Retiring overseas to eke out a miserly pension is no longer a viable option for many British pensioners.
Government spending controls and a wayward Pound mean the state pension has lost a lot of spending power abroad.
Pensioners in Canada, for instance, pick up 42% less each month than those in the USA – equivalent to around £6,450 less to spend over the past 10 years for retirees.
That’s one of the reasons why Canada is lagging outside the top retirement hotspots for British expat pensioners, according to research by annuity provider MGM Advantage.
Top expat retirement spots
The top destinations last year for British pensioners were:
Cyprus and USA tied for fifth place.
Spain, Ireland and Cyprus are all Eurozone countries that have put out the begging bowl for financial assistance due to collapsing economies.
Many homeowners who sold up in Britain to seek a new life in these countries now find themselves worse off than if they had stayed in the UK.
“Retiring to another country is living the dream for many,” said Andrew Tully, of MGM Advantage.
“They are lured by hopes of warmer weather, a less expensive standard of living and homes that offer better value for money. Unfortunately, many fall victim to poor advice and end up financially worse off.”
Professional financial advice
The firm also urged those approaching retirement to consider their finances before they leave Britain for good.
“If you are banking on your state pension to increase with inflation, you could be in for a surprise if you end up in a country without a reciprocal agreement with Britain. Your pension will be frozen at the same rate as the first payment,” said Tully.
Canada, South Africa and Australia are three popular retirement destinations that have no agreement.
As the state pension is paid in Sterling regardless of where the pensioner lives in the world, currency exchange rates can also badly affect spending power.
The British government’s recent decision to axe pension benefits like the winter fuel allowances for expats will chop between £100 and £300 off the income of pensioners abroad from the winter of 2014.
“Expats need to take professional advice as it’s easy to get caught up in the romance of moving overseas without thinking the consequences through,” said Tully. “Many expats have found their homes had no planning permission and developers fled with their deposits, leaving them broke and homeless.”