Top five retirement places
Our unpredictable weather is the number one reason for Britons choosing to retire overseas. With the average man's pension being £18,250 a year and a woman's around £11,750, according to Prudential, a lower cost of living is another driver. But high inflation in most popular overseas retirement spots, combined with our weak currency, means you cannot take it for granted.
Pensioners retiring abroad may be able to reduce the tax paid on their retirement income or escape tax altogether by moving their pension abroad under the Qualifying Recognised Overseas Pension Scheme introduced by HM Revenue & Customs - but they must take specialist advice before doing this.
Other reasons are that property prices abroad are often cheaper than in the UK, there is often a better standard of living, and within the EU up to €100,000 (£84,400) in a local bank is protected by the EU Deposit Guarantee Scheme.
So here's our lowdown on five retirement places where Brits love to live.
For years, the French lifestyle has lured the British to settle there. Despite the recession, in the past decade, property prices across France have risen 71%, according to Thomson Reuters Datastream. But there are now bargains to be had as they began falling in 2011 and are predicted to continue to slide by 5 to 10% this year.
The cost of living is similar to the UK, but eating out and booze is cheaper.
Naturally, it helps if you speak French, though many areas have strong expat communities. The south is far warmer than the north, with Nice and Perpignan being the hottest cities, while Rouen and Strasbourg are the coldest.
But speak to your lawyer about inheritance tax as France's laws mean property will be divided equally between the surviving spouse and any children on the first death.
The property boom along the Costas is long gone. Last year alone, prices fell 9.3% according to The Economist, though estate agents say prices have bottomed out.
Alex Vaughan, director of Lucas Fox International Properties, says prices started levelling off in the second half of 2012, adding: "International buyers picked up the best-value properties to take advantage of their prime location."
Residency rules, even for other EU members, were tightened in July 2012. Pensioners must prove they are entitled to healthcare paid for by the Spanish version of the NHS - the SNS - and have 'sufficient resources' to support themselves.
Grocery shopping in supermarkets is generally 10 to 15% cheaper than in the UK, according to a recent price comparison carried out by the Overseas Guides Company (OGC). Eating out and enjoying a drink in a bar is far cheaper, but petrol is more expensive.
The hottest places are the Costas in southern Spain and the eastern coast, which covers Catalonia and Valencia, with average annual temperatures of around 20°C.
However, the economy is in bad shape. Last year, the government and the EU had to prop up some local banks.
The Algarve and the Silver Coast, north of Lisbon, were developed and marketed as an upmarket alternative to Spain, with its wonderful beaches and immaculate golf courses. Prices reflected this elitist view, but the housing market continues to slide as demand remains weak.
There are no restrictions on foreign property ownership in Portugal and transaction costs are generally low. But Portugal was one of a handful of eurozone countries needing a bailout and it's not out of the woods yet.
Grocery shopping and drink are far cheaper than in the UK. "You can dine out on three courses, wine and coffee for £12," says Richard Way, editor of OGC. "A glass of wine or a small beer can be as cheap as 78p."
As an EU citizen, you don't need a residence permit, though it's useful for tax purposes.
Unlike Europe, America's economy is recovering. There are thriving expat communities along much of its coastline. "Florida remains popular with the retirement crowd, both for the climate and standard of living," says David Kerns of currency specialist Moneycorp.
Property prices have increased by 4.3% in the last year and are still undervalued by 7%, The Economist says.
"Property prices are nowhere near pre-credit crunch levels, so in the Florida area, there are still plenty of bargain properties to be snapped up," adds Kerns, but retiring Brits' spending power has suffered. At its peak in November 2007, £1 bought $2.11. Now it buys just $1.53.
There is no such thing as a retirement visa in the US - a large number of older people moving there get investor visas - so you need to be relatively wealthy.
The other drawback is that medical care is extremely expensive and health insurance can be sky high depending on your age and previous medical history.
On the bright side, Florida weather is warm all year round. On most Miami days, the temperature stays above 21°C but it can be humid.
Fierce competition keeps the price of food and drink in supermarkets down and the vast number of takeaways means you never have to cook if you don't want to.
If you're on a tight budget, forget about retiring to Australia. Sydney and Melbourne are in this year's top five most expensive cities in the Economist Intelligence Unit's world index.
Australia avoided the worst of the global crisis and the Aussie dollar is strong. "Sterling has depreciated by 46% in just over four years," says Kerns. "Nothing is cheap, with the average glass of wine costing more than £4.50 and a three-course meal for two people more than £100."
Interest rates are currently 3%, compared with 0.5% in the UK, and its banks are stronger than those in Europe.
Most people retiring to Australia are joining their family, which means you can apply for a parent visa provided your child has been a citizen or permanent resident for at least two years. Otherwise you can apply for an investment retirement visa, which needs to be renewed every four years, but this is only for the wealthy: they must have assets of at least AU$750,000 (around £480,000), or AU$500,000 for those settling in regional Australia.
The visa system is complex. "It is a specialist field and you need to take expert advice. The rules are strict as the moment you get a permanent visa, the whole social security system is open to you," says Geraint Davies, head of migrant specialist Montfort International.
"The visa affects your tax liability and, if you qualify, you could put yourself in a non-tax position."
Five pitfalls to watch out for
- Protect yourself from exchange rate fluctuations if your income is in sterling by using a currency exchange specialist. You can fix the exchange rate in advance, whether you're transferring a large sum to buy a house or need regular monthly amounts.
- If you retire within the European Economic Area or Switzerland, your UK state pension will increase each year. However, it may be frozen if you settle further afield, unless there's an agreement between the two governments.
- Before buying a property overseas, ask your lawyer to check the planning permission and any financing on the property. In some countries, such as Spain, debts stay with the property and not the original owner.
- Ask your foreign exchange specialist which local bank is easiest to work with for receiving and sending money.
- When house hunting, consider how close you are to your local airport or port and how much it costs to return to the UK
The tax levied on the total value of your estate after you die. IHT has to be paid by the beneficiaries of your estate before they can receive any of the money from it. The money can’t be taken from the value of the estate _– it has to be paid before any money can be released. There is an IHT threshold – known as the “nil-rate band” – below which no tax is levied (£325,000 in 2011/12). Any amount above the nil-rate band is subject to tax at 40%. If your estate totals £600,000, there is no tax on the first £325,000; however your estate will pay 40% tax on the remaining £275,000, a total of £110,000. Prudent tax planning can reduce your IHT liability, so always consult a specialist solicitor.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).
Everything you own: all your assets (property, cars, investments, savings, insurance payouts, artwork, furniture etc) minus any liabilities (debts, current bills, payments still owed on assets like cars and houses, credit card balances and other outstanding loans). When you’re alive this is called your wealth; when you’re dead, it becomes your estate.