Mention retiring abroad and clichéd images of couples walking hand in hand along the beach, such as the one below, spring to mind. But is this really what retirement in another country is like? Or is there more to consider?
There are several reasons why some people consider relocating to another country when they hit their retirement age and the first reason that comes to mind is good climate. According to a MGM Advantage survey, top retirement destinations of UK adults are Spain, France and US, followed by Australia and East Asia – all sunny and warm regions. Is the sun really number one reason to leave home?
Cost of living matters the most
Turns out that it isn’t. To many, spending their golden years away is seen as a more affordable option than living in the UK. According to a Daily Mail article there was approximately 4.7 million UK citizens living abroad in 2014 and large proportion of these are retirees. The same article compared the cost of living in different countries and found that living in Spain is far cheaper than in the UK, taking into consideration the cost of fuel, utility bills, supermarket shopping, public transport and eating out.
While listing countries by the cost of living is somewhat accurate, it’s hard to include all variables. The NHS means that most medical care in the UK is free for everyone, but it might not be the case in other countries and this is not to be overlooked – as we get older this is likely to be more important as health problems may become more common than when we were younger. So in the light of possible medical costs, health insurance is definitely an expense that should be included in your budget.
If the retiree’s main source of income is state pension, they can still claim this if retiring abroad, as long as they have made sufficient National Insurance contributions to qualify. Whilst it is very likely that a fixed income will stretch a lot further in some countries than it does in the UK, it is important to be aware that only citizens either within the EEA or countries which have a social security agreement with the UK are likely to get the usual annual increase in pension. Whilst this may not make a significant difference year on year, it may have an effect over the longer term, as cost of living increases. Luckily, this still leaves a very large scope of countries to consider.
Look out for the taxes
Another thing to bear in mind is the taxation of the destination country as well as your home country. Pension income can never be taxed twice, but income from UK investments might be another story. Certain countries have tax agreements with the UK, but in most cases you are still liable for taxes on investments or UK rental income, should you keep your property. It’s recommended to always consult with a specialist to be sure how your income will be taxed.
Some people prefer to sell their UK real estate and buy a new home in their new country of residence. But this may involve unexpected costs. There are countries, notably in Central America, where real estate property may actually be deemed as shares in a corporation and if the corporation fails, the entire investment may be lost. In some countries foreigners’ investments are welcome, but restrictions apply to exporting the profits. Therefore, passing property down to the next generations can also be tricky. Different countries have different rules dictating who you’re able to leave your estate to and may vary from the rules found in the UK. In France for instance, it’s impossible to leave your entire estate to your spouse. We recommend you to have a look at the guide by Consumer Affairs portal, which has dedicated two chapters on inheritance rules and regulations.
Overall, the decision to sell your UK real estate and buy a property abroad, or to keep your UK property and let it out, is one which should be formed based on a great deal of research. It might also be worthwhile to consider what would be the best option for your children or grandchildren. It’s no secret that buying a property in the UK these days is tough and help from parents/grandparents is the only way for younger generations to become independent and get on the property ladder, as prices are increasing disproportionately to wages and even a small, unassuming family home is out of reach for many young families.
Is it worth it?
Money is important, but it’s not the only aspect that needs attention, when considering relocating in retirement. Being in close relations with your friends and family is just as important. To be a loving grandparent from a thousand miles away is hard and this living arrangement is certainly not for everyone. But with the help of modern technology, such as Sentab’s easy video calling, you can still be there for your grandchildren.
And there’s a positive side – grandparents who live in another country are a perfect excuse for taking trips. Christmas celebrations and other important family events can be shifted from the UK to wherever, especially now that, with the right planning, airfares are ridiculously low. Same goes the other way around. If planned well in advance or by taking advantage of the sales campaigns, flights to the UK at least once a year are affordable.
Test it out first
All this can sound a little daunting, but there is a great deal to be said for retiring abroad. It’s a well-known fact that people from the Mediterranean generally live longer than those from Northern Europe. Factors such as diet play an enormous part in this, but there are other factors which shouldn’t be overlooked, such as the quality and pace of life, weather and the feeling of community gleaned from smaller town living.
It’s true that throwing yourself into a new culture and environment could equally be seen as a scary or enriching experience. Learning a new language, getting used to the local cuisine and traditions is at times difficult, but is also stimulating and exciting. And it may afford you the opportunity to experience more of the things you love, whether that be improving your golf handicap or being inspired to paint some of the beautiful new surroundings.
There are many websites introducing the best places to retire, but almost all of them have one recommendation in common – go and test it out first. This sounds reasonable as it’s the only way to find out how being away from your friends and family really affects you. It’s also the only way to go and fall in love with the fantastic nature, pleasant climate, friendly locals and the pleasure that comes from fulfilling a lifelong dream. And of course, a good excuse to holiday – as if one needs an excuse!