Britons dreaming of retiring abroad could see thousands of pounds wiped from their State Pension depending on where they choose to live.
For some retirees, the loss could reach more than £3,200 a year, with payments frozen at the level they were receiving when they moved overseas.
Standard Life has warned that while the UK State Pension can be claimed from abroad, retirees are not guaranteed the annual increases received by pensioners living in Britain.
Whether someone’s payments continue to rise depends on the country they move to and the arrangements it has with the UK, which can include reciprocal social security agreements.
Popular retirement destinations including Australia, Canada and New Zealand are among the countries where the UK State Pension is frozen.
This means retirees living there continue receiving the amount they were entitled to when they moved and miss all future increases, including those provided under the triple lock.
How the state pension triple lock has changed over the years | GB NEWS/FIDELITY INTERNATIONAL
Over a long retirement, this can leave pensioners thousands of pounds worse off.
Someone who started receiving the full new State Pension at £179.60 a week in 2021/22 and then moved to a country where their pension was frozen would still receive £9,339.20 a year in 2026/27.
By comparison, someone whose pension continued to receive annual increases would now get £241.30 a week, equivalent to £12,547.60 a year.
That leaves the pensioner with a frozen payment more than £3,200 worse off this year alone.
The gap has widened significantly over recent years. It stood at £288.60 in 2022/23 before rising to £1,261 in 2023/24 and £2,163.20 in 2024/25.
The annual loss increased again to £2,633.80 in 2025/26 and has now climbed above £3,200 for 2026/27.
Altogether, someone whose pension remained frozen throughout the period could have missed out on more than £9,500 in State Pension income between 2022/23 and 2026/27, according to Standard Life’s figures.
Emma Furlonger, Managing Director for Workplace Pensions at Standard Life, said: “However, one thing many people don’t realise is that where you choose to live can have a direct impact on your retirement income.
“While your UK State Pension can still be paid overseas, people living in certain countries won’t receive future annual increases. Over a long retirement, missing out on those increases could make a significant difference to your income.”
Ms Furlonger also stressed that private pensions bring additional complications for those relocating permanently.
“Private pensions also bring their own considerations, from whether you can continue contributing to how you access your savings and the tax you may pay,” she said.
“Understanding the rules before you move can help avoid unexpected surprises later.”
She noted that the appeal of living overseas often intensifies after a good summer holiday, but urged people to examine the financial reality before committing to such a move.
For those still considering a move, Ms Furlonger outlined several important factors to weigh up. Retirees can claim their UK State Pension abroad provided they have sufficient National Insurance contributions and inform the Department for Work and Pensions of their relocation.
People retiring to the EU or the United States currently continue to receive annual uprating
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GETTYThe destination matters enormously. People retiring to the EU or the United States currently continue to receive annual upratings.
Those heading to Australia, Canada or New Zealand do not, and their payments remain locked at the initial rate indefinitely.
Transferring UK pension savings overseas is possible but comes with significant conditions. The receiving scheme must typically be a Qualifying Recognised Overseas Pension Scheme, or QROPS.
If it does not meet this requirement, the transfer may be blocked or attract a tax charge of at least 40 per cent. Even with a qualifying scheme, a separate 25 per cent overseas transfer charge can apply depending on the retiree’s country of residence.
Retirees living abroad may also face taxation on their pension income in both the UK and their new country of residence.
From April 2027, most unused pension funds and death benefits will fall within the scope of UK Inheritance Tax
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GETTYMs Furlonger advised notifying HM Revenue and Customs when moving overseas. The UK maintains double-taxation agreements with many nations, which can help prevent people paying tax twice on the same pension income.
While up to 25 per cent of a pension pot can normally be drawn tax-free in the UK, other countries may treat that money differently.
From April 2027, most unused pension funds and death benefits will fall within the scope of UK Inheritance Tax.
Moving a pension abroad will not necessarily shield it from these rules, with liability depending on factors such as residence status and where the scheme is based.
Ms Furlonger urged anyone considering a permanent move overseas to seek specialist financial advice before making any decisions about their pension arrangements.