Changes starting this April will give the option to over 55’s to withdraw all the money from their scheme, with a 25% tax-free lump sum. Alternatively, they can chose to withdraw 25% tax free in chunks and receive the remaining sum at a lower tax rate. If the lump sum is chosen then you may want to consider a sun kissed retirement abroad in one of the following countries:

France

Expats looking at retiring abroad to France will have their UK annual pension taxed at the French rate with a 10% reduction. In France, lump sums received are subject to 7.1% income tax and 7.5% social charges. However, if you hold a certificate of entitlement to health care, which is available to you providing you’re from another European country, then you will be exempt from the social charges. Therefore you will have the same status as French nationals with regard to healthcare.

This certificate is available via the Department for Work and Pensions and for those in receipt of a state pension, it ensures you’re entitled to the document on a permanent basis. Therefore an overall tax rate of 7.1% in France on a lump sum is substantially more beneficial than paying the UK tax rate which can reach 45%.

Portugal

Even better news as we move onto Portugal, as if this is your retirement destination of choice, you may be entitled to not pay anything at all! Assuming you have not been a resident in Portugal for the last five years, it ensures you get tax exemption on foreign income sources – including interest, dividends, employment income, rental capital gains and pensions – for the first 10 years of a residency.

Cyprus & Malta

Should you choose to relocate to Cyprus then you will not pay more than 5% in taxation and any lump sum incomes will be entirely tax free. The remainder of the pension will be taxed at an extremely low rate which is said to be less than 5%.

Malta seem to be the European leaders in attracting potential expats to the island, as they have a well established retirement programme. Malta impose a 15% flat tax on any income from outside the country, so to apply for the scheme you will need to be an EU national and either own or be renting a home in Malta to the worth of 275,000 Euros or 8,750 Euros rental income.

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