Cost of Living Forces Retirees Overseas
April 12th, 2007
A growing number of British retirees are hoping for a better standard of living by downsizing and relocating overseas. Over one million Brits are currently receiving their pension abroad, according to the Institute of Public Policy Research, and this is expected to more than triple to 3.3 million by 2050. Three quarters (750,000) of those drawing their state pension abroad have relocated to Spain.
However, Bank of Scotland International recently warned those planning to retire to Spain that they may no longer continue to receive pension credits. It also highlighted tax liability related to early retirees. Currently, only those people resident in the UK are able to take 25% of their pension lump sum tax-free and if a client is liable for tax in Spain before they start drawing their pension they may find that this 25% is taxable as well. The Bank recently explained how IFAs can add value by helping those planning to retire to Spain to avoid a double hit on Inheritance Tax.
Last year, the Foreign and Commonwealth Office (FCO) highlighted the plight of British expats living in squalor in parts of Spain as inflation and poor financial management eroded savings. As IFAs offer more bespoke services, retirement developers are already working with banks and brokers on a solutions like home reversion schemes to help residents live to a comfortable standard – and for longer.
Retirement communities are also adapting their offering. They not only provide older buyers with a range of facilities and a community of similarly aged and like-minded people but, crucially, at a lower cost. Such communities are well established in the US, Australia and the UK, and taking off in places like Spain, France and Portugal.
Sol Andalusí, a gated community set in 130,000 square metres of landscaped sub-tropical gardens in Spain, claims to be the first project in Europe to offer ‘healthy living’ through the combination of a fit and active lifestyle balanced with a high-level of medical care and security. “The cost of living is much cheaper here in Spain (€7 dinner at a typical Venta, 3 course exclusive meal here at sol for €12.50), but also insurances, taxes for retirees, transportation, etc,” said Coen Moonen, Sol Andalusi’s commercial director.
“Medical care is better arranged and also much cheaper, clients can get a private nurse at sol Andalusi for around €12 an hour, but also the seguridad social is free for retirees. SA works with the seguridad social and SA also gives the opportunity to rent or lease next to buying, so clients don’t have to take finance and can have equity to live from.”
Recently comparing the cost of buying in Spain with the UK, Mark Wilkins, a Marbella lawyer from The Rights Group, highlighted new findings that favour a move overseas.
“Many people who plan to purchase a retirement property abroad may be able to do so without needing a mortgage,” said Wilkins. “According to new data published by Retire to the Sun (23.03.07) online mortgage company – mform.co.uk – 13% of UK citizens planning to buy a new property in the near future expect to be able to do so without borrowing money. The majority are older people looking to downsize and take advantage of recent house price increases.
“Buying in locations, such as Spain, where it is typically cheaper than in the UK, mean that people who retire abroad could free up more cash from the move and enjoy a better standard of living.”
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