Top 10 Best Retirement Destinations for British Expats

The Best Retirement Destinations with Low Tax on Pensions

We will be looking at the best retirement destinations for British expats to look for when retiring abroad.

We look at the top 10 retirement destinations for Brits living abroad. We are searching for countries with low tax on pensions as well as low or no income tax or low living costs.

In light of the new “exit taxes” by HMRC, many retirement destinations are not quite so attractive for your pension(s), but we will look at the different destinations and make pension recommendations.

The Top 10 Retirement Destinations for Brits Abroad

Click on the links below for detailed descriptions on how to transfer your pension(s).

Please note for pension transfers to QROPS, you need to remain resident in these countries for 5 years following a transfer or you face a retrospective “exit tax”.

  1. New Zealand – you can transfer your pension to New Zealand and pay no tax on any retirement benefits you receive whilst resident in New Zealand. Your pension is usually invested in GBP, but paid out in New Zealand Dollars. There is also no tax on death. It’s also about 15% cheaper for rent and housing and eating out is slightly cheaper as you can see in this comparison. It is also a bit more British than Australia.
  2. Australia – you can transfer your pension to Australia and there is no tax on income or death. Your pension will be transferred to Australian Dollars, although there are limits on the transfer.  If you still want to work, wages are slightly higher than NZ. House prices are high now though in Australia and the conversion to Aussie dollars from the pound isn’t generous anymore.
  3. Portugal – you can transfer your pension to an EU QROPS as a resident in Portugal and you will pay no tax on your pension on growth and death. Your pension will be paid out in EUR to your local bank account in Portugal. Thanks to the Malta-Portugal taxation treaty, your pension will be taxed on retirement income in Portugal, which is currently 0% for 10 years if you apply for Non-Habitual Residence in Portugal, which means renting an apartment or buying a property in Portugal. Restaurant prices are around 20% cheaper in Portugal than Spain.
  4. Spain – you can transfer your pension to an EU QROPS as a resident in Spain. Your pension will be paid out in EUR to your local bank account in Spain.
  5. France – low tax on pension lump sums if you move your UK pension to an EU QROPS. See UK pension transfers to France
  6. Malta – Foreign pension income is taxed at a flat rate of 15% and only if it is then sent over and paid into a Maltese bank account. Additionally, foreigners resident in Malta aren’t subject to income tax on any foreign sourced capital gains, even when they remit these gains to a Maltese bank account, for example capital gains made by buying and selling shares on foreign stock markets.
  7. Cyprus – If you move a UK pension to an EU QROPS, you are only taxed at 5% on your pension income in Cyprus.
  8. Italy – there is a new plan being putting in place which means that you could pay 0% income tax on your pension in Italy if you move your pension to a QROPS in Malta. However, currently income taxes are high. You can read more here about QROPS for residents in Italy.
  9. Bulgaria – one of the cheapest places to live and buy houses in Europe. Income tax if a flat rate of only 10%. Click here to see more about UK pension transfers to Bulgaria.
  10. South East Asia – Thailand/Malaysia/Philippines/Indonesia/Vietnam – there are no pension transfer options to Asia. However, you could transfer to an International SIPP for currency or investment purposes. Also, Philippines is the only place that has a Double Taxation Agreement with the UK, so the state pension isn’t frozen.

Also, check out our top tips for moving to Europe.

These are the best pension option(s) for retiring abroad, but if you are looking at low cost options as far as price of living, we suggest the following countries.

top retirement destinations

Top 14 Retirement Destinations for Cheap Living

Please note, this isn’t a definitive list or order, just suggestions.

  1. Malaysia – Enjoy delicious curries, seafood, Muslim culture, a multi-cultural population, R&B, Perhentian islands & top quality healthcare. Sip a Teh Tarik whilst grabbing a Naan bread and a chicken masala or take a visit to the many bars and street life of Kuala Lumpur or Penang.
  2. Thailand – The home of Thai boxing, spicy Thai salads, sandy beaches and jungle. Sit in a hammock sipping your Sangsom & coke or explore the hills sipping tea & drinking mulberry wine. However, note that Thailand is now becoming a much more expensive place to live than Malaysia & Vietnam.
  3. Costa Rica – Known in the States for its quality medical tourism and universal healthcare insurance, you can set up businesses on a tourist visa, foreigners & locals have the same rights for property ownership, you can find cheap apartments, surfing, beaches, rainforests and wildlife. Chow down on Tamale, Casado, Gallo Pinto, Chifrijo and sip on a Guaro Sour whilst sitting looking over the Caribbean sea.
  4. Panama – There are all sorts of discounts for living in Panama as a pensioner. Also, if you want to set up your other investments in a tax advantageous way, please check out our guide to retiring in Panama coming soon…
  5. Ecuador – If you like ranches & horses, this is your place. Eat Empanados or Llapingachos (potato omlettes) whilst sipping on Canelazo (Cinnamon Spiced Rum).
  6. Sri Lanka – Sit at the cricket club or visit one of the colonial style hotels in Colombo. Take a trip into Kandy to see tea picking or relax on one of the beaches or float down the river to see the local wildlife.
  7. Philippines – Enjoy the madness of Manila or explore the many white sandy beaches in the islands. Filipinos are known for their singing, so don’t move here if you don’t like a pop song or two. Eat chicken adobo or Kare Kare (oxtail stew) whilst drinking your San Miguel.
  8. India – Many Brits will have seen the TV show, The Real Marigold Hotel or the movie preceding it. India is a low cost, multi-cultural, multi-religious, multi-racial, multi-ethnic and multi-linguistic wonder. Read India Times’ guide to best places to retire in India.
  9. Indonesia – Visit the cultural heritage cities dotted across Asia, go scuba diving in the Islands or hide in the jungles of Indo whilst listening to small groups of locals play guitar.
  10. Bulgaria – You might not be snowboarding, but you can still enjoy the Alpine Forests and afternoon swims in the Black Sea or enjoy the natural hot springs before Apres-ski. Try the Hot Eskimo – a hot chocolate topped off with cream and Cointreau. If you like kebabs and grilled meats, you are in for a treat with Kebapche or enjoy Moussaka with your local red Bulgarian wine.
  11. Vietnam – Visit the paddy fields, sit on the beach in Danang, Mui Ne or Nha Trang, sip the local rum or get a motorbike round Ho Chi Minh exploring the coffee shops and bars.
  12. Mexico – Sip a Tequila, Margarita or Corona in your hammock. You can see a list of the best locations to retire in Mexico here.
  13. Greece – sink a couple of Tsipouros after dinner whilst sitting on the beach overlooking the Aegean sea eating your ripe, juicy tomatoes in a Greek salad accompanied by Souvlaki.
  14. Kenya – Find yourself in Diani, Watamu, Kilifi, Malindi or Lamu in soft white sand with palm trees and empty beaches surrounding you, only an hour from Nairobi. Finish a Safari with a Tusker beer or Dawa vodka cocktail at sunset.

You can also check out this list of tax-free retirement countries and these low tax countries for expats.

If you want more information about moving overseas and want to speak to a consultant for advice, please contact us.

Best Retirement Destinations in the World to Avoid QROPS Exit Tax

Best Retirement Destinations in the World After 25% Exit Tax on Certain QROPS Introduced

In this article, we will discuss the best retirement destinations in the world for Brits wanting to move abroad after Philip Hammond introduced a 25% exit tax on many QROPS. If you are moving to the European Economic Area (EEA), Australia, New Zealand or Hong Kong and staying there for five years following your pension transfer, you will be relatively unaffected by the new rules. For those living further afield, you must now weigh up the option of paying a 25% exit tax vs keeping your pension in a UK SIPP and possibly paying up to 45% income tax plus a death tax after the age of 75 in the UK. A thorough understanding of International Tax Treaties is needed and we highly recommend speaking to a QROPS specialist and/or an international tax attorney.

Best Places to Retire Abroad for Brits

Here are the best retirement destinations for British expats in 2017 for tax reduction…

If you are looking to pay zero tax on your retirement income, the best places to retire abroad for Brits after the new QROPS rules in 2017 are Australia, New Zealand and Hong Kong which all attract zero tax.

Portugal also does not tax British expats for the first ten years that they are in Portugal.

Some countries in Europe attract zero income tax such as Monaco or Andorra. Low tax rates can be found in these other European countries: Bulgaria, Cyprus, Malta, Gibraltar, Hungary, Latvia, Liechtenstein and Romania.

For places outside these areas (EEA, Australia, New Zealand and HK), there is now a 25% one-off exit tax payable to HMRC on transfer out of the UK. So, for many countries now, you may be better off in a UK SIPP or paying the exit tax if you have a very large pension pot and live in a country with a high income tax rate.

Moving to Australia

best retirement destination

Australia is still the top destinations for Brits who want to retire abroad. There are more than 1,300,000 Brits living in Australia.

If you are over age 55, you can move your pension pot to Australia and pay zero tax on your retirement income, however, you can only move around 172,250 GBP pension pot in one go and there are other restrictions.

For those under 55 or for those with larger pension pots, you may have to transfer to a UK SIPP first or to a New Zealand QROPS if you are concerned to get your pension out of the UK tax net before rules are tightened further.

The rules for QROPS in Australia are affected by QROPS rules imposed by HMRC in the UK and tax rules set by the Australian Tax Office (ATO).

The new rules, from July 2017, allow you to transfer a UK pension into an Australian SMSF (Self Managed Super Fund) only once you have reached 55 years of age and you can only transfer in 300,000 AUD (about 172,250 GBP) into your Australian QROPS and then you can move a further 100,000 AUD per year. So, you may have to set up a UK SIPP first and drip feed your pension into your Australian QROPS.

An Australian QROPS which is an Australian SMSF specifically designed for those aged 55 or over, attracts zero income tax at retirement. There is also no tax on death.

These are the technical rules: you are allowed 25,000 AUD as a Concessional Tax-deductable Contribution, as well as 100,000 AUD as a Non-Concessional Contribution with the ability to bring forward 3 years or 300,000 AUD with no further contributions for the following 2 financial years.

Any Non-Concessional Contributions are tax free going into the fund.

Concessional Contributions, where the individual claims a personal tax deduction are taxed at 15% in the fund and the individual claims a deduction on their personal tax return. This is great for anyone with Australian taxable income.

For a person with a very large pension pot which is over the Australian lifetime limit of AUD 1,600,000, clients may be better off transferring their pension to New Zealand and paying a one off 25% exit tax than paying the 32.5 – 40%+ Australian income tax above 37,000 AUD in Australia. Why? Well, due to the NZ-Australian DTA, there is no further tax due in NZ or Australia. Then the client can build up an Australian SMSF separately and would still have the whole lifetime limit to be able to contribute to.

Five Year Rule – you must live in Australia for five years after transfer to avoid the 25% exit tax in the UK. If you move to another country, this tax can be imposed on your pension pot at a later date. Although you may be able to avoid the tax by moving to another appropriate QROPS, for example if you moved to the EU and moved your pension to a Malta QROPS, if allowed.

You can read more about the Australian QROPS rules here.

Moving to New Zealand

More than 215,000 Brits live in New Zealand. For British expats in New Zealand and Kiwis returning from working in London or elsewhere in the UK, the process is much more simple. As long as you remain resident in New Zealand for five years after transfer, you avoid tax on your pension scheme.

You can transfer a pension to New Zealand and then pay zero income tax at retirement. There is also no tax on death.

Five Year Rule – however, you must live in New Zealand for five years after transfer to avoid the 25% exit tax in the UK. If you move to another country, this tax can be imposed on your pension pot at a later date, although you may be able to avoid the tax by moving to another appropriate QROPS.

You can read more about transferring a pension to New Zealand here.

Moving to Hong Kong

You can transfer your pension to Hong Kong and pay zero income tax, no tax on growth and no tax on death on your pension as long as you remain resident in Hong Kong for the five years subsequent to transferring your pension. If you move to another country within these five years, you may face a 25% exit tax, unless you can move to another QROPS which avoids the exit tax.

Moving to the European Economic Area (EEA)

You can move your UK pension to a Malta QROPS which is based in the EU for tax efficiency if you are resident in the EEA. The EEA is comprised of the European Union (EU) as well as Lichtenstein, Iceland and Norway.

Over 700,000 Brits live in Spain with 200,000 British expats living in France.

The EEA consists of Austria, Belgium, Bulgaria, Croatia, Republic of 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 and the United Kingdom.

Although the UK may leave the EEA after Brexit. If will certainly leave the European Union.

A Malta QROPS has strong Double Taxation Agreements with most countries in Europe and often your QROPS is paid out gross in Malta with no tax deducted. Usually, you would pay income tax in your country of residence.

A Malta QROPS also allows full pension flexibility, so you can draw down as much pension as you want in retirement.

You can read more here on transferring a pension to a QROPS in Malta and the Double Taxation Agreement rules.

Five Year Rule – you must live in the EEA for five years after transfer to avoid the 25% exit tax in the UK. If you move to another country outside the EEA, this tax may be imposed on your pension pot at a later date if you do not move to another appropriate QROPS, for example if you move to a QROPS in Australia, New Zealand or Hong Kong and become resident in these countries.

Moving to the USA

How many Brits live in the USA?

Nearly 700,000 Brits live in the USA.

You cannot transfer a pension to the USA as the IRS won’t allow it. Other options include moving your pension to a UK SIPP and using the US-UK Double Taxation Agreement. Your pension can then be taxed in the USA rather than the UK. Although you would still face the death tax in the UK after age 55 and be subject to US income taxes.

If you haven’t moved to the USA yet, you could move to a QROPS in Malta or a QROPS in Hong Kong to avoid the death taxes. However, both would attract the 25% exit tax and US income taxes. But, would avoid any taxes on death.

Moving to Canada

How many Brits live in Canada?

There over 700,000 Brits living in Canada.

You cannot transfer to a QROPS in Canada. The QROPS there were all removed from HMRC’s QROPS list.

You can move your pension to a UK SIPP or pay a 25% exit tax and move to a QROPS in Hong Kong. Thanks to the Canadian-Hong Kong Double Taxation Treaty, there would be no further tax on your QROPS in Hong Kong as the taxation rights are given to Hong Kong. So, you just pay a one-off 25% tax, then no tax on your retirement income and no tax on death.

Moving to South Africa

You cannot move to a QROPS in South Africa, but you can pay a 25% exit tax and move your pension to Hong Kong.

South Africa has very high income taxes, same as the UK of up to 45%.

You may be better off paying a one-off 25% exit tax and then zero taxes after that as the SA-HK DTA gives the taxation rights to Hong Kong and is taxes at zero.

It depends on the size of your pension pot and other income. Smaller pots are better left in the UK or moving to a UK SIPP.

Moving Elsewhere in the World

If you are outside Australia, New Zealand, the EEA (Europe) or Hong Kong, you will face a 25% exit tax. Usually, if you are set on transferring to a QROPS, Hong Kong is preferable as there is zero income tax in Hong Kong and many of the Double Taxation Agreements actually give the taxation rights for pensions to Hong Kong.

Examples where it is still necessary would be where you have a large pension would normally still be taxed in the UK on your pension or you are moving to a country with high income tax rates such as the Netherlands (up to 52% income tax), Japan (up to 55.95%) and South Africa. Sweden, Austria, Belgium, Denmark, Finland, France and Israel all face up to 50%+ income tax rates.

You can see the list of countries with the highest income tax rates here.

Obviously, the best retirement destinations in the world don’t depend on the tax rate, the local cost of living, the culture, the food and the entertainment are more important, but I hope this acts as a useful guide if you can’t make your mind up bewteen living in a few countries abroad and provides clarity on the government’s new rules.

Please contact us for a free pension review.