Retiring abroad while living abroad is not as simple as it seems. It is better to be well informed in advance before taking this major step and be able to claim your rights during and after your departure.
We explain it all in this article!
Retiring abroad: different rights depending on the worker’s condition and the host country
Seconded worker or expat? Distinct statuses
There is a tendency to confuse the terms expat and seconded worker.
In fact, these are two distinct statuses, with different pension rights.
Throughout their overseas mission, seconded workers retain the employment contract that binds them to the employer in their home country. They are therefore subject to State law regarding their social protection, including pension, throughout the period abroad.
They continue to contribute as they would in their country and do not lose any rights.
Expat workers, on the other hand, are employed by a local company and no longer have an active employment contract under the laws of their country of origin. They can also be self-employed or non-active citizens living abroad in retirement.
Expats are covered by the local health and retirement system, if it applies. They are no longer affiliated with their home country’s social security system and therefore do not acquire any rights during this period abroad.
Retiring abroad on Social Security within the European Union
Retiring abroad on Social Security in one of the EU countries, and also in Switzerland, Liechtenstein, Norway or Iceland, the contributions to the various national schemes will be added to the UK contributions.
In this case, expatriation and retirement are easily compatible, even if one must take into account the fact that the legislation of each country in terms of minimum age and contributions will apply: if you have contributed in a country where the legal retirement age is higher than in the UK, you may:
- Choose to postpone retirement beyond the legal age in the UK to benefit from all of your rights
- Retire at the UK legal retirement age and request a recalculation of your rights once you reach the legal age abroad
The case of expats outside Europe: living abroad in retirement
There are two situations regarding retiring abroad and expatriation outside Europe.
There is a bilateral social security agreement between UK and other signatory countries, such as:
- New Zealand
In these countries, the professional activity performed during expatriation will be taken into account for the UK pension according to the conditions of each agreement, which are very variable.
It is therefore necessary to obtain information on a case-by-case basis, and to take note of the fact that in the event of expatriation to several of these countries, it will only be possible to claim one of these agreements: the pension rights acquired in the other expatriation countries will be lost.
Bilateral agreements also exist for self-employed expats, but in smaller numbers.
As for expats living in a country without any agreement, the rule is simple: no coordination will be carried out by the UK social security system, and they will only be able to claim their expatriation period for their retirement if the local legislation provides it.
How can I avoid retirement abroad taxes?
Continue to voluntarily contribute to your home country pension system
Retirement abroad taxes can be considerable. It is therefore essential to find out about your pension rights before living abroad in retirement.
Local systems differ greatly, and this can have a significant impact on a retiree’s pension: for example, the replacement rate of earned income by the mandatory French pension system is:
- 60% in France
- 80% in Austria
- 20% in the United Kingdom
To avoid excessive losses, it is possible to continue to voluntarily contribute in the pension scheme of the country of origin during expatriation, and if this option is not particularly interesting for seconded workers, it is highly recommended for expats, although it does not exempt them from the obligation to contribute locally.