Pensions and retiring abroad: an administrative headache
On paper, everything is clear. It's perfectly possible for retirees to receive a pension abroad. Social security agreements between the home and host countries determine the applicable law. All you have to do is apply to the pension fund in your home country by providing the necessary documents (including a certificate of residence and a foreign bank account so that payments can be made). This application must be made before you leave your home country. Dedicated services in the foreign country will then contact those of your country of origin so that you can receive your pension overseas. In principle, everything is done to make the process as smooth as possible.
In practice, however, many foreign pensioners experience challenges and delays, mainly due to communication problems between departments. Among the possible causes of these delays are changes in the rules in the country of origin. An adjustment period is often required for these rules to be integrated by both parties. For example, in July 2023, Australia again increased the state pension age. People born after January 1, 1957, will have to wait until age 67 to retire. This is the final stage of a measure introduced in 2009 to increase the retirement age gradually. These changes affect both Australian retirees overseas and foreign retirees in Australia.
In principle, every effort is being made to ensure the process' transparency. However, there have been delays at various levels, starting with the state governments that issue superannuation payments.
Are there too many retirees?
What if the problem was the retirees themselves? Some organizations are of the opinion that the number of retirees is growing faster and faster. In France alone, about 1 million retired people are living abroad. This number is growing, in addition to the ever-increasing number of retirees in the country. Baby boomers are retiring all over the world. The pressure is even greater in popular destinations for expat retirees, such as Portugal, Spain, Greece, Malta, Morocco, Thailand, Colombia and Costa Rica.
While many retirees are doing well, some report delays in receiving their pensions. For them, it's not that they have too many files to manage. Instead, the bottleneck is due to a shortage of administrative staff and a lack of coordination between departments in the two countries. For their part, agents point to the sometimes complex nature of expatriate files, with careers of varying lengths, fragmented, incomplete or poorly documented. These situations increase the time needed to process the files but also the error rate, sometimes causing great difficulties for expatriates.
Very long waiting periods
Eight months, one year, two years... In some countries, waiting times for pensions are getting longer and longer, forcing many expatriates to draw on their resources. Such is the case in Canada, which, far from its image as a top expat destination, is struggling to complete the files of foreign retirees. With just over 6,800 files backlogged for more than a year, Service Canada, the agency responsible for paying pensions to expatriate retirees, is overwhelmed, and delays are piling up. For the foreigners involved, the situation can quickly become dramatic. Between pensions that don't arrive and savings that run out, it's far from a peaceful retirement.
What causes these long delays? In Canada, everything depends on international agreements with other countries. The process is much more complicated than it seems. In fact, Service Canada is the point of contact for expatriates applying for their pensions. A service that seems difficult to contact, according to aggrieved expatriates.
And expatriates are not the only ones having pension issues. Locals are also experiencing delays in processing their claims. The entire federal system is backed up. The Canadian media points out that these long waiting periods are not due to a lack of agents. According to figures published by Employment and Social Development Canada (ESDC), there has been a 58% increase in the number of agents responsible for the processing of pension claims, from 1142 in 2015-2016 to 1802 in 2021-2022. Over the same time period, the number of files decreased from 887,155 to 737,737. More agents, fewer files, but longer wait times. This is yet another blow to the federal administration, which is already facing a series of issues, including delays in processing immigration applications, passports, etc.).
How to plan your retirement abroad
To avoid complications, it's best to start planning at least one year before the expected retirement date. Future expatriates are advised to talk to their pension fund to prepare for life abroad. Remember that you must apply to your pension fund for a pension, as pensions are not paid automatically. Applications should be submitted at least 4 months in advance. However, too much anticipation (more than 6 months in advance), may delay the application.
Be well-informed about the country you are relocating to. Global rankings often highlight the favorite countries for expat retirees. What they have in common is a privileged living environment and usually an attractive cost of living. However, make sure to check whether these countries have pension payment agreements with your home country. Seeking the services of experts (health, banking, legal, pension and expatriation advisors) can help to clarify not only pension issues but also taxation, possible investments and health insurance.
While the attractive cost of living in a foreign country may be a consideration, it should not be the primary motivation for moving there. The moral worth is equally important. Moving away from loved ones takes a toll on daily life. Even a trip to a neighboring country can have consequences that need to be anticipated. Ideally, it would be best to make several trips to the target country outside the tourist season to test the waters.
It's equally important to learn the host country's language. Even without becoming perfectly bilingual, a conversational level will make integration easier. Some retirees choose countries with the same language as their own to avoid difficulties. Even in this case, it's essential to take the time to discover the local culture to integrate better. Retiring abroad comes with not only excitement but also a lot of challenges. In the event of an issue, especially regarding the payment of your pension, inform your health insurance as soon as possible and, above all, avoid remaining isolated.
