A Change Of Scene

Brexit uncertainty is fuelling enthusiasm for retiring abroad. Laura Henderson examines two relocation markets successfully wooing the grey pound

Many dream of retiring abroad and with pension freedom - the opportunity to take those nest egg savings and head for sunnier climes is even more tempting. A chilly spring has doubtless made more contemplate joining the 1.3m or so Britons who live in mostly warmer EU countries.

If the thought of spending your retirement years sipping a glass of wine by the pool, dining out at a fraction of UK prices and enjoying a gently-does-it pace of life appeals, you are not alone. There were 204,074 Brits aged 65 and over living in the EU at the beginning of 2017 and 41% of the British population in Spain and 39% in Portugal were retired, according to data from the Office for National Statistics.

Far from deterring UK residents from moving to France, Spain, Portugal, Cyprus and Malta — the most popular European destinations — the Brexit vote appears to have galvanised interest in emigrating.

“There’s agreement in place already between the UK and the 27 EU members on legal residency, healthcare and the UK state pension for the transitional period, up to December 31 2020,” explains Jason Porter, director at Blevins Franks, a wealth manager specialising in expat communities. “We have a significant number of people talking to us who aim to be in-country at the latest by the end of this year. The long-term outlook for UK migrants living in Europe however still remains largely a matter of guesswork at this stage.”

The uncertainty of Brexit may have another unwanted effect for would-be migrants, warns Sarah Coles, a personal finance analyst at fund Hargreaves Lansdown, the fund supermarket. “While the negotiations are ongoing, we can expect currencies to remain fairly volatile, so it’s vital that expats consider the impact of currency movements, both when they initially move overseas and buy a property, and after they have settled,” she says. “Not only could it be cheaper to exchange money with a currency specialist than a bank, but it’s also possible to fix an exchange rate in advance.”

Demographic shifts are also being matched by a growth in long-haul location preferences. Premier stalwarts Australia, New Zealand and Canada have more recently been joined by ‘tax havens’ Malaysia, Belize and Panama.

Choosing a location solely on the grounds of price, however, is ill advised. “Pension arrangements should come first,” adds relocation expert, Clive Easton. “Individuals not only need to look at how their savings will be affected, they need to ensure existing assets (particularly if they are reinvesting income) fit into the tax regime of their chosen country. Inheritance tax and succession laws should also be addressed from the outset to avoid any nasty surprises down the line.”

Health insurance can be a further stumbling-block. While many countries operate a national health service, these won’t necessarily cover the total cost of healthcare, making it vital to investigate what your entitlement is before taking the plunge. “Certain countries require you to take out private medical insurance,” adds Samantha Sargeant of AXA PPP Healthcare. “Premiums will go up, so it’s important to ring-fence savings for future pay-outs.”

Ultimately, however, it’s about finding a place that meets your lifestyle needs and wants. “Putting down roots somewhere should be because you really want to settle in that particular country,” adds Easton, “not just for tax or cost of living reasons. Plan with that criteria in mind and you can count on a rich and fulfilling retirement.”

PICK OF THE BUNCH

Portugal – best for short-haul perks

While a pauperised Greece and high-debt Spain are tentatively emerging from EU imposed austerity, Portugal boasts a respectable GDP growth of 2.1% in 2018, driven primarily by export growth rates, but also tourism.

The country’s construction industry, in parallel with the rest of Europe has felt the bite of the recession, but real estate growth in the past 18 months has been reflective of a prudent philosophy filtering across all areas of economic activity: a flight to quality, with high value-added real estate development leading the way.

Property prices in Portugal also remain competitive compared to many rival destinations in Western Europe, with a choice of high-quality homes at attractive prices in both finished form as well as developments currently under construction in sought-after locations such as Lisbon and the Silver Coast with entry-level prices from £250,000.

In an effort to attract more wealthy foreigners to its shores, Portugal has reviewed its non-habitual residence programme NHR, whereby individuals are exempt from paying tax on their non-Portuguese income for a decade.

Although the scheme has been in place since 2009, the introduction of UK pension freedom means this generous tax break is now even more attractive. Adds Easton: “Under pension freedom, a retiree can take their entire pension out in one go or over a number of years and if they are living in Portugal, they could access the whole pot over a 10-year period tax-free.”

The programme makes Portugal one of the most tax efficient countries for retiree expats to live in as long as they have not been resident in Portugal for the past five years. NHRs will also benefit from the lack of inheritance and gift taxes, which is quite convenient in terms of deciding about passing assets to the next generation. In fact, almost all kinds of income from a foreign source are exempted from taxes in the country, which contributes to the favourable regime even further.

Malaysia – best for long haul luxury

Sugar-sand beaches, island archipelagos and an up-tempo culture isn’t a bad opening bid for a new life abroad, but expats are drawn to this former British colony more by familiarity – an English speaking, tea drinking dragon economy with a high value property market.

Ranked ninth in the world for tourist arrivals, many Brits are now finding it the ideal long-stay destination - a tropical climate, world-class healthcare, and one of the lowest costs of living in Asia, alongside steady real estate appreciation of 6%-8% per annum.

The government’s ‘Malaysia My Second Home’ initiative launched in 2002, now has UK applicants driving the programme, many putting down roots on the scenic Sepang Gold Coast close to the capital Kuala Lumpur and the exclusive suburbs of Mont Kiara and Kenny Hills, where freehold apartments can be snapped up for £400,000. To qualify, buyers over 50 must hold at least MYR 350,000 (approx £65,000) in a deposit account, with a minimum of MYR 10,000 (£1,800) in monthly income. Successful applicants, provided that they do not work in the country, benefit from a ‘rolling’ 10-year residency visa and are allowed to bring their spouses, unmarried children under the age of 21 and parents above the age of 60 as dependants.

MM2H residents may bring in household effects duty-free, and import or purchase one vehicle locally, tax-free. Further benefits include exemption from Malaysian income tax on pension and related income remitted into the country. A ‘taxlite’ regime also means no CGT, wealth tax or inheritance taxes, although any income (such as income from house rental) made in Malaysia is subject to income tax.