Cost of expat retirement
The financial impact of a frozen pension can be significant. For a retiree whose pension was frozen 15 years ago, the loss amounts to nearly £26,000. Over a 20-year retirement, that figure could rise to an eye-watering £70,000. These figures highlight the gap between pensioners who remain in the UK and those living abroad in countries where pensions are frozen.
To provide context, a UK retiree who moved overseas before 2011, when the triple lock came into effect, misses out on annual increases that could have significantly boosted their income. Over time, the financial gap widens as inflation and living costs rise, while a frozen pension remains stagnant. For example, according to recent analysis, those who moved abroad just five years ago are already £7,391 worse off, experiencing a real terms reduction[1].
Where are pensions frozen?
Whether your state pension is frozen depends on your choice of retirement location. Fortunately, if you relocate to a country within the European Economic Area (EEA), Switzerland, Gibraltar, or a nation with a reciprocal social security agreement with the UK, your pension will continue to increase annually under the triple lock.
However, this is not the case for popular expat destinations such as Canada, Australia, or New Zealand. For retirees in these countries, pensions remain frozen at the rate they were when payments commenced. This is an important consideration for those considering sunnier shores and a lower cost of living, but who may later feel the pinch of a stagnant income.