Older Britons are being reminded that a certain retirement decision could wipe out an estimated £77,000 in state pension over two decades, based on recent research.
Pensioners who relocate to countries such as Canada, Australia, or New Zealand during the current tax year risk losing up to this amount in state, wealth management firm Rathbones has warned.
The substantial financial penalty stems from the the Department for Work and Pensions’ (DWP) frozen pension rule, which locks payments at the initial rate received when retirees settle in certain overseas destinations.
Unlike those remaining in Britain, expatriate pensioners in affected countries receive no annual increases, meaning their income remains static regardless of rising living costs.
A retirement move could you lost up to £77,000 from your state pension
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The triple lock mechanism guarantees that state pension payments increase annually by whichever figure is highest among inflation, average earnings growth, or 2.5 per cent.
However, this protection vanishes entirely for those settling in nations without uprating agreements with the UK.
Olly Cheng, a financial planning divisional lead at Rathbones, says: “The state pension is uprated every year under the triple lock to help keep pace with the rising cost of living.
“If your pension is frozen when you move abroad, those increases stop entirely. Over time, inflation steadily eats away at its value, meaning your state pension buys less each year in real terms.” The financial damage accumulates rapidly even over shorter periods.
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Rathbones’ calculations reveal that expatriate pensioners find themselves more than £18,600 worse off after a decade abroad, with this figure climbing beyond £42,000 at the 15-year mark.
Approximately 450,000 British pensioners currently residing overseas already face the consequences of frozen payments.
The wealth manager’s research indicates that someone who retired to an affected country when the new state pension launched in April 2016 has already missed out on nearly £19,400 in payments over the past decade.
Analysts suggest this is because their pension remained unchanged while UK-based recipients benefited from annual uplifts.
How the state pension triple lock has changed over the years | GB NEWS / FIDELITY INTERNATIONAL
Covering this shortfall demands considerable private resources, Rathbones notes. The £77,585 loss translates to roughly £3,880 annually, or approximately £320 each month that retirees must generate from alternative income streams.
Mr Cheng advised: “Anyone planning to retire abroad should start by checking their National Insurance record to make sure they’re entitled to the maximum state pension, particularly if future increases won’t apply.”
He emphasises the importance of understanding local tax regulations, healthcare expenses, and currency fluctuations when calculating overseas retirement costs.
“Given the complexity and the irreversible nature of some decisions, taking professional financial advice before committing to a move can help avoid costly mistakes later on,” Mr Cheng added.