Top finance tips for retirees heading abroad in 2015-16
Pensions and property were in the spotlight in the UK Government’s Autumn Statement last week, a reminder that careful estate planning should be a priority for anyone with plans to retire abroad in 2016. Here are five key points to be aware of following the recent announcements.
1. Be sure of your pension entitlements.
The recent and ongoing changes to the pension system make it worth double-checking your own situation. You’ll need to budget carefully as an expat and will be exposed to exchange rates once abroad, so keeping a track of every penny is important. Consult your experienced currency trader to discuss your particular situation. Two bits of good news from the Chancellor are confirmation that from April 2016 existing pensioners will see their weekly payment rise by 2.9 percent to £119.30 in line with average earnings, while the same month sees the launch of the new ‘flat-rate’ pension, set at £151 a week. However, Mr Osborne did announce this week that pension credit payments, a type of means-tested top-up for pensioners, will be stopped for anyone who leaves the country for more than a month, compared to the current cut-off of 13 weeks (the rule is different for those travelling abroad for medical treatment under the NHS), so you will have to bear this in mind for any overseas property plans. And don’t forget that from April 2016, the number of years you will need to have worked and made national insurance contributions in order to receive the full flat-rate pension will rise from 30 years to 35 – could this also affect your plans to relocate?
2. Plan your UK buy-to-let carefully.
Keeping a buy-to-let property in the UK is a popular way to earn extra income as an expat, and at the same time keep a sterling based foothold in the UK. The Government announced a three percent rise in stamp duty (SDLT) on second homes or buy-to-let property at the Spending Review, kicking off in April 2016. If you’re on the verge of buying a property to let while you’re abroad, act fast to save on tax. If not, plan accordingly, and if you’re a few years off moving abroad, investigate the option of downsizing into a UK home that could also be your future rental property once you’ve retired to the sun.
3. Understand the Statutory Residency Test (SRT) and how it could affect you.
The SRT determines where you are tax resident, and is especially relevant to people who split their time equally between homes in the UK and abroad. Regulation that came into effect in recent years has minimised any flexibility that existed previously where British people are registered as resident for tax purposes.
4. Consult a lawyer about inheritance.
Owning a property abroad brings with it the responsibility of putting in place the necessary paperwork to ensure it is inherited according to your wishes. A new EU succession law that came into effect this year states that the succession law of the country where a deceased person was ‘habitually resident’ at the time of their death (i.e. a British expat living in Spain or France) applies to the deceased assets. However, at the same time, an individual can elect to apply the law of their nationality, i.e. the UK, to all their assets through a statement in their will or a similar document. This would apply only to the property of a non-resident homeowner and not their worldwide estate. For peace of mind, speak to lawyer about making the necessary will.
5. Consult a financial planning firm experienced in helping expats.
Ensure you consult an expert well in advance of moving overseas. Preparation is key, as it is harder to change things in the UK once you are a tax resident somewhere else. Typical things you may need to review include life assurance or savings policies, what to do with ISAs or large cash deposits, personal pensions and accumulated pension rights.
To discuss the latest developments and the currency implications for your pension when buying or moving overseas, contact your Smart Currency Exchange Trader today.