Two topics are of particular importance to people retiring abroad: their pension (even if they have not reached retirement age) and healthcare provision. Even if you still feel young at heart, you need to face the fact that your health is likely to decline with age and you will become more dependent on the services available.

An increasing number of people are members of private pension schemes or have taken out private health insurance. However, few of us can afford to ignore any state benefits to which we are entitled, and this chapter deals principally with these.

The UK has concluded a number of social security agreements with other countries including members of the European Economic Area. The EEA, as it will be referred to in this book, comprises the countries of the European Union plus three others. The full list is as follows:

Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Gibraltar, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, the Netherlands, Norway. Poland, Portugal, Slovak Republic, Slovenia, Spain and Sweden. Bulgaria and Romania are due to join the European Union in 2007.

The other countries with which the UK has an agreement are Barbados, Bermuda, Canada, Cyprus, Israel, Jamaica, Jersey and Guernsey, Malta, Mauritius, New Zealand, the Philippines, Switzerland, Turkey, the USA and the republics of the former Yugoslavia (such as Bosnia, Croatia, Slovenia, Macedonia).

More agreements of this nature could be signed in the future, so if the country you are retiring to is not in the above lists you should consult with the Benefits Agency. Since the treaties differ to a greater or lesser degree (not all include provision for free medical treatment, for instance), you ought to obtain a copy of the relevant leaflet from the Agency outlining the benefits for which you are eligible and how to claim them. If your local office does not have the relevant leaflets, such as NI38 (see Appendix C) you can contact the Newcastle main office.

YOUR STATE PENSION

If you are of pensionable age or in receipt of a widow’s or invalidity pension you will need to inform the Pensions Service and discuss arrangements for the payment of your pension when you are abroad. If your local social security office is not able to advise you or supply you with the necessary forms for completion, you should contact the International Pension Centre giving your full name, date of birth and, where possible, your National Insurance or pension number. The address is in Appendix C.

If you live in Northern Ireland you should direct your enquiries to the Social Security Agency (Overseas Branch).

You can choose various methods of payment:

• by credit transfer to your bank or building society in the UK. If you are planning to stay abroad for only part of the year, this may be the best plan, since you will not need to change payment arrangements when you move;
• by credit transfer to an overseas bank or institution where such a facility is available;
• by a sterling payment cheque to you, your overseas bank or an agent nominated by you every four or 13 weeks;
• in a lump sum on your return (if you are away for no more than two years).

At the time of writing special arrangements need to be made if you are going to certain countries.

Applying for a pension when abroad

If you reach retirement age after you have moved abroad you will normally receive a letter from the Pensions Service inviting you to claim a UK retirement pension, provided you have kept the Service posted about any changes of address. If you do not receive a letter around four months before your 60th birthday (in the case of a woman) or your 65th (in the case of a man) you should contact the Service.

If you reside in any European Union country you may make a pension claim direct to your country of residence rather than to the one in which you have been insured. The country in which you live will then pass on the details of your claim to the Pensions Service.

If you have made social insurance contributions to more than one country in the European Union (as well as certain other countries), your pension will be made up of pro rata contributions from the UK and the country of residence.

The following procedure would be used in calculating pension entitlement:

• Each country works out the amount of pension payable on the basis of insurance under its own social security scheme only.
• Your social security records are combined and each country works out what would be payable if your social security contributions had been paid into its own social security scheme.
• You are informed by each country which of the two calculations produces the highest rate of pension, and this will be paid to you automatically.

Uprated and frozen pensions

In the UK state retirement pensions are adjusted annually to reflect any change in the retail price index, and for as long as I can remember because of inflation this has meant an annual rise for pensioners. Once you leave Britain to take up residence elsewhere, you cannot count on this regular uprating.

In about thirty countries, including the USA and much of Europe, you receive the same amount of pension as pensioners still resident in the UK. Not that you will necessarily feel richer if your pension is uprated: if sterling weakens against the currency of the country you are living in, you could find your pension buys you less.

Unfortunately, if you retire elsewhere you may well find your state pension is frozen. That means it stays at the rate prevailing when you leave Britain or become entitled to a pension (whichever occurs later). Thus some people who retired abroad in the 1980s are receiving less than £30 weekly.

This is an important consideration if you are thinking of retiring to Australia, Canada, New Zealand or South Africa, for example, where your state pension is not uprated. The Caribbean is something of a puzzle: if you retire to Barbados or Jamaica, your pension will be increased annually; in Trinidad it remains frozen. It is worth bearing in mind that there are currently over half a million British expatriates with frozen state pensions.

There are a number of expatriates’ pressure groups at home and abroad campaigning for a change in the law, notably the Canadian Alliance of British Pensioners and the British Australian Pensioners’ Association. While it is always possible that the government will have a change of heart some time in the future, you cannot bank on it. Hence you need to check whether your pension will be frozen or not if you decide to retire to a particular country.

Finally, let us end on a more cheerful note. If you return to the UK, even for a short holiday, your pension will be paid at the prevailing rate, provided you inform the International Pension Centre. War pensions and war widows’ pensions are not frozen.

OTHER PENSIONS

The majority of people retiring abroad will also receive pensions from the companies or organisations for which they have worked in the past. Self-employed people are usually in private pension schemes.

If you have worked in the public sector your pension will be index-linked in line with inflation in the UK. Most company pension plans aim to increase their payouts in a similar manner. Private pension plans vary, and one should beware of plans offering a fixed income which does not rise in value.

In Chapter 6 I caution people not to rely on their state pensions alone when they retire abroad. In the past people have retired to places where the cost of living has increased more rapidly than the value of their pension. It is therefore vital to have reserves that you can drawn on if such a situation arises.

If you have a personal or occupational pension you should review your pension arrangements before it becomes due and before you go abroad to ensure that tax liability is minimised and that the income generated will be sufficient for your needs. If you are planning to move your pension abroad, you should take appropriate financial advice.

ADDITIONAL STATE BENEFITS

If you are going to live abroad permanently you will no longer be eligible for certain benefits, such as disability living allowance, attendance allowance or income support.

However, over-60s receiving Winter Fuel Allowance before leaving the UK will normally continue to be eligible for it if they move to any EEA country and Switzerland.

If you make enquiries, you may discover you are eligible for other benefits available to nationals of your country of residence, such as cheap travel. The European Commission has proposed an EU Over-Sixties Card which would offer concessions on public transport and to cultural activities.

You should not assume that every country has the same range of benefits as are available in the UK. For example, if your savings fall below a certain level in Britain, you can claim a number of supplementary benefits, but few other countries have welfare systems that are quite so generous in this respect. The Benefits Agency will be able to advise you.