Retiring in Malaysia: A Guide for UK Expats
Thinking about spending your “life after work” in Malaysia? As financial advisers with offices based both here in Kuala Lumpur and in the UK, we can certainly vouch for it!
Retiring abroad is an exciting idea for many people, but rarely straightforward. Not only do you have to consider the climate, currency and culture of your desired retirement destination, there is also the practical aspects surrounding the finances involved.
In particular, how will you receive an income if you retire in Malaysia? Are there any taxes or financial obligations which you need to be aware of? What about currency issues, or owning property in Malaysia as a retired British person?
Let’s look at some of these questions in more detail, as well as some of the great reasons to consider Malaysia as a retirement destination.
What follows is for information purposes only and should not be interpreted as financial advice. To get financial advice into your own unique financial goals and circumstances, speak to a financial adviser.
Retiring in Malaysia
Malaysia is a very attractive option for British people thinking about retiring abroad.
There are lovely beaches, tropical islands, exciting and developed cities as well as incredible local food. Plenty for you to explore and experience – you certainly would not be bored!
There are also many British expat communities for you to get involved with, particularly in some of the more urban areas. Retirees often spend their time together in social clubs, travelling and frequenting coffee houses and bars.
The weather is also generally hot and sunny all-year-round. The culture is vibrant and fascinating, whilst living costs are staggeringly low. You can buy a three-course meal at a mid-range restaurant, for instance, at around $12 (USD).
These are just a handful of reasons to consider retiring in Malaysia. You do also need to factor in the potential downsides too, however. The weather can get monotonous and too strenuous for some people, and not everyone enjoys the hustle and bustle of Malaysian city life.
Of course, if you are able to visit Malaysia and sample it for yourself before you uproot your life over here, that is always a good idea!
Living costs in Malaysia
Everyone’s living costs are different, of course, but it helps to have an idea of your potential outgoings when putting together a financial plan for a possible retirement in Malaysia.
Excluding rent, it is possible to live in Kuala Lumpur or Penang for around $500 (USD). This includes the essential costs of living as well as some optional luxuries such as eating Western food regularly and having a gym membership.
If you adopt a more local lifestyle, then your monthly costs would likely be significantly lower.
When you factor in rent as well, this can vary widely. A one-bedroom apartment might cost upwards of $250 per month. Larger, more luxurious apartments will be more expensive.
Pensions & Taxes
So hopefully, this gives you a starting idea of what life and living costs are like when living in Kuala Lumpur, Penang or other parts of Malaysia. Now to some practical questions which we often deal with as financial advisers – how does it all work when it comes to pensions?
Under Article 19 of the UK-Malaysia Double Taxation Agreement, British nationals residing in Malaysia are not taxed on foreign income. So, if your pension income will primarily be coming from the UK, then it should be taxed in the UK – not in Malaysia.
On the other hand, you should be aware that if you move to Malaysia to retire, then you will not be entitled to the Full State Pension. Rather, the UK government “freezes” your state pension. That means that its value will diminish gradually, year-on-year, due to inflation.
Of course, lots of issues and questions arise at this point. How can I mitigate the fact that my state pension would be “frozen” like this? Should I keep my pension(s) in the UK, or move them to Malaysia to try and avoid currency fluctuations and/or minimise UK taxes?
It can be helpful to talk through these sorts of questions with an experienced financial adviser who specialises in expat pensions – and ideally also in Malaysian financial advice.
For instance, perhaps you are considering a Qualifying Recogised Overseas Pension Transfer (QROPS), but don’t know how it really works or if it is right for you. Alternatively, perhaps you are toying with the idea of an international Self-Invested Personal Pension (SIPP), but don’t know where to start. Or, perhaps you really have no idea at all about pensions when it comes to moving abroad, and you really just need someone to walk you through all of it so you can make an informed decision which is best for you.
Here at Hebden Consulting, we offer financial planning and advice specifically to British people who are considering retirement in South East Asia – and Malaysia in particular. We have successfully helped a number of people move here and enjoy a comfortable retirement overseas. We would love to assist you with your financial questions as well.
Get in touch to arrange a free phone/Skype consultation with a friendly member of our team. There is no obligation involved with this call – if you decide after talking with us that you don’t want to take things any further, that’s absolutely fine.
We look forward to speaking with you. In the meantime, we hope you enjoy more of our content on the website about financial advice and retirement for British expats in Malaysia.
The information is provided in good faith without any warranty and is intended for informational purposes only. It does not constitute investment advice, recommendation, or an offer of any services or products for sale and is not intended to provide a sufficient basis on which to make an investment decision. For further details see our Regulatory Statement.