Aon Consulting had a multi national survey conducted recently for the over 50’s life insurance, and pension markets, asking people who would like spend their retirement in this country. Only 43% of Brits wanted to stay here, compared with 87% Spanish and 81% of French saying that they wished to stay in their country. So you’ve had your last payslip, the gold clock to go with it and a few pressies from your work mates, where should you go and importantly how much will it cost?
If you are considering moving abroad there are many financial considerations that you will have to take into account, taxes, utilities, legal expenses, exchange rates, property prices, costs of fuel/cars, living on a day to day basis. So how many Brits want to move abroad when they retire, well 25% want to live in Spain followed closely by USA and Australia.
Let’s start with Taxes, HMRC can give you not only information on potential tax liability of moving to your chosen country, but also a state pension forecast. Depending on what you’re plans are it’s possible you could still be taxed by HMRC while also being taxed in your new country. If you are in Britain for more than 183 days a year, you will be liable for tax as if you were a full time resident in the UK; the same applies if you are in the UK for 91 days a year over a period of 4 years. Fear not, as Britain has “Double Tax Agreements” with Spain, Italy, France and Portugal, so you would not fall into the trap of paying more than you should. Though that is not the only consideration, that does not mean you won’t get taxed in the other country, depending on how your assets are spread, the tax will be spread among them as is appropriate to that jurisdiction, anything that applies to both countries you can expect a rebate from the UK in most areas.
Another alien tax to British citizens would be Wealth Taxes, France and Spain has these in which your whole, worldwide assets are taxed, wherever they may be. In France it begins as 0.55% at £500,000 to a maximum of 1.8% starting at £15.5 million if you’re lucky enough to have that much in the bank! In Spain, the rate begins at 0.2%, though you will also get £150,000 exemption on your main property and the first £108,000 is exempt also for “personal allowance”. Again, this will affect what are, in the UK, tax free savings (ISA’s Tessa’s and PEPS); even if still in Britain they could be subject to tax in France, Italy, Spain and Portugal to name a few. It might desirable to cash in on these savings and reinvest them in your new country depending on which country you settle on.
Bags are packed, car fully loaded, full tank of gas, house emptied, have you forgot anything? Well after reading the above you might have some concerns, but don’t let this put you off, things will seem strange for a while, not just because of the taxes, you will be moving to a new country that has a different currency, different language, different foods. Taxation as it stands will continually change even within the UK, so don’t be alarmed, get some independent advice and a full insight into your tax liabilities before you make the final voyage.
Did you know currently Spain has approx 74,000 Brits that have left the UK and set up home here, this compares to 26,700 that lived there 10 years ago. Why such a big increase? Well it is quite simple, under EU legislation any Brit that moves to say Spain is still entitled to their state pension and winter fuel allowance a somewhat controversial payment considering that you are living outside the UK and have sunshine all year round. I suppose this is the main reason Brits want to move here. The next on the list is Wills, you may have one for the UK, but you will need one that mirrors your existing one as you would want to make sure that the beneficiaries benefit from your estate and helps with inheritance tax laws etc within the country of destination, always seek advice on worldwide assets when making a Will, it will help your family out should anything serious happen to you.
Other Costs – So tax, pensions, wills and property expenses et al are the big costs everyone thinks about, but would you be surprised to know the ones most people neglect are on things like house appliances? We’re talking about dishwashers, freezers, washing machines, even computers. It’s impractical to buy plug adapters for everything, not to mention shipping such bulky appliances (Your eyes will water at furniture shipping costs, I can assure you), and what of the most important appliance, the car? The country you might be moving to might drive on the opposite side of the road (the wrong side of the road!) then you have to factor in car insurance costs on top of the price of a potential new car.
Had a trip over to your desired location, was it a choice of city, countryside or beachfront, what made the choice for you, was it the hustle and bustle of the city or that you didn’t have any transport, was it the rustic lifestyle or was it the beachfront villa and swimming pool that made your mind up for you. Location, location, location, is all important, what suits one person will not suit another. When looking at buying in this market place do your research as there will be some fantastic bargains to have, especially if you are a cash buyer, you have to remember that the market is somewhat different to that of the UK, so do not expect to make huge amounts of equity as these countries are also going through the same credit crunch as us.
Britain is an overcrowded island with not enough housing being built, one of the reasons you’re undoubtedly leaving Britain to begin with, many other countries don’t have this problem so house prices can remain quite static, and in an economic downturn can drop relatively quickly. So if you’re buying a property with half an eye on it as an investment to leave behind for your loved ones, a thorough analysis of the housing market is going to be required.
So, there you have it! All the above is nothing more than a wide lens view of what to expect, when you find the country you’re happy with, you’ll have more specifics to work with and formulate a better plan to advance with. The planning can be a long hard slog, but the rewards can be your just rewards after a long life of saving and hard work. Bottom line is it’s not overly costly to retire abroad, it can just be more complicated than realised, if you have any plans of “doing a Shirley Valentine”, it’s not going to happen.