People wishing to retire abroad are being told to seek financial advice to avoid having their retirement income affected by possible changes to social security agreements post-Brexit.
Retirement Advantage warned any changes to reciprocal social security agreements, as a result of Brexit negotiations, could end up having a detrimental effect on retirement incomes.
Countries in the EU have reciprocal social security agreements with the UK, which means the state pension is to increase each year in the same way as retirees living in the UK.
However, these arrangements are currently not in place in countries including Australia, Canada and New Zealand.
Retirement Advantage is warning this could have an effect on retirement incomes and could see retirees feeling the squeeze due to exchange rates, an increase in living costs and local taxes.
Andrew Tully, pensions technical director at Retirement Advantage, said: "Many people dream about retiring abroad, often hoping to enjoy better weather, a better lifestyle or cheaper living costs than back in the UK.
"However, without the right planning and financial advice, you can very quickly find yourself fall foul of local tax laws, feeling the pinch because of currency exchange rates or other financial issues, even more so given the current uncertain climate.
"As one example, if you retire to some countries, you will find your UK state pension won’t increase every year like your peers who remained in the UK. As living costs inevitably go up over the years, you will need to have other sources of income to help maintain your chosen lifestyle."
According to Advantage Retirement, a person retiring to Australia in 2008 would have seen their UK basic state pension frozen at £90.70.
However, the basic pension rate has gone up by 39 per cent to £125.95 a week during the last ten years, which is worth an extra £1,833 a year to those who stayed in the UK.
In September 2014, there were 1.24 million people in receipt of a state pension outside Britain. Of these, about 560,000 were in countries where the state pension is not up-rated, including Canada, New Zealand and Australia.
The government has estimated that uprating frozen pensions in payment to current levels would cost more than £500m a year.
The retirement specialists also revealed the top three overseas retirement spots: Spain ranked first, France second and Portugal third; these countries currently uphold the reciprocal social security agreements with the UK.
Tully said the existing agreements are likely to form part of any deal reached as a result of Brexit negotiations. He advised people to factor in how their retirement fund would be affected by possible changes to these agreements.
He said: "As part of the Brexit negotiations, reciprocal social security agreements will form part of any deal reached, but it looks like both sides are committed to honoring the current position.
"But it’s worth keeping in mind how your financial position would be affected by changes to these agreements as well as how incomes currently paid in sterling would be impacted by currency exchange rates.
"To help navigate the complexities of retiring abroad, it is vital people seek professional financial advice."
