State pensioners retiring overseas during this tax year are being warned they could miss out on over £77,000 in state pension income over 20 years. According to new analysis by Rathbones, pensioners who move to countries including New Zealand, Canada, and Australia will have their state pension payments frozen at the rate they first received them, with no future increases.
Impact of Frozen State Pensions
Olly Cheng, a financial planning divisional lead at Rathbones, explains: "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." Replacing the income lost to a frozen state pension would require a substantial private financial buffer. A loss of £77,585 over 20 years is equivalent to around £3,880 a year, or £320 a month over 20 years, that retirees would need to generate from other sources.
Triple Lock and Frozen Pensions
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 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."
Rathbones' expert added: "Once your pension is frozen, there's very little you can do to undo the damage." He further advised: "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."
