Retiring Abroad

What you need to know

Dreaming of a retirement in the sun? It could be the best decision you'll ever make - but only if you get the planning right.

A flu jab - that's what made up my mind in the end. I was sitting in the doctors waiting room on a grey day, looking towards a cold, wet winter and I just thought "there's got to be something better than this" says Jeanette Morris, 66, who, with her husband, Bill, retired to Spain two years ago. "We had lovely holidays in Spain and often talked about moving there. By the time the flu season came round the following year, we were sunning ourselves on our own patio overlooking the sea."

Jeanette and Bill are among the 850,000 British pensioners who now live abroad, and the number is rising all the time - a survey last year by Alliance & Leicester found that 13% of people about to retire were considering moving abroad, almost double the number in last years survey.

Migration expert Professor Russell King has researched the experiences of Brits retiring abroad and says most are happy with their decision, enjoying a more civilised pace of life, lower costs of living and even better health. "Only those who had a starry-eyed view of what it would be like, based on a few short holidays, found the new life more difficult"

The key to a successful move is plenty of research, says Jacqui Spradbery of Age Concern, which produces a useful fact sheet on retiring abroad. (For a copy of the Age Concern fact sheet, call 0800 00 99 66 or visit www.ace.org.uk)

"Never plan your retirement on the basis of a fortnight's holiday, even if you've spent that fortnight in the same place every year - a resort that's bustling and lively in the summer might be quiet and lonely into. the winter. If you can, go over on a trial basis first - rent out your UK house for a while before you sell it, so you can easily move back if you want

"Find out all you can about services like public transport and healthcare - different cultures have different habits and some of them can come as a shock. In countries such as France and Spain, for example, healthcare standards are excellent, but something that surprises a lot of British people is that family members often provide a lot of the aftercare in hospital - cooking meals, for example. That's fine if your family are around you, but for a lot of people retiring abroad, it's not so easy"

One of the best ways to find out what life is really like in the area you plan to move to is to talk to other Brits who've moved there. The local British consulate should be able to put you in touch with Expat groups - ask them what they like and don't like, whether anything came as a shock once they moved, whether they'd do anything differently if they were starting again. Their inside knowledge will save you time, money and hassle, as well as helping to make sure you really are doing the right thing. You can get contact details for British Consulates abroad from the Foreign and Commonwealth office (020 7270 1500).

Not all countries are easy to retire to - Canada and Australia, for example, are extremely difficult unless you have family there, while the USA doesn't issue visitor residence permits to retirees, though you can stay for six months at a time as a visitor. Some countries will require you to have a certain level of savings or to buy a property, before they'll let you settle there. Retiring abroad is easiest if you choose a country in the European Economic Area (EEA), which comprises of the European Union (Austria, Belgium, Denmark, Finland, Germany, Greece, Ireland, Italy, Luxembourg, Portugal, Netherlands, Spain, Sweden and the UK), plus Iceland, Liechtenstein and Norway. UK Citizens have the right to live in any of these countries, though you may still have to apply for a residence permit.

Buying a home

Procedures for buying property vary widely, so it's essential to use a lawyer with experience of the country you're buying in. Although there are UK based lawyers with experience of markets such as France & Spain, they'll cost you more than a local one, without necessarily offering a better service. The local British Consulate should have a list of English-speaking lawyers.

Although foreign property is often cheaper than in the UK, the costs of buying may be much higher - in France for example, stamp duty can be as high as 13% and estate agents' commission up to 5%, while in Spain, you can expect to pay around 10% over the purchase price in taxes and fees. Make sure you allow for these costs when you set your budget.

Get to know the area before you buy, says David Hampshire, author of buying a home abroad (Survival Books £9.95) "Many people make expensive, even catastrophic mistakes, because they don't do sufficient research and are in too much of a hurry, often setting themselves ridiculous deadlines such as buying a home during a long weekend break." Rent at first, to find out which neighbourhood suits you and the amenities you want to be close to.

Your Pension

Your UK state pension can be paid into a bank account anywhere, and if you move to an EEA country or one of 21 other countries, which have special arrangements with the UK, you'll go on receiving annual pension increases as you would here. But this doesn't include for example Australia, New Zealand or Canada; if you move to any of these, your pension is frozen at the amount you receive when you move abroad, which could seriously reduce your income over time. For advice on getting your pension paid abroad, and the rules applying to your country of choice, call the International Pensions Centre (0191 218 7777) and ask for Customer Liaison.

Personal or Occupational pensions can usually be paid through your foreign bank account, but check, as some providers will only pay into a UK bank account. In that case, you can still use cash points abroad to access your money, although this works out more expensive than having it paid into your foreign account.

Banking, Savings & Investments

You'll need a local bank account into which to have your pension and other investment income paid, and to pay your bills from. But if you have deposit accounts and other investments such as unit trusts, you can leave them in the UK or move them offshore. "Offshore banking is heavily promoted to people who move abroad, because you can get interest paid free of tax, though it'll then be taxed in your new country of residence" says Charles Ansdell of international independent financial advisers Inter-Alliance. "But for many retired people, it's pointless: the charges can be high, and if, as most do, you're taking regular income from your investments, you won't get real tax benefits anyway.

"People retiring abroad are often targeted by people offering what sound like fantastic returns on offshore investments, but there are often a lot of scams about, and the area is very sparsely regulated. If it sounds too good to be true, then it almost certainly is"

If you have ISAs, you will be unable to pay more money into them while you're living abroad, though you can keep the ones you have.

Healthcare and Benefits

Healthcare arrangements vary widely, but in most countries, you'll have to pay some or all of the cost of your care. If you move to an EEA country, once you're receiving state pension, widow's benefit or long term incapacity benefit from the UK, you're entitled to use the health services there on the same basis as pensioners who are nationals of that country. In practice, that could mean paying part of the costs for healthcare yourself. For advice on obtaining an E121 form, call the International Pensions Centre (0191 218 7777) before you go.

In most non-EEA countries, there's no entitlement to free healthcare, so private medical insurance is essential. If you already have it, you'll probably have to switch it to an international policy. Shop around for the best price, or use a broker like Globalsurance.

Most UK welfare benefits end when you move abroad, but if you move to an EEA country after becoming entitled to incapacity benefit, severe disablement allowance, widow's benefit, widow's pension, industrial injuries benefits or war pensions, these can still be paid: the same applies to attendance allowance or disability living allowance if you've been receiving it since 1st June 1992. You may also be entitled to benefits paid by the EEA state you move to. Leaflet SA29, from your local benefits agency, has more information.

A few non-EEA countries have agreements with the UK, which mean you may be able to continue receiving certain UK benefits in that country - details are in leaflet GL29 from your local benefits agency.

Tax

Becoming non-resident in the UK changes your tax situation in some respects and, in general, you'll be classed as non-resident if you spend less than 91 days per year in the UK per tax year (averaged over 4 years). You'll still be liable to pay UK tax on certain income from the UK, which usually includes business or partnership profits, Government pensions paid to civil servants and teachers, and income letting property, including your former home if you decide to keep it and rent it out. But in most cases, providing you fill out the right forms, you won't have to pay UK tax on interest from UK bank accounts and building society accounts. The country you're moving to may tax you, but the vast majority of countries have double taxation agreements with the UK, which prevents you from being taxed twice on the same income.

When a British person dies abroad, UK inheritance tax will almost always be applied to their estate, even if they've lived abroad for a very long time. "You can only really escape it by completely renouncing all links with the UK which would mean you couldn't even be buried here" says Charles Ansdell. That means that if you want to minimise inheritance tax, you need to use UK tax planning measures - a solicitor or tax advisor can arrange these for you.

Tax issues for Expats are complex and getting them wrong can be expensive, so it's worth using an accountant or tax adviser to handle your tax affairs once you move abroad - ask other expatriates for a recommendation.

Other things to do before you go

• Learn the language - thought many Expats get by knowing a little more than hello, goodbye and two beers please, if you're moving somewhere non English- Speaking you'll find life much easier and more rewarding if you can speak the language. Tapes and books can be useful if you're very disciplined, but you'll learn more quickly and develop more confidence if you go for a class, even if only for a couple of months.
• If you plan to drive outside the EEA, you may need a permit - check with the London Embassy of the relevant country.
• Make a will, if you haven't already. Dying intestate abroad cause's enormous difficulties for those you leave behind. Depending on the new countries inheritance laws, you may need a second will dealing with your assets there - Make sure each solicitor knows about the other will.
• Keep your UK vote - register as an overseas elector with your local council's electoral registration officer. Overseas electors can vote in UK parliamentary and European parliamentary elections, but not local government. Scottish parliament, Welsh assembly or Northern Ireland Assembly elections.
• If you're not already using the internet, get someone to show you how to set up a free web mail account (e.g. yahoo or hotmail) - an email address you can access from anywhere in the world. It's a quick and easy way go keep in touch with home, much cheaper than phoning and you don't even have to have your own computer, you can use the ones in libraries or internet cafes.
  
  

The Hot spots

Portugal : A lovely climate, relaxed pace of life and some of Europe's most unspoilt beaches have attracted nearly 5,000 British pensioners to Portugal, but drawbacks include a relatively poor health service and the fact that Portuguese is considered one of the more difficult languages. Though often thought of as cheap, a basket of basic supermarket goods costs more in Portugal than in France, Spain or Italy.

France: Home to 21,000 British pensioners, with the highest number s in Provence, the Dordogne, Normandy and Brittany. The French healthcare system is excellent, and links to the UK easy and cheap. British and German buyers have pushed up the prices of property in the most popular areas, but you can still pick up a bargain, especially if you're prepared to restore an old building. Make sure you get a detailed estimate of the restoration costs though, and then double it - French building costs have a habit of escalating once work starts.

Italy: Nearly 30,000 British pensioners live in Italy, and research suggests that of the 4 major retirement destinations, Italy is the place where retirees are most likely to really integrate into the local community. Property is more expensive than in the other three countries, though in recent years it's proved to be a good investment. Healthcare varies widely and in some areas private medical insurance is the only way to ensure a good standard of care. The cost of living is higher than in France or Spain, but lower than in the UK.

Spain: The most popular choice - more than 50,000 British pensioners live there. Advantages include sunny climate, excellent healthcare, relatively cheap property, lots of cheap flights to the UK, and the lowest cost of living in Europe, but watch out for the complicated system of buying property. Horror stories abound of Brits buying homes built without planning permission, or with huge debts attached, so a good lawyer with local knowledge is essential.

Written By. Frances Quinn
Woman's Weekly
2nd September 2003

Globalsurance is an independent Worldwide Health Insurance Advisor. If you are planning to retire to the sun or have plans to live or move abroad we can give you independent advice or a range of free Health Insurance Quotes; click for Free Advice and Quotes.

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