Retirement UK

Planning your retirement in the UK

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UK retirement offers a high standard of living and quality healthcare. Find what you need to plan your retirement in the UK, including the UK retirement age, pensions and UK retirement communities.

There are attractive prospects for expats planning retirement in the UK, particularly English-speaking foreigners who don’t want a language barrier when relocating. While this is important, there is much more to consider when planning UK retirement as a foreigner, including UK visas and permits, health insurance. After weighing up your prospects, you can better determine if whether retiring to the UK is for you.

According to Mercer (2016), the UK pension system ranked 11th in the world, putting it ahead of countries such as Germany, the United States and France, although it has some shortcomings. What this means for your UK retirement is that relying on the state UK pension alone is not going to be sufficient.

Understandably your UK pension is going to be a factor for a comfortable retirement in the UK, but it shouldn’t be the only one. This guide will discuss the various considerations and implications when planning your UK retirement, including the UK retirement age, UK pension services, healthcare requirements and the best places for retiring in the UK.

This guide to planning your retirement in the UK includes: 

Who can retire in the UK?

If you’re planning to retire in the UK, it’s important to understand if it's legally possible as the process can be more complicated depending on where you come from.

Citizens from the European Union (EU) country or the European Economic Area (EEA, EU plus Norway, Iceland and Switzerland) are allowed to study, live and work in the UK as part of the Freedom of Movement agreement. Although for retirement circumstances, it’s advisable to clarify with the UK immigration office and pension department on what you need to do. It remains to be seen, however, what EU citizens' rights will be once the UK leaves the EU.

If you have lived and worked in the UK prior to reaching the UK retirement age, you can apply for permanent residency after five years and ‘naturalisation’ after six years providing you meet the criteria. If you paid national insurance contributions and social security, you may also be eligible to a UK state pension which can be harmonised with EU pensions from other countries.

The process for non-EU citizens can be more complicated, although the UK does have a number of social security agreements in place with countries such as the United States, Australia, New Zealand and Canada, whereby citizens can relocate to the UK for retirement or continue to reside permanently in the UK after retiring. However, the stipulations for applying for permanent residency will require you to prove a close affiliation to the UK, such as a close relative/spouse from the UK/EEA, previous residency in the UK and business interests, as well as financial resources to show you can afford to live in the UK. You should expect to be asked to provide sufficient evidence of all the necessary criteria.

Prior to 2008, foreign retirees in the UK had to apply for an ‘Independent Means Visa’ to confirm suitable financial support for UK retirement, but these have since been withdrawn.

There are various visa options for non-EU citizens depending on your reasons for residing in the UK. The UK government website provides information and contact numbers if you need more clarification on immigration or retirement in the UK.

Retirement planning UK

Retirement age in the UK

The pension system in the UK has been undergoing major changes to bring the women’s retirement age in line with the men’s. As a result, the official UK retirement age of 60 for women and 65 for men has been updated in phases.

The first phase affects men born between 6th April 1945 to 6 April 1951 with an official retirement age of 65, while women born during the same period have a retirement age between 60 and 63 years depending on their date of birth.

The second phase mandates that the official UK retirement age for men born after 6 April 1951 remains at 65, and women born after 6 April 1953 can retire at 63. However, an additional phase will increase the UK retirement age for this group to sit at 66 for men and 65 for women by the end of 2018.

It is also possible to take early retirement in the UK but you won’t be able to claim your state pension until you reach the official UK retirement age. To retire early, UK residents may have the option to withdraw private or occupational pensions as early as 55 years old, depending on the pension scheme restrictions and personal circumstances.  

Retirement calculators in the UK

  • You can check the retirement age in the UK based on your date of birth using the government's UK retirement age calculator.
  • This UK retirement calculator helps determine your retirement age and UK retirement pension amount.
  • AgeUK is a charity that offers a UK retirement calculator and advice on financial planning.

Funding your retirement in UK

If you’ve been living and working in the UK, you will have been paying UK taxes to Her Majesty’s Revenue and Customs (HMRC), as well as National Insurance Contributions (NIC) towards the social security system including UK state pensions. Providing you meet the minimum contribution of 10 years, you may be eligible to draw a UK retirement pension, besides any funds from UK private pension schemes and occupational pension schemes you have contributed to.

If you aren’t eligible for a retirement pension in the UK, you will need to draw other pension provisions from your home country or other countries you have worked in. If you've worked in other European countries, your pension from other countries can be combined. Find more information in Expatica’s UK pension guide.

Transferring international pensions to the UK

You can harmonise other EU and EEA state pensions, which are then calculated pro-rata and paid into a UK bank account. To do this, you should notify the pension office in the country you currently reside in; they will communicate with the other pension offices to calculate your pension allowance.

Similarly, you can transfer private pension funds from EU countries unless your pension fund provider has any restrictions on transferring funds abroad. Transferring your pension can incur transfer fees and have tax implications. However, the UK has bilateral agreements to avoid double taxation, which include the US, Canada, New Zealand, Barbados, Bermuda, Chile, Israel, Jamaica, Jersey and Guernsey, Mauritius, the Philippines and Turkey, although these agreements are only applicable to state pensions. For more clarification on tax implications and transfer procedures, check with the relevant pension offices and providers.

UK retirement

Tax requirements for UK retirement

Like most countries, pensions in the UK are considered taxable income after it exceeds the annual personal allowance threshold, which incorporates income received through employment, state pensions, private pensions and social security benefits. Currently, the annual allowance for tax-free income is GBP 11,000, after which different tax percentages are applied for different income thresholds. Read more about UK tax rates.

With pensions, HMRC calculates a Lifetime Allowance for tax free pension pots, which is currently GBP 1 million. If your total pension pot, including state and private pension schemes, exceeds this then tax will applied to income above the threshold. However, tax calculations vary depending on the amount of allowance you’ve used and your type of contributions, so check your Lifetime Allowance with the UK pension services. 

Tax deductions are usually deducted by HMRC or the pension provider before you receive your allowance.

Inheritance implications when retiring in the UK

To protect your estate and family after you’ve gone, it’s advisable to draw up a will to establish the distribution of assets. As a foreign national, it may be worthwhile drawing up a will in both the UK and your home country, particularly if you have assets in both, although foreign wills are also recognised in the UK.

Although there is a regulation in place across EU member states to implement a unified law to succession of inheritance, the UK is not part of this agreement, so your inheritance will be governed by the national rules and procedures carried out in the UK.

Inevitably your assets will typically be subject to UK inheritance tax, made up of property, money, possessions and business assets. As a rule there is no inheritance tax to pay if the total estate value is less than GBP 325,000 or the entire estate is left to a spouse/civil partner, charity or a community amateur sports club. The UK inheritance tax rate of 40 percent is then paid on any inheritance above GBP 325,000 threshold. However, there are some tax reliefs and exemptions on gifts and business assets; find more information on UK inheritance tax.

If you have worldwide assets, these may be subject to tax in both countries, however, the UK does have double taxation agreements with other countries including the Republic of Ireland, the Netherlands, the US, South Africa, Switzerland and Sweden, as well as France, Italy, India and Pakistan.

Whatever your circumstances it’s advisable to seek professional advice on UK probate law and inheritance tax when planning your retirement in the UK. Read more in our complete guide to inheritance law, tax and wills in the UK.

Healthcare requirements for UK retirement

The UK’s National Healthcare System (NHS) provides free healthcare to UK residents funded through general taxation payments. If you are a legal resident in the UK then treatments are free, while emergency treatments are free to everyone including foreign visitors.

That being said, the NHS has introduced changes to healthcare for non-UK-based residents, which includes British expats who no longer live within the UK. Free healthcare is only provided to those considered ‘ordinarily resident’ (currently living in the UK legally) regardless of nationality, tax and NIC contributions, having an NHS number or owning UK property. 

Non-UK residents are expected to pay for NHS healthcare and typically have private health insurance to cover the cost. With valid health insurance healthcare will be charged at the standard cost, but without insurance visitors will be charged 150 percent of treatment cost.

EEA and Switzerland citizens can receive temporary free healthcare with a European Health Insurance Card (EHIC) issued by their country of residence. However, it can still be advisable to have private health insurance.

These policies are typically applicable in England, but can vary across Wales, Northern Ireland and Scotland; visit the NHS for more information. Read more about visiting UK doctors.

Retirement in UK

Retirement communities and villages in the UK

Where you settle plays a huge part in your UK retirement, so beyond the practical elements of what you can afford, think about the types of community you're seeking and the practicalities of retirement, such as healthcare requirements. If you buy property in the UK, for example, you should carefully consider accessibility to healthcare, socialising, security and whether it’s financially viable long term. See our guide to some of the top places to live in the UK.

Another increasingly popular and affordable option are retirement villages located around in the UK. These UK retirement villages offer a comfortable way of life in surroundings that are completely designed to cater for the elderly.

There are various types of accommodation available from luxury retirement villages in the UK with 24-hour care and plush surroundings to more modest but comfortable settings. Some of the best retirement villages in UK are located in beautiful countryside and, far from being quiet, they offer range of facilities and amenities for the elderly.

There may be certain requirements when buying UK property in a retirement village, such as having reached the UK retirement age (between 60 and 65) or being able to purchase property outright without a UK mortgage.

Best places to retire in the UK

Naturally, where you decide to retire in the UK will influence your quality of life – and more importantly your finances. The counties in the south of England are always popular with a laid back lifestyle, good healthcare and lower crime rates, but some of Britain’s larger cities are also attractive prospects among the best places to retire in the UK.

Dorset

On the south coast, Dorset offers stunning coastlines, countryside and quaint villages with a laid back lifestyle set towards UK retirement. With a large retirement community, it’s a popular destination for offering a picture perfect retirement. However, property prices aren’t cheap with average house prices around GBP 318,000 according to Zoopla, being one of the more luxury retirement villages in the UK.

Somerset

Somerset is another rural retirement community haven in the UK. Tucked away in the south west it delivers a relaxed pace of life, rustic countryside to explore and good amenities. It can be an idyllic location for pensioners seeking a quiet retirement with low crime rates, good healthcare and affordability.

Greater London

If you love the hustle and bustle of the city, then retiring in Greater London can be a solution. Understandably house prices are considerably higher in the UK’s capital and location is everything, but there are a great deal of affordable and well-connected areas with access to all the fantastic things to do in London as a pensioner. But remember the cost of living in London is high, alongside everything else generally being more expensive. Read more about renting in London.

Birmingham

According to the results of a survey published by Business Insider, Birmingham is one of the UK’s best cities to retire. With average house prices under GBP 200,000, excellent public amenities including cafes, cinemas and green spaces, good public transport and a reasonable crime rate, it’s a multi-cultural city that has lots to offer pensioners in the UK.

Edinburgh

Edinburgh was also tipped as a top hotspot for urban retirees in Scotland. A historic city brimming with culture and local amenities, it has much to offer. While Edinburgh's house prices are some of the highest in Scotland, its low crime rates and beautiful surroundings are worth it.

Liverpool

Home to the Beatles and a previous City of Culture, Liverpool has certain attractions for UK retirement communities. With a youthful and cosmopolitan atmosphere, those young at heart will fit right in. The house prices are lower than other large cities, averaging around GBP 150,000, and with excellent UK public transport links by road, rail, sea and air, it’s a great place for explorers.

Tips for retirement living in the UK

When it comes to retiring to the UK, you'll need to prepare yourself financially and emotionally. Relocating to a different country is a big deal at any life stage, and in retirement you'll want the transition to be as smooth and comfortable as possible.

Some tips on UK retirement to help with the potential challenges ahead include:

  • Socialise – the UK offers a great deal of social activities and clubs both Government-funded and private, which are often free or discounted for retirees. These range from fitness activities at community centres to book clubs and sporting groups. These are ideal places to get to know your local area, meet people and make your integration into UK retirement a much more enjoyable process.
  • Learn the language – if English isn’t your first language, it’s always advisable to learn a little – like in most countries, making an effort and knowing the basics go a long way. You can find numerous language schools in the UK.

 

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