8 key steps for Australians retiring in the UK this year

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The whole process of retirement is never straightforward and, for Australians retiring in the UK, there are added levels of complexity to be addressed.

The key thing to remember is that a successful retirement takes careful planning, and it’s never too soon to start the planning process.

To help get you started, here are eight key steps to take if you are retiring this year. These should give you every possible chance of enjoying what you want when you finally decide to stop work.

1. Make sure you have a plan in place

If you have not done so already, now is the time for you and your spouse or partner to put together a plan for your retirement.

One key priority will be to decide where you want to live. You might decide that you will want to move back to Australia at some stage, or at least go back and visit regularly.

As well as location, your plan should include the things you want to do once you finish work and when you want to do them. Also, consider the commitments you have, and the pension and savings you have available to fund your retirement.

This will give you a decent idea of how much income you will need, whether you still need to be saving, and if you need to make any changes to your lifestyle.

2. Review your retirement assets

It’s likely that much of your income in retirement will come from your pension arrangements.

Make sure you have details of all your plans, including those in Australia, and get up-to-date values for each.

As well as values and projections for your planned retirement date, also check the full details of the type of arrangements you have. You should find out how your funds are being invested, and what benefits are available.

As well as pension arrangements, don’t forget other assets – including those in Australia that will form part of your retirement income planning.

These could include:

  • ISAs (Individual Savings Accounts) in the UK
  • Other investments such as shares or an investment portfolio
  • Property in Australia
  • Offshore and onshore bonds.

3. Understand if you have ‘enough’ to retire on

Having decided what you want to do in retirement and calculated the value of the assets that will provide you with the capital and income you will need, the next step is to work out if you have enough to retire on.

Put together a schedule of your regular monthly outgoings, together with an assessment of any lump sums you know you will need. Then work out what your income will be in retirement, considering inflation, potential growth on your investments, and taxation.

You should also factor in exchange rate fluctuations that could impact transferring assets from Australia, and your official residency status.

4. Decide if you will continue working

Once you’ve worked out if you have enough to retire on, you might decide that you’ll continue working for a period.

Many people now enjoy a ‘phased’ retirement, where they might work part-time and reduce their working hours or leave their main job and start working on a consultancy basis. Often, they find that winding down gradually is better than switching off suddenly.

It also gives you time to increase the value of your assets by making further contributions to your pension.

It is possible to start taking income from your pension fund even though you are still working, although you do need to consider the tax position if you do.

5. Try to clear any outstanding debts

You should make sure you are as debt-free as possible when you retire.

It’s likely you’ll be earning less in retirement than you currently do while working, so credit card and personal loan repayments will make a real dent in your disposable income each month.

You may have earmarked any lump sum you get from your pension for other purposes, but if you still have hefty debts, you should consider using this to clear them.

As you clear your debts you will immediately see a boost in your income.

6. Review your investment strategy

How you invest your pension fund, and any other savings and assets you have, is crucial in ensuring they will provide you with a suitable income during your retirement.

A sudden drop in value could impact on your plans to retire as it may take time for your fund value to recover to where it was. You may therefore want to consider starting to move some or even all your fund to lower-risk investments as you move into retirement.

Investing can be complicated, so if you are unsure about different investment strategies, we would strongly recommend you take financial advice.

7. Check you have an emergency fund

Regardless of how your savings are invested, stock market turmoil, such as during the recent Covid-19 virus, can sometimes impact on all investments – even if it’s only for a short period.

Taking income from your assets earmarked for retirement at this time can be expensive, as you’re cashing in more investment units, and therefore missing out on future growth.

One way to avoid this is to have an emergency cash reserve that can provide you with an income for a short period whilst you wait for markets to recover. A very rough rule of thumb is to have three to six months’ income in cash as an emergency fund.

8. Speak to your financial adviser

As you have probably realised on reading through these steps, planning for a successful retirement is complicated, and can be daunting.

It is likely you will have assets in both the UK and Australia, which adds an extra layer of complexity.

We would therefore strongly recommend you speak to a financial adviser before starting off on your retirement journey. They will be able to assist you with all the steps we have suggested here, and help you put a robust plan together to ensure you maximise your assets and enjoy the retirement you have planned.

At bdhSterling, we believe we are ideally placed to advise you. We have a licence to provide financial advice in both the UK and Australia and have helped many Australians in the UK plan for their retirement. To help with your planning, we’ve published a guide for Australians retiring in the UK that you should find useful.

Get in touch to find out how we can help you with your retirement planning.