Retiring overseas: a checklist before heading for your dream home

We consider the retirement options for three top expat destinations – New Zealand, Bahrain and Singapore

Retiring overseas is an aspiration for many expats, especially after they have spent much of their working life outside the UK. But while you may think you know what’s involved, there are many things to consider about a permanent move abroad.

The world is literally your oyster for retirement so unless you have an ideal spot in mind, finding the right place for you will require research. There are many aspects to consider, such as climate and culture, how to deal with your pension, the tax implications of retiring abroad, plus currency risk, possible political risk in your new home, and even how you will be cared for as you get older.

All this could take a significant amount of time, but one annual survey – the HSBC Expat Explorer Survey – reviews some of the most appealing destinations for expats, and highlights the pros and cons of living there.The latest survey found that the top three countries for expat residents were New Zealand, Bahrain and Singapore, and each had its own merits according to the residents who responded.

A HSBC Expat spokesman (expat.hsbc.com) said: “Expats in Bahrain are able to enjoy a life outside of the workplace. More than six in 10 expats in Bahrain (62 per cent) say they have a better work-life balance than in their home country compared with a global average of just 40 per cent. With 68 per cent of expats saying it’s an easy place to make friends (compared with a global average of 54 per cent), there is plenty to do outside
of work.

“For New Zealand, the promise of the ‘great outdoors’ sways expats looking for an energetic experience. Almost three quarters (73 per cent) of expats surveyed in New Zealand rated their environment as better than their home country, compared with a global average of 33 per cent. More expats in New Zealand say their quality of life improved as a result of moving than anywhere else; almost three fifths (59 per cent) associate New Zealand with a higher quality of life, compared with a global average of 46 per cent.

For expats looking for the buzz of a multicultural metropolis, the HSBC spokesman said the top choice was Singapore. “The vast majority (71 per cent) of expats in the city-state say they find fitting into Singaporean culture easy, with almost four fifths (78 per cent) saying that they find getting used to the local food easy.”

Good research before you leave and meticulous planning in the execution will make life easier.

The first port of call should be the embassy of the nation you plan to retire to, said Jonathan Spring-Rice of Towry. He added: “The rules differ from country to country, so it would be prudent talking to banks in the country you’re moving to. Most have London offices, but that is also where I would talk to the embassies. They would be able to advise you on how you how you should deal with medical cover and bank accounts, and make sure you are registered for electricity and water.”

One of the first considerations if you want to retire to one of these three countries is whether or not you would need a visa. The rules on visa requirements are country-specific, so the best way to find out what you need to do and how you can qualify to retire to a country is to speak to the embassy or check online.

For example, if you have children who are residents or citizens of New Zealand, then you could be eligible to apply for a visa. There are more details on the New Zealand Foreign Affairs & Trade website (nzembassy.com).

If you plan to use an adviser to help with your application, then unless they are exempt from needing one, each must have a licence. The website states: “Immigration New Zealand (INZ) will refuse to accept a visa application lodged on your behalf by an immigration adviser who is not licensed or exempt.”

Bahrain has announced that it will grant entry visas and two-year renewable residence permits to retired foreigners who have worked in the kingdom or any of the other five Gulf Cooperation Council countries for at least 15 years. Those with sufficient wealth and property will also qualify.

Similarly, most potential expat retirees in Singapore are likely to be working there.

While your retirement planning will differ depending on your chosen country, there are some overriding principles that should be followed to make the process easier when you reach your new home.

Jason Porter, director at Blevins Franks (blevinsfranks.com), said: “It is wise to open a local account with a strong bank, to deal with money transfers and payments for property. Also, appoint a local English speaking lawyer and accountant to deal with property acquisition and tax registration and other arrival documentation – some jurisdictions require tax registration to acquire real estate. Appoint an English speaking financial adviser who is conversant with the local financial system, and consider adjusting your mix of financial investments for tax efficiency in the new jurisdiction. For example, ISAs are not tax efficient outside of the UK and will be taxed according to the make-up of the underlying assets.”

In New Zealand there will no language barrier for expats, and English is also widely spoken in Bahrain and Singapore, so finding advisers that can help you in your own language should not be difficult.

The tax position is one of the biggest considerations for expats, whether they are working or retiring overseas, as it impacts on all aspects of their financial affairs. Each nation offers some definite tax advantages on your income. Bahrain, for example, does not levy any personal tax. So any income you receive will not be taxed, providing you are a resident, said Mr Spring-Rice. He added: “There is no personal tax in Bahrain, and there is a tax treaty in place between the UK and Bahrain. It states that the person is taxable where they are resident. Singapore has a similar treaty, so you would be taxed in Singapore at Singapore rates.”

The top rate of tax in Singapore is 20 per cent – less than half of the UK top rate. To be tax resident in Singapore, you would need to be there for 183 days or more, and you can find out how much you would pay relatively easily, as the Inland Revenue Authority of Singapore (iras.gov.sg) has a range of tax calculators on its website.

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New Zealand offers a migrants’ exemption for money brought into the country, meaning there is no personal tax on income from that for the first four years, said Mr Spring-Rice.

He added: “It is highly tax attractive, and available to new migrants and returning kiwis who have been non-resident for at least 10 years. The new migrants rule says that these individuals moving to New Zealand get a four-year honeymoon period where any benefits [gained from the money they bring into the country, including a pension] are tax-free.”

There is also a difference in the tax treatment of foreign funds to those locally invested in New Zealand, which is designed to encourage expats to invest in the country.

However, you should be careful about how you move your pension. Qualifying Recognised Overseas Pension Schemes (QROPS) have long been the best way to move a pension overseas. However, changes to the UK pension rules in April this year mean that a QROPS could be one of the least efficient ways to deal with your pension transfer abroad. Under new UK pension flexibility rules, you can now take your pension as and when you wish after you reach the age of 55. A QROPS was set up to mirror the pension regime that existed prior to this, allowing a maximum of 30 per cent as a lump sum, and the remaining 70 per cent being used to provide an income.

However, the QROPS rules have not yet been changed to mirror the new regime, and although they are expected to change later this year, if you were to use a QROPS now to free more of your pension, you would be at a disadvantage, said Mr Spring-Rice. He added: “I would say ‘sit on your hands’ and look at various other options, like is there a tax treaty? Why do you want to do a QROPS?”

While the tax efficiency of a QROPS is more limited now, it may still be useful to reduce currency risk on your pension payments, as any UK payments made in sterling and transferred to your new home currency will be subject to foreign exchange movements.

Mr Spring-Rice said: “But if you are taxed in Bahrain, for example, [where there is no personal tax] and you have a self-invested personal pension, you could sidestep most of that currency risk by holding investments denominated in US dollars.”