the country for more than three months, to avoid becoming “a social burden for the state”.

Many simply don’t like living abroad. They get bored. They miss their families. They long for Tesco. Or they feel like an outsider in their picturesque Andalusian mountain village because they can’t get on with the local lingo, and suspect it wouldn’t make any difference if they did.

Others fall sick, and discover too late that the NHS won’t treat them despite a lifetime of paying UK taxes, because they are now classified as an overseas resident.

Daft, isn’t it?

FX-rated horror show

If you’re living on your UK pension in a foreign land, currency risk is a constant worry. When the pound crashed against the euro, expats saw their income drop 25%. Despite the recent recovery, it is still down more than 12%.

Many find themselves checking the exchange rate every single day. In volatile times, such as now, they check it every few hours. That’s no way to spend your retirement.

If you retire in Australia, Canada, New Zealand or South Africa, your state pension will be frozen, and won’t qualify for inflation-linked increases. Its value will steadily shrink in real terms, year after year.

As we live longer, this will become an even bigger problem. A 100-year-old British woman in Australia has had her UK state pension frozen at just £6 a week.

You’d be daft to expose yourself to these dangers.

Go on then, ignore me

Okay, I admit it. Some people love their foreign retirement. Maybe you will too. If you’re harebrained enough to give it a go, you have to prepare for it sensibly.

MGM Advantage suggests you protect yourself by doing the following:

• Get a state pension forecast, to find out how much you have to live on. Do the same for your private and company pensions.
• Do your homework on the cost of living in your chosen destination.
• Understand the rules on claiming your state pension overseas, including whether it will be frozen.
• Check your welfare rights while abroad.
• There is no NHS overseas. Find out what you have to pay towards local healthcare, and what you can get for free.
• Find out whether you still have any tax liability in the UK.
• Work out what you’re going to do with your home. If you decide to keep it on, either empty or renting it out, you need to inform your mortgage company and your household insurer.

Don’t let me stop you

Living the foreign dream demands a lot of practical effort and hard work. It can also be an emotional wrench, especially if your kids start producing adorable little grandchildren, who you only see once or twice a year.

You may still make it work, but you have to be plan for every possible danger, of which there are plenty.

Anything else would be daft.

More on retirement:

Why young people MUST opt in to auto enrolment

Social care: thousands of pensioners lose home due to poor procedures

Annuity meltdown will eventually end

The next pensions scandal

Auto enrolment: should saving for a pension be compulsory?