Why moving abroad can affect your state pension

Retiring overseas is a dream for many Brits. After all, who wouldn’t be tempted by the better climate and the amazing travel opportunities found abroad. Where you choose to spend your retirement, however, will affect how much state pension you get.

State pensions are frozen if you decide to move abroad to certain countries, such as Australia, New Zealand, Canada or India. Whilst normal state pensions rise according to the triple lock, in these countries your pension would be frozen. The triple lock means that pensions currently rise by the highest of inflation, average earnings or 2.5%.

Whether or not your state pension is frozen depends on whether the Government has struck individual deals with the country you move to. As it stands, the Government has only made deals with the EU, the US, Switzerland, Norway, Jamaica, Israel and the Philippines. It has been decades since any new deals have been made.

To illustrate what this freeze means, an expat who retired to Canada when the basic rate was £67.50 a week in 2000 would still get that, rather than the £125.95 received by those whose pensions have not been frozen. Likewise, if you qualify for the full state pension of £164.35 and already live in or move to one of the ‘frozen’ countries, the amount you receive will not increase while you stay abroad.

This freeze currently reduces the pensions of approximately 550,000 British pensioners.

However, upon returning to the UK, pensioners are eligible to get their state pension uprated back to the full amount by applying directly to the Department for Work and Pensions service centre.

What about Brexit?

As it stands, nothing is certain until we get a final deal (or no deal!). However, it’s likely that state pensions in the EU will not be frozen. An update on Brexit talks published jointly by the EU and UK indicated they had ‘convergence’ of their positions on state pension increases.

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