Retirement Guide

Introduction

Retiring abroad or remaining in the UK?

The whole picture of retirement has changed. At one time, most people thought of this period of their lives as a question of downsizing their property by selling off their family home and either moving into a small flat or bungalow, or moving into a retirement complex. All of this would have been within the UK. In many cases today, couples are selling the family home (or taking out an Equity Release – see ‘money’ section) once the children have left, and they then invest in a home abroad to which they retire.

The alternative for a growing number is to use part of the funds raised from their main home by purchasing a small property abroad (and become what is known as ‘residential tourists’ - this means that they travel without much luggage and spend extended periods in their overseas home) and then use the balance of the funds to buy either a much smaller independent property in the UK or a house or apartment on a complex.

Generally the latter is very much a ‘lock up and leave’ investment and, should the time come when there is a need to move into a more controlled environment because of health, then the UK property can become the main residence and the overseas home can be sold or rented out to provide the necessary funds.

At this stage, it’s important to define what retirement means and this depends very much on the individual’s circumstances, age and general state of health. The world is now open to couples who are thinking about retirement and looking for a home in the sun. But it’s also worth thinking about what happens if they decide to return to the UK (will they be able to climb back on the UK property ladder?), if one of the couple dies or if the property/pensions/income fails to keep up with inflation. There have been cases of people stranded abroad with homes they can’t maintain, with ever-diminishing incomes and, in some cases, completely on their own.

For those who purchase a property when they are much younger, say 50 or 60 years old, such problems are surmountable. But once someone reaches 70 plus years old, things can become that much more difficult. And that is why in-depth research is so essential before making any move abroad.

Retiring abroad needs forethought

Probably the four most important factors for anyone thinking of going abroad for retirement are:

• Don’t be starry eyed about the move. It’s essential to remain clear-sighted and to take a cold, hard look at what is probably the biggest upheaval in anyone’s life at any age.

• It can be the most marvellous life-improving experience but it’s no use avoiding the fact that there are hard decisions and choices to be made. Avoiding careful thought and not making those choices will guarantee problems in the future.

• Unless the chosen country is English-speaking, there’s the question of learning a new language. Some people take to it like the proverbial duck to water, regarding learning a new language as a fun challenge. Those are the people who never mind making fools of themselves. Others can never get the heads round it. But it’s worth remembering, most people accept a stranger far better if they have a mutual language. There’s also the question of dealing with day-to-day activities such as going to the doctor, opening a bank account, understanding enough to deal with the plumber or electrician and being able to answer the phone in a new language.

• Buying a home abroad costs more than just the purchase price. Don’t forget:

• Legal expenses (depending on which country, there are notary fees, stamp duty, registration fees and local taxes) as well as the cost of a solicitor (and possibly a surveyor, although this is less common in most countries outside the UK)

• The cost a making a new Will. If you die without making a Will while you are living abroad, it can cause major problems for your heirs. The best thing to do is to seek professional legal advice

• The cost of removals from the UK to a new country (these can be quite expensive). Get at least three quotes from different companies. Also ensure the chosen company is part of an industry organisation

• The cost of purchasing a new car (sorting out the insurance may well mean speaking the new language).

• The possible expense of buying a new dishwasher/fridge freezer/oven (those brought with the rest of the removals may not work abroad)

Making a start

The first question that needs answering is: why move abroad? Think carefully about the answers. The most common reply to this is: to find a better/warmer/healthier climate. The World Health Organisation has nominated Spain’s Costa Blanca as one of the healthiest places to live – could your health be the reason for leaving the UK?

Have relatives moved abroad and if so is it simply a question of being near to them? Would moving abroad be a financial advantage? (The introduction of the euro caused prices to rise throughout the various countries that adopted the new currency. They were rounded up rather than down!)

Certainly one of the biggest mistakes anyone can make is to move to a country they’ve never visited. Having chosen a destination, it’s important to take several holidays in the region to begin the process of getting to know it, to enjoy the lifestyle, to feel whether it is possible to spend time there without work and therefore with the possibility of being bored.

If you are in any doubt about whether you should make such a sea change in your life, let alone after 50, one possible answer is to let out your usual home/property in the UK. You can then use the income to fund a trial period living in a rental property in your chosen area. This makes it possible to check up on local services and it helps to lessen the shock of making a major move. It also provides the time necessary to seek out the ideal property, rather than being rushed into making a decision.

Don’t forget to talk to others who have already made the move during the period of renting a property. There are plenty of expat groups who are always happy to welcome a newcomer. They’ll be a wonderful source of information and obviously they’ve been there and done it. Expat groups can be found on-line. Follow this advice and you’ll be able to avoid making awful mistakes.

Where to go?

Currently there are 52 countries around the world that are attracting the attention of property purchasers. However, of these there are a number that would probably be unsuitable for anyone thinking of retirement. Thanks to the upward spiral of UK property prices, for many people the age of retirement has edged lower in recent years and quite a few are giving up regular work at 55. Obviously they would be young enough to move to more exotic destinations such as Egypt or Panama and should they find they’d made a mistake, there would still be time to move elsewhere.

But for anyone of more than 70 years old or who has a medical condition, it would be more sensible to consider other countries such as Italy, France, Portugal or Florida. At present, there are 25 member countries of the European Union with others waiting in the wings. Again, however, it is unlikely that living in, for example, the Czech Republic, Poland or Lithuania would be ideal for most retirees given the complexities of language and the differences in lifestyle.

Retiring to an EU country

Obviously EU countries are preferable from the more senior point of view. Certainly, being within Europe makes it easy to access medical facilities. Spain, France, Portugal and Italy all have excellent health services. These countries are also closer to the UK if you want or need to return for whatever reason. It’s worth remembering that those living within the EU have the right to seek medical care anywhere within the European Union. This can be a major factor in deciding where to live.

During the process of deciding whether to retire to an EU country, don’t forget to apply for the European Health Insurance Card (EHIC). This has replaced the old E111 form and is available on-line.

Living in a mainland EU country has several bonuses. The mere fact that travel through so many different countries without having to cross a single frontier makes travelling so much easier and more pleasurable. In addition, anyone from the EU who chooses to reside in another country within the EU has the right to do so.

The euro has certainly simplified travel throughout much of Europe. There’s no need to go through the procedure of having to change money. For someone living in France who decides that a few days in Spain would do them good, it’s just a question of jumping in their car, drive in the direction of Collioure and soon there’s that strange feeling of arriving in a new country without the formality of going across a border. Travelling by train is simple thanks to the Eurostar/TGV networks.

The difference between the UK and other EU countries such as Spain, Italy and France is that retirees moving to mainland Europe have tended in the past to buy an individual property rather than moving into a complex. However, that is changing, particularly in the case of Spain where an increasing number of purpose-built developments are opening.

It’s also very important to note that living in any one of the EU countries means that the UK pension can be paid on an on-going basis. Moving to a non-EU country means that pensions are frozen at the time that the individual leaves the UK.

Spain

Spain is a wonderful place for retirement. It has a great climate, and it’s a country that has improved its facilities such as medical services and the normal utilities by leaps and bounds. A reasonable cost of living makes for a comfortable lifestyle. There are also excellent flight connections (there are 22 international airports) from all over Europe that make it easy for family and friends to visit. Not only that, there is a strong Age Concern presence in Spain.

Looking at property in a development on one of the Costas is a good start. All the services will be nearby. Shopping and transport will be widely available and medical facilities will doubtless be close. Buying a house away from the coast and in the country may seem quite attractive but do think how cut off it could easily feel. Even with reasonable Spanish, it will take time to become integrated into the local community.

If a property on a development seems ideal (and whichever Costa seems best), you should visit several before you make a decision. Find out what facilities the various developments offer and draw up a checklist of questions to ask. On the recreation side, what about communal swimming pool(s), tennis courts, golf, health and fitness centres?

Is there a supermarket? Is internet access available in each property? How about garden maintenance? Is there a medical centre? How about transport to the nearest town? Don’t rush in, but examine what different developers offer. One-bedroom properties on a very comfortable estate are being offered from £131,000 and for two bedroom penthouses, prices start at £172,400.

France

Retiring to France is very different. There simply aren’t the residential developments that cater for Britons that can now be found in Spain in reasonable numbers, and in Britain in great numbers. Nevertheless, for many Britons, France is their preferred choice.

Quite a few retirees start out with a home in the country surrounded by a piece of land and with a swimming pool at the end of the garden. These cost, on average, from around £250,000. As time goes by, however, the physical side of looking after a fairly large property can become too much, especially with things such as pool maintenance and gardening. Keeping up an old house, especially one that is large and with extensive grounds, can prove costly.

The next step for those who have become residents in France is to sell this original property and to move into a village home where they are close to shops. Most French villages and towns have a weekly market and this makes shopping simple. In addition, living in a village provides daily contact with neighbours. This, in turn, helps the new resident to become integrated into the community.

The alternative to moving into a village is, in the main, a return to the UK. Most people who have lived abroad for some time become used to the lifestyle and they probably have friends in the area but sometimes, it can be easier to make the move back. Additionally, if for any reason long-term ill-health strikes, it can be that much easier to communicate with medical staff in one’s own language.

Italy

One of the most attractive countries within the EU, Italy very much follows the French model in the sense that while it has retirement homes for its own nationals, it would be hard for a foreigner, and especially a non-EU citizen, to find a retirement complex that would cater for their needs.

A great many non-Italians have bought homes in Italy, but on the whole the purchasers have been at the lower end of the age scale, they have tended to have sufficient funds to be independent and usually they are in good health. If they are not, usually they can afford to have someone to look after them

In terms of where anyone seeking an Italian home should look at buying, the climate could well govern this decision. Tuscany, for many years, has been the ideal destination for non-Italians looking for a home. With properties becoming more expensive, however, Umbria became one of the new favourites, closely followed by Le Marche, Liguria and the Italian lakes such as Como and Garda.

Portugal

Portugal is beginning to catch up with Spain with more retirement urbanisations being built by overseas companies. In addition, sheltered housing projects are taking place for those who are more than 70 years old.

On the whole, these developments are exceptionally well-equipped with amenities such as nursing and in some cases an on-site doctor, a supermarket, provision of accommodation for guests, plus a wide range of sports. Do check whether the property you are interested in is freehold or leasehold as this can make a difference in the property taxes.

Portugal divides up into five different regions. Obviously the most southerly, the Algarve, has been popular both among tourists and residents for many years. Now, though, the other four have become more popular. These are: Alentejo (the next region up from the Algarve); Lisbon and Vale do Tejo come in the middle; Beiras is next and the most northerly is Porto and Norte de Portugal.

Certainly properties are proving popular around the capital, Lisbon, but it’s worth looking at the Alentejo which has a hot, dry climate and the real old-fashioned Mediterranean attitude to life, with long siestas and a slower rhythm of life. Retirement properties in Portugal start at around £125,000.

The United States

For many people, Florida would seem to tick all the boxes when it comes to owning retirement properties (there are no restrictions on purchasing a holiday home there) and quite a few of those who own properties there are eligible to enter either on B Visas or under the Visa Waiver Programme (VWP). Entering under the VWP scheme means that the visitor can only stay for up to 90 days and this can’t be extended. B Visas allow a stay of up to a maximum of six months.

However, the reality is that the United States simply doesn’t have such a thing as a retirement visa that allows long-term residence. It is possible to apply for a Green Card (this is a permanent residence card that give the right to live and work in the US). Obtaining a Green Card is via the annual ‘Diversity Lottery’ (DV) Programme that grants 50,000 visas to people around the world. The application can be submitted on-line and there is no charge for applying. Also, being a Green Card holder does not affect that person’s original citizenship. Do note, though, that there are no guarantes that you will be granted a Green Card as the DV is very well subscribed. The other two methods of applying for a Green Card are either employment-based or family member-based.

An E Visa is the nearest that the US has to a retirement Visa. Having one will give the holder the ongoing right to stay in the United States while they are starting a business. This Visa is more flexible for tax purposes. It is possible that by purchasing a home in America, an E Visa will be granted (the purchase of a property can be considered as starting a business). Whichever type of Visa seems most appropriate, it is absolutely vital to obtain legal advice.

An alternative: Mexico

Mexico is an example of one of those countries that falls outside the norm in most people’s thinking when they consider where they should move to as an alternative to their original home country, for example, within the EU. However, for Americans and Canadians, Mexico is their backyard (there are no oceans to cross) and many Mexicans speak excellent English as a result. This makes it much easier for those English-speaking retirees who don’t speak Spanish.

The country boasts a wide variety of climates, an infrastructure that has been improved out of all recognition within developed areas and the pace of life is relaxed. In addition, this is a land where the produce, meat, fish, fruit and vegetables are inexpensive and the quality is excellent.

An average budget of around US$1,500 provides most retirees with a perfectly adequate amount to live off. An additional US$500 would be needed if accommodation is to be rented.

In order to obtain retirement resident status, the applicant must be 50 years of age or older and the Mexican government requires that they have a proven fixed income of at least 400 times the daily minimum salary per month. This works out to about £865. Given the above, a resident permit is pretty much a formality.

How much money is needed to live abroad?

The answer to this is like to proverbial question about the piece of string - there’s no hard and fast answer. Much depends on a number of factors. Which country; the region of that country (obviously, it will cost more to live around Barcelona in an apartment for example, than 50 kilometres inland in a farmhouse); is the climate warm year-round (if so, central heating becomes redundant and that’s one less expense); what are the prices of food and drink, for example, in a local market/local supermarket; what about the cost of using a car?

Long-term financial planning is essential and tax planning can be complex for those thinking of moving abroad. If in doubt, don’t hesitate to take advice from a professional before making any major changes or commitments.

The financial questions that need you need to answer include:

• What about your current and future incomes? Will there be a fixed amount to live off or is the income likely to fluctuate?

• Will there be enough funds to cover emergencies abroad? In the best of regulated worlds, accidents do still happen and it is vital to have enough money available to provide a safety net.

• How does the cost of living compare between the UK and your new country?

• Will your income be threatened by changes in the rate of exchange?

• Will your finances be strong enough to withstand changes in personal circumstances such as disability or the loss of a partner/wife/husband?

Equity release

One way of raising the money to purchase a home abroad is via Equity Release. What this really means is that a company will advance part of a property’s value in return for a share of the proceeds when the owner dies. Reputable Equity Release schemes guarantee that the owner will be able to continue to use the property until their death.

This can appear to be the ideal solution for raising funds. However, there are terms that may vary from one company to another and it should be noted:

• There may well be fees and costs attached to the raising of Equity Release.

• There may be a minimum sum below which the lender won’t go.

• A minimum age of 55-60 is required by most lender companies

• Ask if there is a maximum amount available in the loan. This could be around 60%.

• It is essential you own your home.

• Ask if there early repayment costs.

UK retirement property

It is certainly worth noting that should living abroad prove too difficult/expensive or through illness, there are some exceptionally good retirement complexes in the UK. Some are simply developments where residents live as they would in a small village but quite often with a resident’s committee controlling the maintenance of the common parts. Some have a manager who comes in daily to ensure that the development runs smoothly (the manager is quite often left in overall charge by the construction company).

Others are warden controlled and there are alarm facilities for use in an emergency. Lastly, there are developments/retirement homes where there is a full-time staff which can provide dining facilities and some nursing. Should a resident become seriously unwell, however, they will often be taken to a hospital and then a nursing home.

The cost of buying a retirement property varies, obviously, depending on the level of service offered and the size of the property. However, generally the prices are comparable to a similar property outside a development.

And finally...

In all the excitement about thinking of a moving to a new country, stop for a moment and think the unthinkable: what happens if, after you’ve made the move, you don’t actually like living there? What about if there is such a change in circumstances that mean you have to move back? Do you have the funds to afford to move back to the UK and to purchase a new home? All circumstances vary and it’s important to seek professional advice before you make any commitments. Ask yourself the right questions now and you can be sure to enjoy the time you’ve been planning for years to come.