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State pension can erode overseas, warns MGM

Analysis of the most popular overseas destinations for British pensioners revealed that the UK state pension for those living abroad could be significantly eroded depending on the country.

For example, Canada, which was among the top-10 places to retire, was particularly unfavourable to pensioners who retired there in 2003, as they could have seen the value of their pensions worth 42 per cent less than if they had chosen the US.

Spain was the most popular overseas retirement destination, followed by France and Australia, with pensioners citing quality of life as their primary reasons for moving abroad. But Andrew Tully, pensions technical director for MGM, warned: “Without the right planning and advice, you can quickly get caught out by local tax laws, exchange rates and other financial arrangements, turning a retirement dream into a potential nightmare.”

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He added that pensioners could find their UK state pension frozen at the point of retirement if the country they chose to retire to did not have a reciprocal agreement in place with the UK.

Adviser view

Nigel Green, chief executive of international advisory firm deVere Group, said: “We expect the incoming Bank of England governor to devalue the pound by up to 15 per cent. This would be another devastating blow for Britons overseas who live on a fixed sterling income. Many of these British pensioners have lost more than 20 per cent of their income since the financial crisis hit – a problem that’s been compounded by soaring living costs in most major expatriate destinations. Anyone who lives abroad and whose primary income is a UK state pension will certainly have been feeling the financial pinch in recent years.”