The key question every expat pensioner must ask
The key question every expat pensioner must ask
By Michael Doherty
These are anxious times for Britons living abroad. The Brexit deadline draws ever nearer and the danger of the UK leaving the EU without a deal becomes ever more likely.
Pensioners, and those soon to become pensioners, have the most reason to worry. They share concerns common to all expats, but also have specific worries related to their age, about health care and their ability to access social services.
Fixed-income pensions leave many vulnerable. If their incomes are static, they will be unable to maintain their current lifestyle in Cyprus, or anywhere else in Europe.
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A quarter of all UK citizens living in other EU countries are pensioners and that percentage is expected to grow. Cyprus is one of the most popular locations for British pensioners. A study for the Migration Policy Institute (MPI) found that while Spain and France had the biggest number of older British residents, in relation to population the highest concentrations were in Ireland, Cyprus and Malta.
The figure for Ireland is complicated by the fact that many Irish people have, at some point in their lives, worked in neighbouring Britain and so qualify for a UK pension, even if it is a limited one. They will often have other means of support such as an Irish pension.
British pensioners in Cyprus are in a different position. They were drawn here by the attractions of sun, sea and a relaxed lifestyle. Brexit is threatening their retirement dream.
The MPI study is authored by Helen McCarthy of Middlesex University. She poses a question all British expats need to ask: “Will UK state pensions continue to increase in value for pensioners in the EU-27, as they do for those living in the United Kingdom?”
The answer is critical, she says, “because without this uprating, pensions will stagnate and the risk of financial hardship and poverty will increase”.
That question is also relevant to holders of private UK pensions, more so, in fact, since the British government has promised to keep paying state pensions, even in the event of a hard Brexit. But the full British state pension of a little over EUR 187 per week is clearly not sufficient to make retirement dreams come true in Cyprus or anywhere else. So most Britons who have retired here, or intend to retire here, will have been putting money into a personal pension. They still need to ponder Ms McCarthy’s question: Will my pension continue to increase in value?
Many people have several small pensions that are not growing as they should. One way to make your money work for you is through a self-invested personal pension (SIPP). This is a form of pension that gives you the freedom to choose and manage your own investments, from a wide range approved by HM Revenue and Customs.
You can make regular and one-off payments into your SIPP and, like other pensions, the British government will give you up to 46% tax relief on the amount you pay in.
Anyone under 75 who is a UK resident for tax purposes, or a Crown employee, can open and pay into a SIPP. Even if you are not earning you can contribute up to GBP 2,880 net each tax year and receive tax relief.
Investment carries some element of risk, so it is important to take advice. My company, the Woodbrook Group, can help you understand your options – whether that is a SIPP or another scheme – how to address your income needs in retirement and how much wealth you will need to support the lifestyle you want.
We are not owned by any financial institution or life insurance company. This makes us different from the majority of financial advisory companies and means we offer you unbiased and impartial advice.
I would also recommend anyone interested in this topic to read Helen McCarthy’s report for the MPI. It draws on 38 expert interviews with policymakers from seven EU states and a panel of UK officials and policy experts.
You can find it online at www.migrationpolicy.org . There are a lot of reports on the site. This one is headed ‘the end of the retirement dream?’
Michael Doherty is CEO of the Woodbrook Group in Limassol, Tel.: +357 25272820
