British people who retire to the Philippines will receive annual state pension increases as per retirees living in the UK. However, retire next door in Thailand and it is frozen for life from the date you moved there. There is a completely unfathomable list of countries that fall into each category.

Why is this please and what determines which country slots in where?

Simon

Tom Selby, AJ Bell Head of Retirement Policy, says:

Retiring abroad is a dream for lots of people. If you are considering finding a place in the sun for your later years, it’s important to think carefully about the implications for your finances, including your state pension.

Provided you have a sufficient National Insurance (NI) contribution record to qualify for the state pension, if you move abroad you can continue to receive the benefit. As a reminder, to qualify for the full state pension, you need a 35-year NI record, and to qualify for at least some state pension, albeit a reduced amount, you need a 10-year NI record. You can choose to have your state pension paid into a UK bank account or a bank account in the country you are living in.

Whether or not your state pension continues to increase in line with the so-called ‘triple-lock’ – which guarantees it rises by the highest of average earnings, inflation or 2.5% – will depend on the country you move to. This is a major consideration as over the course of someone’s retirement the impact of having your state pension frozen could be substantial.

The state pension will only increase each year if you retire to a country in the European Economic Area, Gibraltar, Switzerland and countries that have a social security agreement with the UK. For example, if you move to the US, your state pension will increase, but if you retire across the border in Canada, it won’t.

Equally, as you say, if you retire to the Philippines, which also has a social security deal with the UK, your state pension increases should be protected, whereas if you move to Thailand, which doesn’t have a similar agreement, they won’t be.

You can get a full list of countries where your state pension will increase.

In terms of ‘why’, successive governments have justified the state pension freeze by saying they prefer to focus resources on retirees that remain in the UK. UK pensions minister Guy Opperman responded to a question on the subject in Parliament in 2018.

DO YOU HAVE A QUESTION ON RETIREMENT ISSUES?

Send an email to asktom@sharesmagazine.co.uk with the words ‘Retirement question’ in the subject line. We’ll do our best to respond in a future edition of Shares.

Please note, we only provide information and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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