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Daily Mail
a day ago
- Business
- Daily Mail
Beware moving to the 'wrong' country in retirement... you could miss out on £70k in state pension
Choosing to retire to one of the 150-odd countries around the world where the state pension is 'frozen' could prove a £70,000 mistake, new research reveals. That is the vast sum you stand to lose if your state pension stays stuck at the current £230.25 a week, and misses out on the increases everyone else receives for the next 20 years. Many elderly expats live in a country where their state pensions remain at whatever amount they were set at when they moved - including popular destinations like Canada and Australia. Those people have lost out on an estimated £26,000 over the past 15 years, as attempts to persuade successive governments to unfreeze their state pensions have failed to date. Around 450,000 pensioners are presently affected, according to Interactive Investor, which looked back to work out what this has cost them, and ahead at the potential impact on people retiring abroad now. 'Many pensioners dream of spending their golden years overseas - whether it's for a warmer climate, an improved quality of life or to be closer to family and friends,' says Myron Jobson, senior personal finance analyst at II. 'But while the lifestyle may be appealing, it's vital to consider how such a move could affect your state pension entitlement.' > Beware moving to a 'frozen' country: Scroll down to find a map and a full list Your browser does not support iframes. The Government has struck deals to uprate state pensions with some countries, including the US and all those in the EU, but left many others out in the cold. If you move to a frozen destination, II estimates you face a near £70,000 deficit over 20 years. That is based on a 3.7 per cent state pension rise from April 2026, and a fairly conservative assumption of only 2.5 per cent-a-year increases after that. The full new state pension is currently almost £12,000 a year, and the triple lock means it is increased every year by the highest of inflation, average earnings growth or 2.5 per cent, according to the prevailing economic data each autumn. The Government has promised to stick to the triple lock for the whole of the current parliament, and it will be politically difficult for Labour or any other party to drop it at future elections. II factored in a 3.7 per cent state pension rise for next year because that is the Office for Budget Responsibility's current inflation forecast for September 2025, which is the decisive month. Its figures above show the impact of a frozen state pension over shorter timeframes too, with the loss of £433 over just one year. What is your dream retirement destination? Check your state pension rights before deciding if it's affordable Your browser does not support iframes. II also calculated the effect of a frozen state pension on someone who moved to an affected country in 2010. That was the year before the triple lock was introduced by the Coalition government in 2011/12, meaning they wouldn't have benefited from any uprating under the pledge. Those expats have received nearly £26,000 less than someone with a National Insurance record that also earned them a full basic rate state pension, but who stayed in the UK or moved to an unfrozen country like Spain in retirement. II calculated the 15-year figure based on the old full rate basic state pension, which was reformed in April 2016. This is currently around £9,200 a year - though people on the basic rate also get hefty top-ups, called S2P or Serps, if these were earned earlier in life. II also worked out the impact if you moved to a frozen country 10, 5 years or one year ago, but based those figures on the full rate new state pension for this period. Myron Jobson of II says: 'If you move to a country where the UK has no uprating agreement, like Australia or Canada, your state pension will be frozen at the level you first receive it. 'That means you won't benefit from the valuable triple lock increases that pensioners in the UK enjoy each year, and over time, that can seriously erode your spending power.' Therefore, Jobson says planning ahead is key, and you should check whether your chosen destination is affected (see below) and make financial decisions and arrangements with this in mind. 'Consider topping up any gaps in your national insurance record to maximise what you're entitled to,' he says. 'Deferring your state pension can boost the amount you get, though it won't help with uprating in frozen countries. 'Most importantly, building a strong private pension pot can help provide the financial cushion you'll need to maintain your standard of living abroad, regardless of state pension freezes. 'It is worth considering seeking advice from a financial adviser to fully understand the implications of retiring abroad and plan accordingly.' Last year, a This is Money reader asked whether the then very new Labour government would end the freeze on state pensions if you move to some countries. Well-connected pension industry expert Henry Tapper, chair of AgeWage, replied: 'I'm sorry but I can give you no expectation that the Labour Government will be any more generous on this matter than its predecessors. 'While no civil servant I spoke to ruled out the possibility of rules changing, no one would give you any hope and the Labour party manifesto is silent on this matter.' Tapper noted: 'If you return to the UK or go to live in a country where the UK does pay state pension increases to UK expats, you can have increases for the time you are resident at your new location.' Regarding the 70-year history of state pension uprating overseas, he said: 'Whether you get state pension increases (lately with the triple-lock) or not, depends on a tax-treaty lottery. Some countries, including the US and Switzerland have treaties, some don't.' Tapper quoted a Government response to a petition which put the cost of paying expat pension increases between 2023 and 2028 at over £4.5billion, and a research briefing to MPs which stated: 'The Government has no plans to change the policy on up-rating UK state pensions overseas; the policy is longstanding and has been supported by successive Governments for over 70 years.' Will you get state pension rises if you retire abroad? Where are state pensions frozen? Whether an expat's pension is frozen or not depends entirely on where they move (Source: International Consortium of British Pensioners)
Daily Mirror
2 days ago
- Business
- Daily Mirror
DWP state pension warning as thousands missing out on £25,000 worth of payments
Pensioners who have moved abroad have seen their state pension payments remain at the same rate they were when they left, as they are not entitled to an uplift - even though they are British nationals Thousands of pensioners living abroad could have missed out on almost £26,000 worth of state pension payments, new analysis has found. Under the triple lock promise, the state pension is subject to an annual rise each year. This ensures it increases by either inflation (based on the previous September's figure), wage growth (the average increase between May and July), or 2.5% - whichever is the highest. However, under the Department for Work and Pensions (DWP), the state pension is only uprated for someone if they live in the UK, the European Economic Area (EEA), Gibraltar, Switzerland, or countries with a social security agreement with the UK. However, popular retirement spots outside of Europe, including Canada, New Zealand, and other Commonwealth nations, do not have this agreement. Pensioners who have moved to these countries have seen their payments remain at the same rate they were when they left as they are not entitled to an uplift - even though they are British nationals. The state pension rose again in April by 4.1%. This saw the weekly payments for the new state pension rise to £230.25 a week, or £11,973 a year. According to Interactive Investor, someone who retired abroad to a country 15 years ago where UK state pensions are not increased would have had their annual state pension frozen at £5,077. This was the state pension level in 2010. READ MORE: Poundland shutting three stores in June with more closures to follow - see full list Pensioners living in the UK, as well as other areas within the agreement, will have seen it rise each year. Interactive Investor calculations found that pensioners living abroad would have lost income worth £7,391 over the course of five years. This rises to £13,162 across 10 years, and a whopping £25,832 over 15 years. Myron Jobson, senior personal finance analyst at Interactive Investor, said: 'Many pensioners dream of spending their golden years overseas - whether it's for a warmer climate, an improved quality of life or to be closer to family and friends. But while the lifestyle may be appealing, it's vital to consider how such a move could affect your state pension entitlement. Sign up to Mirror Money's newsletter for the latest advice and news From universal credit to furlough, employment rights, travel updates and emergency financial aid - we've got all of the big financial stories you need to know about right now. 'If you move to a country where the UK has no uprating agreement, your state pension will be frozen at the level you first receive it. That means you won't benefit from the valuable triple lock increases that pensioners in the UK enjoy each year, and over time, that can seriously erode your spending power.' The International Consortium of British Pensioners (ICBP) - which has bee lobbying for change in state pension rules for years - estimates that 453,000 pensioners do not get the uplift in pension payments each year. This week, the DWP confirmed it had 'no plans to review such reciprocal social security agreements'. Pensions Minister Torsten Bell confirmed this in a written response to Liberal Democrat MP Liz Jarvis, who asked if the DWP 'plans to review its policy on freezing State Pensions for people who move abroad'.
Yahoo
21-05-2025
- Business
- Yahoo
‘Act now', savers told as saving accounts lose money
Savers should 'act quickly,' with the average savings account now losing you money, financial experts have warned. Inflation in April rose to 3.5pc, it was confirmed on Wednesday, leaving attractive savings rates 'on borrowed time'. The average 'easy access rate' is now 2.78pc, down from 3.11pc in May 2024 (see chart, below). The best easy-access rates currently available are higher, at 4.75pc, according to The Telegraph's daily-updated best buy tables, but billions of pounds are languishing in accounts paying far less. If the rate of inflation, a measure of the rising cost of living, is higher than the rate you earn on your cash than the value of your money is being eroded. Experts are urging customers who can afford to lock away their money to consider investing for 'inflation-beating returns that far outstrip current savings rates'. Average fixed-rate bond and Isa rates fell month-on-month for the first time in half a year, according to a Moneyfacts UK Savings Trends Treasury report. The average notice rate has also dropped, to 3.78pc, which is its lowest level since July 2023. It comes after savers faced weeks of uncertainty as speculation mounted that Rachel Reeves would slash the tax-free Isa allowance. But it emerged on Tuesday that she will not reduce the £20,000 annual limit, after pressure from City of London bosses. Though it seems likely there will be a push to force savers to invest rather than leave their money in cash or bonds. Myron Jobson, of stockbroker Interactive Investor, said: 'The best savings rates appear to be on borrowed time. Barring any major economic shocks, the only likely direction for interest rates is downward, which means Britons are set to earn less on their savings in the future. 'The simple message for savers is to act quickly to secure the best deals. Those who can afford to lock away their money for at least five years or more should consider investing for the potential of long-term, inflation-beating returns that far outstrip current savings rates.' Earlier this month, the Bank of England cut interest rates to 4.25pc. While rate cuts are usually good news for mortgage holders and first-time buyers, the opposite is true for savers. Falling savings rates mean investors can lose thousands in interest. However Sarah Coles, of Hargreaves Lansdown, said savers can still protect their cash and that switching to a more competitive rate will 'keep you ahead of inflation'. She said: 'Locking in a competitive fixed rate now – with money you don't need for at least a year – will protect the spending power of your savings even if the Bank cuts rates.' The average easy access Isa rate fell to 3.02pc and the average notice Isa rate dropped to 3.71pc, which is its lowest level since August 2023. Meanwhile the average one-year fixed bond rate fell to 4.11pc, its biggest month-on-month fall since October 2024. The best fixed-rate bonds pay more – see here. Rachel Springall, a finance expert at Moneyfacts, said: 'Savers will be disappointed to see all fixed rates fall across the spectrum month-on-month, which has not occurred for six months. 'The reductions in the average longer-term fixed bond and Isa rates were the most significant falls for over six months, and are a disheartening turn of events after they rose above 4pc at the start of April. This demonstrates the volatility in future rate expectations, with rates expected to fall even further due to the recent cut to the Bank of England Bank Rate. 'Savers must make every effort to review their pots and shop around for a better deal.' Sign in to access your portfolio
Telegraph
21-05-2025
- Business
- Telegraph
‘Act now', savers told as saving accounts lose money
Savers should 'act quickly,' with the average savings account now losing you money, financial experts have warned. Inflation in April rose to 3.5pc, it was confirmed on Wednesday, leaving attractive savings rates 'on borrowed time'. The average 'easy access rate' is now 2.78pc, down from 3.11pc in May 2024 (see chart, below). The best easy-access rates currently available are higher, at 4.75pc, according to The Telegraph's daily-updated best buy tables, but billions of pounds are languishing in accounts paying far less. If the rate of inflation, a measure of the rising cost of living, is higher than the rate you earn on your cash than the value of your money is being eroded. Experts are urging customers who can afford to lock away their money to consider investing for 'inflation-beating returns that far outstrip current savings rates'. Average fixed-rate bond and Isa rates fell month-on-month for the first time in half a year, according to a Moneyfacts UK Savings Trends Treasury report. The average notice rate has also dropped, to 3.78pc, which is its lowest level since July 2023. It comes after savers faced weeks of uncertainty as speculation mounted that Rachel Reeves would slash the tax-free Isa allowance. But it emerged on Tuesday that she will not reduce the £20,000 annual limit, after pressure from City of London bosses. Though it seems likely there will be a push to force savers to invest rather than leave their money in cash or bonds. Myron Jobson, of stockbroker Interactive Investor, said: 'The best savings rates appear to be on borrowed time. Barring any major economic shocks, the only likely direction for interest rates is downward, which means Britons are set to earn less on their savings in the future. 'The simple message for savers is to act quickly to secure the best deals. Those who can afford to lock away their money for at least five years or more should consider investing for the potential of long-term, inflation-beating returns that far outstrip current savings rates.' Earlier this month, the Bank of England cut interest rates to 4.25pc. While rate cuts are usually good news for mortgage holders and first-time buyers, the opposite is true for savers. Falling savings rates mean investors can lose thousands in interest. However Sarah Coles, of Hargreaves Lansdown, said savers can still protect their cash and that switching to a more competitive rate will 'keep you ahead of inflation'. She said: 'Locking in a competitive fixed rate now – with money you don't need for at least a year – will protect the spending power of your savings even if the Bank cuts rates.' The average easy access Isa rate fell to 3.02pc and the average notice Isa rate dropped to 3.71pc, which is its lowest level since August 2023. Meanwhile the average one-year fixed bond rate fell to 4.11pc, its biggest month-on-month fall since October 2024. The best fixed-rate bonds pay more – see here. Rachel Springall, a finance expert at Moneyfacts, said: 'Savers will be disappointed to see all fixed rates fall across the spectrum month-on-month, which has not occurred for six months. 'The reductions in the average longer-term fixed bond and Isa rates were the most significant falls for over six months, and are a disheartening turn of events after they rose above 4pc at the start of April. This demonstrates the volatility in future rate expectations, with rates expected to fall even further due to the recent cut to the Bank of England Bank Rate. 'Savers must make every effort to review their pots and shop around for a better deal.'
Telegraph
20-05-2025
- Business
- Telegraph
Average earners face £200k death tax bills under Labour
The Chancellor's inheritance tax raid will see even average earners hit with £200,000 bills, new calculations reveal. Inheritance tax used to be seen as a charge on the wealthy but families with modest estates are increasingly facing the 40pc levy thanks to soaring house prices and recent policy changes. In the October Budget, Rachel Reeves stripped pensions of inheritance tax relief which means unused retirement savings will now be considered part of the estate upon death. As a result, a middle-aged worker earning a typical income of £35,000 a year, owning a house valued at the national average and with £80,000 in their pension would store up a £194,529 bill by the time they turned 68, according to calculations by the stockbroker Interactive Investor. At the same time years of house price growth mean Britain is now paying more inheritance tax than ever before, with families forking out a record £8.2bn in 2024-25. More than 121,000 face higher inheritance tax bills by 2030 because of the Chancellor's pension proposals, data uncovered by the platform via a freedom of information request has shown. Meanwhile, more than 31,000 will pay inheritance tax who otherwise would have avoided the charge. Myron Jobson, of Interactive Investor, said: 'The stark reality is that the inheritance tax net is expanding, increasingly ensnaring people with modest assets.' A worker earning £50,000 would leave their family a £218,992 bill while someone on £80,000 would lose £267,914 of their estate to the taxman. The calculations assume the worker contributes 8pc of their salary to their pension and that their wages and the price of their property rise 2pc per annum. Inheritance tax is due on the portion of an estate worth more than the nil-rate band of £325,000, which has not been uprated with inflation since 2009. The figures assume the £325,000 nil-rate band remains unchanged and do not include the £175,000 residence nil-rate band which is available to homeowners leaving their main property to their children. There are growing concerns that the loss of tax relief on pensions, due to come into effect in 2027, has driven some taxpayers to take too much out of their retirement pots. Andy Butcher, of wealth manager Raymond James, said: 'In the past we would advise clients to spend their pension last because of the tax relief, but with the recent changes that's no longer the case.' Giving away money is one way to bring an estate below the tax-free allowances. However pensioners risk leaving themselves struggling later in life if they give away more than they can afford in order to avoid a tax bill. Mr Butcher continued: 'A lot of money is coming out of pensions and it does raise questions about people's later-life costs and their reliance on the state.' The Government was urged to rethink the proposals by stockbrokers and pension firms earlier this year following a technical consultation. The firms warned in response to the consultation that the tax raid could discourage workers from saving towards a pension while causing more delays and adding to the administration burden of bereaved families. HMRC has said it will publish a formal report and draft legislation later this year. The Treasury was contacted for comment.
