Best and worst countries to retire to from a tax planning perspective

Many people dream of retiring abroad, be it for the better weather, a slower pace of life or a cheaper cost of living.

Some are also tempted by the idea that they can pay less tax on their pension savings if they move abroad, leaving them more money to enjoy and potentially pass onto loved ones when they die.

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Grazi explains that while it was previously the poster child for expat-friendly taxes, Portugal is now one of the worst countries for pension taxation. “Its NHR [non-habitual residence] regime was fully removed for pensioners from March 2025. The standard progressive tax rates offer no personal allowance and rise to 48% [on incomes] above €84,000. That’s £8,000 more in tax per year on a £50,000 pension, and £12,000 on £100,000, compared to the UK.”

Greece offers new tax residents a flat 7% tax rate on all foreign income (including pensions) for 15 years, according to Grazi, which she calls a “rare and powerful incentive” when choosing which country to move to for your retirement.

“This can mean tax savings of around £4,000 on a £50,000 pension, and £20,000 on a £100,000 pension”, says Grazi, compared to if you stayed in the UK.

For example, if you take your 25% tax-free cash before you move, leaving a pension worth £100,000 when you arrive in Greece, the tax bill would be £7,000.

If you stayed in the UK, you’d face paying about £27,428 in tax.

Grazi adds: “Interestingly, in Greece, some pensions usually considered ‘government’ in the UK – like NHS and teachers’ pensions – may qualify for this [7% tax rate], unlike in other countries.”

Towns under 20,000 residents in southern regions (including Sicily, Calabria and Puglia) offer a 7% flat tax on foreign income for 10 years, according to Grazi. She says she has noticed an increased interest from people thinking of retiring abroad in both Greece and southern Italy due to the low 7% rate.

The tax savings are similar to Greece, however note that the scheme only applies in smaller towns, not big cities or popular northern regions.

Cyprus offers two tax paths for expat pensioners:

According to Grazi, Portugal is one of the worst countries for pension taxation due to the removal of its NHR regime.

Retirees face paying income tax rates as high as 48%. Someone with a £100,000 pension could pay £12,000 more than if they remained in the UK.

“Combine that with real estate prices that have more than doubled in the last 10 years and a rising cost of living, and it’s no longer the strong value proposition it once was,” she says.

Spain’s progressive income tax structure kicks in at 45% on incomes above €60,000. This leads to a £5,000 – £7,500 higher tax bill per year for pensions between £50,000 and £100,000, says Grazi.

She adds that there are regional variations and age-related allowances, “but overall, retirees are generally worse off than in the UK”.

“Expect to pay £8,000 – £9,500 more per year than in the UK for pensions between £50,000 and £100,000,” notes Grazi.