05 May 2024 , 06:00
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Many of us dream of retiring abroad, somewhere sunny - but you could end up with a “nasty shock” if you don’t check the state pension rules for your chosen destination.
The state pension increases every April in line with the triple lock promise. The triple lock was introduced in 2010 and makes sure the state pension rises by whichever is highest out of: inflation (using the previous September rate of Consumer Prices Index inflation), wages (average growth between May and July), or 2.5%.
But there are several popular retirement destinations where the state pension does not get increased. This includes Australia, New Zealand and Canada. The most recent figures show there were just over 450,000 people living overseas who were not getting state pension increases in March 2023.
The full new state pension is currently worth £221.20 per week, while the full basic state pension is set at £169.50 per week. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown: “Frozen state pensions affect pensioners living in certain countries where there is no reciprocal agreement to boost state pensions annually. This means their pensions remain at the same level as they were when they left the UK.
“Over time this means pensioners living in these countries will be on substantially less than those living in the UK so it is vital that you check whether you will be affected if you are considering retiring abroad as you could find yourself struggling financially over time.”
How to check if you’re owed £6,900 in state pension back-payment in 2023
If your state pension is frozen, it will remain at the rate from when you first emigrated. Your pension will go up to the current rate if you return to live in the UK. You will only see your state pension increased every year when abroad if you live in the European Economic Area (EEA) or Switzerland, or in country that has a social security agreement with the UK, apart from Canada and New Zealand.
Ms Morrissey added: “Different countries have different rules and regulations and it’s really important that you understand how these are going to affect you before you make the decision to retire abroad. For instance, tax rules can differ, and you could find yourself massively out of pocket if you fall foul of them.
“State pension is no different - it’s vital you check with the International Pension Centre about the rules before you go to save yourself a nasty shock. The government has been challenged on whether it could reverse the policy, but it has refused to do so on the basis of cost.”
A DWP spokesperson said: “Our priority is ensuring every pensioner receives the financial support to which they are entitled. We understand that people move abroad for many reasons and we provide clear information on GOV.UK about how this can impact their finances.
“The Government’s policy on the uprating of the UK State Pension for recipients living overseas is a longstanding one of more than 70 years and we continue to uprate State Pensions overseas where there is a legal requirement to do so.”
Full list of countries where your state pension WILL increase
EEA countries and Switzerland
- Austria
- Belgium
- Bulgaria
- Croatia
- Cyprus
- Czech Republic
- Denmark
- Estonia
- Finland
- France
- Germany
- Greece
- Hungary
- Iceland
- Ireland
- Italy
- Latvia
- Liechtenstein
- Lithuania
- Luxembourg
- Malta
- Netherlands
- Norway
- Poland
- Portugal
- Romania
- Slovakia
- Slovenia
- Spain
- Sweden
- Switzerland
Countries the UK has a social security agreement with
- Barbados
- Bermuda
- Bosnia-Herzegovina
- Gibraltar
- Guernsey
- the Isle of Man
- Israel
- Jamaica
- Jersey
- Kosovo
- Mauritius
- Montenegro
- North Macedonia
- the Philippines
- Serbia
- Turkey
- USA