British Expatriates Solve Pension Crisis and Move Abroad

Did you know that there’s a new breed of British expatriate moving abroad these days?  From our own research at ShelterOffshore, which we’ve been conducting into how people afford to live overseas and also why they decide to expatriate, we’ve uncovered a seriously interesting and growing trend…

British expatriates are solving the pension crisis, moving abroad and putting their children on the housing ladder all at the same time; and in this article we reveal how it’s done, how you too can get in on the act and the potential issues that you need to be aware of before you commit yourself to retiring to the sun.

It’s a well documented fact that in the UK - as in many other nations around the world from America to Australia - there’s a looming pension crisis that is already beginning to bite, especially for those who want to retire before the age of 65.  Basically the state pension is not sufficient for most people to live on in the UK as fuel costs rise and the rate at which the cost of living increases is not matched with pension increases, and most people have failed to save even half what they need to be able to draw down a comfortable living in retirement.

This has led many people to consider down-sizing – options include selling up real estate and renting or selling and buying something smaller, signing property over to get a life time income or selling and moving overseas to a country where the cost of living is far lower.

Now while all this has been going on the cost of housing in the UK has gone through the roof and more and more first time buyers are priced well out of the market.  As has been well publicised there’s a new generation of 20 and 30 ‘somethings’ still living at home with mum and dad.  Funnily enough, not only do the 20 and 30 ‘somethings’ seriously dislike this situation, so do many of their parents too!  After all, having recovered from the empty nest feeling when their children left home for university and in actual fact, having become happy with their new found freedom, parents are suddenly having to take on the ‘burden’ of having their children move back in!

Well, it seems that there’s a solution to both the pension problem and the first time buyer problem that’s be realised by a large number of early retirees and there are two ways to go about it.

Method One: -  release the equity accrued in your property by raising a re-mortgage on it, go abroad, buy a cheaper house, stick some cash in the bank and then rent your house in the UK back to your children and use that money to pay the mortgage and live off the rest of the money raised from the remortgage.  Sign over the UK house to the children paying the mortgage in your will.

Method Two: - ‘sell’ your house to your children for a fair price (usually below market value), get them to take out a mortgage to pay for it based on their earnings, take the lump sum and move abroad to a new life in the sun.

These methods are being used time and again by an increasing number of British baby boomer expats and they are a fantastic way for everyone involved to get what they want.  The retirees get a place in the sun and no more money worries and the kids get their foot on the housing ladder.  So, as you can see there’s a simple way that you can have it all! 

There are a couple of words of warning that need mentioning though – if you take method one then your home is at risk if your children default on their rent payments because of a drop in income or if they fall out with you and decide to move elsewhere.  The problem with method two is that the lump sum realised from the sale of the house is the only money that the retiree couple can get from their UK property and that’s worth considering if their pension income is not going to be sufficient – they may need to think about getting a part time job in retirement or they will at least have to be careful with the amount that they put down on a new home overseas.

If you or anyone you know is thinking of taking either of these options our advice is to get a solicitor involved just to cement the financial arrangements between parents and children in the case of the Method One approach, and we also suggest that those retiring overseas on a fixed income put a little aside in case they ever need to get health care either abroad or back in the UK.