As a member of Julius Baer’s UK Wealth Planning team, I regularly advise UK-domiciled and non-UK-domiciled clients on topics such as retirement and pension planning, tax efficient investment, as well as inheritance and succession planning. So, I know that, for many, retiring abroad is a dream come true – and one held by over 50s in many parts of the world. Figures released by the UK’s Department for Work and Pensions indicate that, in 2023, more than one million British pensioners living abroad receive the UK state pension. That’s more than the number of pensioners currently living in London!

Given tax varies from one country to another, there’s no such thing as a universally applicable wealth plan for those seeking to uproot to another country later in life. However, when it comes to providing guidance to clients who’re envisaging a life abroad, my wealth planning colleagues and I typically take a three-step approach.

1. Lifestyle is the key decision factor

The starting point is usually a discussion around where the client actually wants to live. For many of my clients, the dream of retiring abroad is inspired by the thought of a better lifestyle, sunnier climes, or a location where they can spend their new-found leisure time pursuing their hobbies and trying new activities. We therefore encourage clients to consider the full range of lifestyle factors – covering everything from language, lifestyle, and healthcare to infrastructure, the weather, and the international community – the things which, in our experience, determine how happy the client is in the new country.

It’s not uncommon for clients to have a change of heart soon after relocating, particularly if they’ve made a decision based on tax. I’ve had many clients who’ve left the UK for other continents only to realise within 1-2 years that they’d rather be closer to their family in Europe. That’s why we focus on being a sparring partner to our clients, using our experience to present a holistic picture of the lifestyle they can expect.

2. Red tape: Investigate the legal implications

The second step before an envisaged relocation is to investigate the legal and tax consequences of the ‘exit’ and ‘entry’ countries. Different countries offer markedly different regimes for obtaining residence permits or citizenship. In many EU countries, for example, UK nationals – as non-EU citizens – would only have the right to stay for up to 90 days in any 180-day period. If they have long-term residency plans, they need a visa.

While the decision to relocate is seldom motivated by financial factors, my client base comprises high-net-worth and ultra-high-net worth clients for whom differing tax regimes could have a significant impact on their wealth, so it’s vital that they’re aware of the implications. For example, if insufficient time is spent in the chosen country after relocation, the exit country, or any other countries where close ties exist – such as residential real estate, business operations, family or simply time spent – might also claim tax residency, potentially exposing the client to taxation in two or more jurisdictions.

If the client’s objective is to become a tax resident in the entry country, they need to meet the local criteria for establishing tax residency. Conversely, this means they may need to limit the number of days they spend in their home country. This limitation is crucial to consider for clients with close ties to their exit country, perhaps due to children, other family members, property, or business interests.

Assuming this limitation is palatable, it’s important to be disciplined in terms of recording your movements and activities. I’ve seen investigations by the UK’s tax authorities where people have had to share their Outlook calendar to account for where they were and what they were doing on given days. Keeping accurate records so that you don’t inadvertently fall foul of the tax authorities should be a priority.

3. Tailor wealth management choices to the specific location

Given the fact that the wealth management implications depend to such a large extent on the country chosen, the discussion of wealth structuring forms the last of the three steps.

Whichever investment vehicle, if any, the client uses, it needs to be effective in the particular country. With that in mind, my colleagues and I consider how the client’s existing asset base is structured and whether it’s tax-efficient for the chosen destination. For example, we’d seek to understand how the pension income paid from a UK pension would be taxed in the new country of residence, which may require an examination of the double tax treaty with the UK.

For retirees moving abroad, as for other internationally mobile clients, having an income in one currency and expenses in another provides another layer of risk.

Enjoy making your dream a reality!

Any lengthy stay abroad requires careful planning – the difference when making the move for good is that you’ve a whole lot more to consider than how to squeeze an extra pair of beach sandals into your case. By consulting a professional well ahead of time and talking through the lifestyle, legal and tax issues, you’ll give yourself a head start to avoid pressured decision-making.

Then all that remains is to enjoy the journey and the next exciting chapter of your life!