Retiring overseas could cost state pensioners dearly, with new analysis revealing they might lose over £77,000 in pension income across two decades. According to research by Rathbones, a leading UK wealth and asset management firm, retirees moving to certain countries where the Department for Work and Pensions (DWP) freezes payments risk missing out on annual state pension increases.
The UK’s state pension is protected by the “triple lock,” which guarantees that payments rise each year by the highest of inflation rates, average earnings growth, or 2.5%. However, this safeguard does not extend to pensioners living in specific countries such as Canada, Australia, and New Zealand. In these nations, state pension payments remain frozen at the initial rate received, with no subsequent increases.
Olly Cheng, Financial Planning Divisional Lead at Rathbones, highlights the issue: “Many people planning to retire abroad are unaware that this choice can significantly reduce their state pension entitlement."
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Rathbones' calculations demonstrate that a pensioner living abroad for 20 years could forfeit approximately £77,585 in pension income due to these missed annual upratings. This estimate assumes a full flat-rate state pension of £12,547.60 beginning in April 2026, adjusted annually by 2.5% in line with the triple lock.
Even shorter periods abroad have substantial financial consequences. After just 10 years overseas, retirees could lose more than £18,600, rising to over £42,000 after 15 years. Over 20 years, the loss averages to about £3,880 annually, or around £320 monthly, which retirees must otherwise make up through other income sources.
Cheng adds, “The state pension increases each year to keep pace with the rising cost of living. When your pension payments are frozen abroad, these increases cease, and inflation gradually erodes the pension’s real value. What appears as a small initial shortfall can quickly accumulate into tens of thousands of pounds lost over the course of retirement — and there’s little that can be done to reverse it once the pension is frozen.”