Where should I retire to?

Where should I retire to?

Tax regimes around the world vary enormously. The majority of countries levy tax on pension income at your highest marginal income tax rate.

While some countries have a top rate the same or higher than Britain’s forthcoming 50% — Belgium’s is 50% and Sweden’s is 55% — others are far kinder on your pocket, figures from Gary Heynes at Baker Tilly, the accountant, show.

Hong Kong has a top rate of only 16% and Singapore has 20%. In America, the top rate of income tax is 35%, and in Cyprus it is 30%.

Pensioners living in Cyprus and drawing an overseas pension can opt to pay a fixed rate of 5% on income above a small tax-free personal allowance of €3,420 (£3,136). Alternatively, they can pay the normal rate of up to 30%, in which case the first €19,500 is tax free — so the smaller your income, the better off you are under the normal system.

France and Spain can be less attractive than the UK — unless you expect retirement income of £150,000 or more, which would mean you would be hit with Britain’s 50% tax. France levies a top rate of income tax of up to 40% and Spain 43%.

In New Zealand and Australia income tax is charged at up to 39% and 45%. However, Australia does not charge tax on pension income, provided you are over 60.

Heynes said: “Recent changes to pension rules in Australia allow you to contribute more to your pension if you move there before you retire, and since July 2007, income drawn from retirement savings has been tax free if you’re over 60.”

Consider other aspects of tax regimes around the world, too. Capital gains tax (CGT) is levied at a flat rate of 18% in Britain. However, in places such as New Zealand and Hong Kong there is no charge. In America, CGT is 15%.

In Australia it is a hefty 45% — although residents are eligible for relief on their main home as in the UK.

Expats receive a tax uplift on their worldwide assets based on their date of arrival, so if you bought a painting, for example, for £5,000 and it had appreciated in value to £20,000 by the time you moved to Australia, you would be liable for CGT on growth only from that point.

Australia does not charge inheritance tax (levied at 40% in the UK), but France has rates of up to 60%.