State pension increases stop when retirees move to some countries (Image: Getty)
Pensioners planning to retire overseas during this tax year are being warned they could miss out on over £77,000 in state pension income over 20 years. That’s the case for anyone moving to a country where payments have been frozen, according to new analysis by Rathbones.
It says for retirees who move to countries including New Zealand, Canada and Australia, state pension payments are frozen at the rate they first received them. There are no future increases.
Olly Cheng, a financial planning divisional lead, at Rathbones, says: “We often speak to people hoping to retire overseas, many of whom don’t realise that this decision could significantly affect their state pension entitlement.”
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He explained that under the triple lock the state pension is uprated every year to help keep pace with the rising cost of living. The triple lock guarantees increases to the state pension rise each April by the highest out of earnings growth, inflation or 2.5%.
Mr Cheng said: “If your pension is frozen when you move abroad, those increases stop entirely.
“Over time, inflation steadily eats away at its value, meaning your state pension buys less each year in real terms.”
He said what looks like a modest shortfall at first can quickly snowball into tens of thousands of pounds in lost income over retirement.
Rathbones’ expert added: “Once your pension is frozen, there’s very little you can do to undo the damage.”
The wealth manager’s analysis shows pensioners who move abroad to a country without an uprating agreement face rapidly escalating losses compared with those who stay in Britain.
According to Rathbones, a pensioner who lives overseas for 20 years could lose £77,585 in state pension income alone due to missed annual increases. The figure assumes a full, new, flat-rate state pension totalling £12,547.60 from April 2026, uprated by 2.5% per year, in line with the triple lock.
Rathbones said the loss of income could be even greater if inflation or average earnings growth exceed the 2.5% minimum guaranteed under the triple lock. The impact is significant over shorter periods. After a decade abroad, retirees could be more than £18,600 worse off, rising to over £42,000 after 15 years, according to the wealth manager.
It said about 450,000 British pensioners living overseas are already affected by the UK’s frozen pension policy.
While retirees who move to New Zealand, Australia and Canada see their state pensions frozen, those in the European Economic Area, including France, Greece, Italy and Spain do not.
Increases are also possible for retirees who move to Gibraltar and Switzerland or any country with a social security agreement with the UK that allows for cost of living increases.
Mr Cheng said anyone planning to retire overseas should check their National Insurance record to ensure they are entitled to the maximum state pension, particularly if future increases won’t apply.
He added: “It’s also vital to understand how much private income you’ll need to replace any lost state pension, as well as factoring in local tax rules, healthcare costs and currency movements, all of which can materially affect how far your money stretches overseas.”
The expert recommended taking professional financial advice before committing to a move overseas.
