If you have recently moved from the UK to Australia, you may well be intending to ultimately retire there. Alternatively, you may still be living in the UK but planning your retirement on the other side of the world.
From our point of view, both aspirations are perfectly understandable. Enjoying warm weather and a relaxed, outdoor lifestyle during your retirement years can be an appealing prospect.
However, as with all major financial commitments, it’s incredibly important that you plan ahead and carefully consider your decision before making any firm commitments.
You will face certain challenges when it comes to retiring in a different country from the one you have spent most of your life in. While those challenges are not insurmountable, mistakes can prove costly. So, as you’re planning for your well-earned retirement, it’s important to make the right decisions.
Here are six questions for you to consider when considering moving from the UK to Australia. The answers you come up with could help inform your planning and give you the best possible chance of success.
1. When and how do I want to retire?
It’s safe to say that the whole process of retiring has changed since your parents and grandparents did so.
It’s no longer a case of finishing work on a Friday and starting retirement on a Monday. Instead, it is far more common to ease into retirement, and to consider all the implications of the biggest change in your lifestyle since you finished your education and started working.
If you also consider that you are planning to retire in another country, it’s easy to see that the whole process of stopping work and starting to enjoy a life of leisure is something to carefully plan for.
For example, as an expat Brit planning to settle permanently in Australia, you’re likely to have assets in two countries that you’ll be using to fund your retirement. Because of this, it’s important to be aware that different rules and regulations apply to how and when you can draw your savings, and you’ll need to take this into account when considering when you want to retire.
There are tax implications too, so we would strongly recommend that you take expert advice as you start to put your retirement plan together.
2. Do you know where you want to live?
Regardless of which country you’re retiring in, you still need to think carefully about where exactly you want to live.
While the purpose of this article is to consider a retirement in a totally different country, there are still more granular details you will want to bear in mind.
For example, if you are already living in Australia, you may be happy to continue living in your current home. However, you may feel your existing property is too big to spend your retirement in, so may be thinking of downsizing.
You might also want to think about moving to a different part of Australia and retiring there – maybe somewhere quieter, closer to the coast, or where you’re guaranteed year-round sunshine.
If you’re still living in the UK with plans to retire in Australia, you’ll need to carefully consider whereabouts you intend to settle. You may have family already in one area and want to live near them, for example.
Even once you’ve chosen a city or state, you will then need to think through the pros and cons of different parts of that city, such as in the suburbs or close to the coast.
Find out more: Where do you want to live in Australia? The options facing emigrating Brits
3. Where will your retirement income come from?
As you plan for your retirement, it will be important to understand what your various sources of income and lump sums are, and how you will utilise them to fund your retirement.
The bulk of your pension income will probably be derived from three sources:
- Accrued pension funds in the UK
- Your Australian superannuation fund if you have been working here
- Social security, so your UK State Pension, and Australian Age Pension
It’s worth noting that you may well be able to transfer your private or company UK pensions to an Australian super once you are an Australian resident. Furthermore, you may be able to access them tax-free at retirement.
Additionally, your UK State Pension can be paid to you in Australia, although you should take into account that this will not increase once you have started receiving it.
In addition to pensions, you may have other assets which could provide an income and one-off lump sums. These might include:
- ISAs (Individual Savings Accounts)
- Other stocks and shares
- Any UK property you still own
- Onshore and offshore bonds.
Deciding where to take income and capital from isn’t straightforward, and you’ll need to plan carefully. A financial planner can help you do this, ensuring you draw your wealth as tax-efficiently as possible.
4. Will you have enough income to enjoy a comfortable lifestyle?
Once you’ve decided how you want to retire and where you want to spend your retirement years, the next step is to understand if you have sufficient assets to fund the lifestyle you have in mind.
Importantly, you’ll need to consider the cost of living where you’re planning to live, and the cost of what you plan to do, to accurately assess whether you have enough to retire.
A good starting point is to consider your existing outgoings, both discretionary and essential, and try to work out how these could be affected by no longer being employed with a regular income.
You will also need to consider other issues such as:
- The impact of inflation on your cost of living
- Exchange rates affecting any UK-based assets
- How long your money needs to last
- Any substantial capital outlays you will need to make
- The possibility that you may need long-term care provision in future.
If all that sounds rather daunting, we would, again, recommend you seek expert financial advice. Here at bdhSterling we have 15 years’ experience in helping expats retire in Australia. We will use cashflow forecasting software to project your income and expenses into the future.
This will account for issues such as inflation, taxation, and life expectancy, and give you an accurate picture of your future finances.
5. Have you planned the transfer of your assets from Australia?
If you’re planning to retire in Australia, you will need to ensure that, when you transfer assets from the UK, you do so as tax-efficiently as possible.
You will be dealing with two different tax regimes. So, it’s important that the movement and disposal of assets is managed carefully so you don’t end up with an unwelcome and unexpected tax bill, either in the UK or in Australia, which could easily have been avoided.
You will also need to account for the exchange rate between the UK and Australia. We would recommend that you use an experienced currency exchange expert to ensure you get the best possible rate, and that you are not affected by sudden fluctuations.
6. Do you have an expert helping you?
We have helped many people from the UK emigrate and retire in Australia. As a result, we’re well-aware that making any wrong decisions can be both irreversible and costly.
Furthermore, you are likely to find that even after you have retired, having an experienced adviser you can call on to help you with your planning can be invaluable.
That’s why it can be highly advantageous to get advice from a financial planning company that has a wealth of experience and offices both here in Australia and in the UK.
Get in touch
As you’ve read, expert advice when it comes to planning for your eventual retirement is important. If you want to discuss any of the issues you’ve read about in this article, please get in touch with us.
Please note
The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
This article is for information only. Please do not solely rely on anything you have read in this article and ensure that you conduct your own research to ensure any actions you may take are suitable for your circumstances. All contents are based on our understanding of HMRC and ATO legislation, which is subject to change.
