Receiving a state pension when retiring overseas
Currently, every single person who has made National Insurance contributions for at least 30 years throughout their working life is able to receive £115.95 a week.
Once you qualify for the UK state pension, you can claim it wherever you are. The money is paid into a UK bank or directly into an overseas account in the local currency, removing transfer fees and bank charges. You can choose to be paid every four or 13 weeks (but if your state pension is under £5 per week, you'll be paid once a year in December).
If you move abroad before retirement and work there for a number of years, it may be possible to receive the state pension from more than one country. But you will not be entitled to any increases that people living in the UK receive, unless you are moving to a country in the European Economic Area (EEA) or one with which the UK has a social security agreement (commonly called a 'reciprocal agreement').
The UK does not have a reciprocal agreement with New Zealand and Australia, which may impact your decision to move there.
Receiving a private pension when retiring overseas
In most instances, private pensions are normally paid in sterling into your UK bank account. The amount can be transferred to your foreign bank account, or you can have a currency broker convert the funds into the local currency of your new country of residence, which is often less expensive. You can work out how much income you might get in retirement to help give you an idea if retiring abroad is just a dream or whether it could be a reality.
In addition to this, you can establish sterling and euro bank accounts with the same international bank to avoid transfer charges. A currency specialist can determine a fixed exchange rate that will allow the rate to be established up to one year ahead of time. This way you can avoid fluctuating currency exchange rates.
The Financial Services Compensation Scheme does not cover currency brokers. Therefore it's important to choose a currency broker that's an FCA authorised payment institution, rather than selecting one that's registered with the FCA. Authorised payment institutions must then use a separate account for each customer's money, ensuring its safety.
What happens if I'm taking early retirement abroad?
If you're retiring early, or have yet to start drawing a pension, there are two important issues to think about.
Consider moving your pension pot overseas. You can do this by transferring it to a Qualifying Recognised Overseas Pension Scheme (QROPS). These can be based in the new country you are moving to, or set up on an offshore basis. When you come to take your pension income from QROPS it may also be taxed favourably in your country of residence.
Consider the implications for any lump sums you may take. In the UK, you are permitted to withdraw up to 25% of your retirement savings tax-free. It should be fine if this occurs before you leave, but not all foreign tax regimes have the same rules (e.g. France and Spain).