Spain is the retirement hotspot of choice for more than a quarter of the 3 million Brits planning to retire in Europe, according to a new poll.
France was the second most popular destination, favoured by 17% of Brits, and Italy came third, attracting 10% of those who took part in a survey conducted by retirement income company MGM Advantage.
However, while some 3.2 million Brits would like to retire in Europe, the same number would also like to go to America. Some 16% would like to end up there, with Australia and the Far East appealing to 14% and 13% respectively.
While the thought of retiring abroad has many attractions, there are certain pitfalls to be wary of too. For example, if you move to a country that does not have a reciprocal agreement in place with the UK, your state pension will not increase annually to keep up with inflation, as it would at home.
For instance, if you retired to Canada a decade ago, your UK state pension would now be worth 42% less than if you retired in the US. That means your pension would be worth £1,742 more a year by choosing to retire in the US instead of Canada.
Andrew Tully of MGM Advantage said: "A huge number of people harbour a desire to retire abroad. Thoughts of better weather, cheaper living costs and potentially cheaper property than the UK can be a strong draw, but thinking that your regular holiday destination can also be your ideal retirement home might be hit with flaws.
"Without the right planning, savings and advice, you can quickly get caught out by local tax laws, exchange rates and other financial arrangements, turning a retirement dream into a potential nightmare."
MGM Advantage's top tips for retiring abroad
- Get an estimate of your pension from gov.uk/state-pension-if-you-retire-abroad.
- Seek independent financial advice before you move.
- Tell HM Revenue & Customs that you are moving abroad to find out about any UK tax liability you may have. It can also allow any UK pension you have to be paid gross (no tax deducted) and then taxed in your country of residence instead (as long as the country has a double taxation agreement with the UK).
- Check whether there are any reciprocal agreements in place with the destination country regarding your UK state pension and other social security benefits.
- Check out your welfare rights abroad.