by Liz Rowlinson
Feb. 20, 2022
For sun-seeking pensioners the dream of a new life in southern Europe has not been thwarted by Brexit. Affordable property, a lower cost of living and warmer climes remain big drivers for prospective retirees.
In 2017 there was a peak of 475,000 British pensioners living in EU countries, but that figure dropped by about 8,000 to 466,920 in 2021, according to the Department for Work and Pensions. Post-Brexit uncertainty about residency rights and healthcare, along with the pandemic, have all played their part.
British retirees will now need to jump through a few hoops to live in Europe. It is not impossible, though — just look at the steady stream of American baby boomers who have moved to France, Portugal and Italy in recent years. With different residency requirements and levels of taxation on pensions key considerations, the choice of where to go is more complex, yet a country’s lifestyle will generally prevail, says Jason Porter of the wealth management company Blevins Franks: “You can’t let the tax tail wag the dog.”
Here is our round-up of the best places in Europe to retire.
Best for affordable property
Lacking any special tax incentives to attract retirees from abroad, it’s really the sunshine, lifestyle and relatively low cost of living that keeps drawing Britons to southern Spain. For €150,000 (about £126,000) you can buy an apartment or village house in many coastal areas of Valencia, Murcia or Andalusia, and council tax (IBI) rates are a fraction of UK levels.
For Lynne Barber, 63, a retired BT worker who lives in Cornwall and completed on a three-bedroom property in Catral in the south of Alicante this month, it’s also the culture and the pace of life. “It’s generally a warmer, more welcoming place with a family-focused attitude to life,” she says. Her company pension will cover the minimum income requirements of the visa. Her requisite private healthcare policy costs €1,550 a year.
“Yes, there are now obstacles, but you just need to bat them out of the way one by one or it will seem too daunting,” Barber says. Through the S1 form — obtained from NHS Business Services — over-65s and their spouse or civil partner can access the Spanish health service on the same basis as a local pensioner.
High-net-worth individuals need to beware that the Spanish wealth tax applies to shares and assets and not just property held in Spain. Porter says: “It doesn’t kick in for a resident couple until €2 million, but then it goes up and up — above €10.69 million it is 3.5 per cent.”
Best for easy access
Being able to drive to France from the UK in a day means that destinations such as Brittany, Normandy, the Loire and Charente remain favourites with British buyers according to the estate agency Leggett Immobilier. For their buyers’ typical budget of €100,000-€300,000, a charming blue-shuttered stone house close to a village is not hard to find.
Britons moving over need to get a long-stay visa, or VLS-TS, for which the minimum income requirement is €1,200-€1,300 net per month (again, with private healthcare for the first year). For private pensions in France there is a 7.5 per cent rate of taxation for lump-sum payments and monthly paid pensions are taxable according to set tax brackets, says Géraud Nayral of Cabinet Budiz, a tax adviser.
“The French wealth tax (ISF) has been replaced by a specific real estate wealth tax (IFI) on property worth €1.3 million (net of mortgage) with the main home getting an allowance. Rates are 0.5 per cent from €800,000; 1.5 per cent after €1.3 million,” he says.
French assets will also be subject to taxe foncière (land tax) dependent on property and location, but on a villa this might be €2,000-€5,000 a year, he suggests. “The S1 form can be used by British retirees to reduce social charges [social security levies on earned assets] as well as to access state healthcare after the age of 65,” Porter adds.
Best for its low-tax pension incentive
If you are happy to move to a low-density area in the southern half of the country, you can take advantage of the flat 7 per cent tax for new retirees. The municipality must have fewer than 20,000 inhabitants, and some Umbrian villages with populations of fewer than 3,000 are included.
Dave Benton, the owner of the Abruzzo-based A Home in Italy estate agency, says British and American interest has increased since the scheme was introduced in 2019. “But while British people might be interested in the affordable property of the Abruzzo, some do not have enough pension income needed to get a visa — which for a couple is about €38,000 a year — having savings is not good enough,” he says. Visa applicants can use the Italian Universal healthcare system after a year.
Lexi Lux from Oklahoma and her husband Craig, 60, a retired government lawyer, moved over to the hilltop town of Civitella Messer Raimondo in October and bought the former mayor’s four-bedroom house. Their Elective Residency Visa was approved in just eight days.
“During lockdown we dreamt about moving to France or Italy — Craig wanted mountains and I wanted sea,” says Lexi, 42. “Chieti offers both and when we found out about the tax incentive we said, ‘We cannot not do this.’ We’ll explore the area and maybe help with a wine harvest — rather than watching Netflix back home.”
Retirees on this concession do not have to pay wealth tax, says Daniel Shillito, an international tax adviser: “There is an annual financial assets tax of 0.2 per cent and a tax on property of 0.76 per cent of the purchase price of foreign-held property.”
Best for healthcare
If you can afford the relative high cost of entry — post-Brexit — then Malta is a tax-efficient place to be. The Malta Retirement Programme offers residency to those buying a property for at least €220,000-€275,000 (depending on location) or renting a home for €8,750-€9,600 per annum. A pension is required, and is taxed at 15 per cent. “British retirees are still entitled to free public healthcare in Malta, thanks to the reciprocal health agreement, which is still in place between Malta and the UK despite Brexit. Being predominantly English-speaking makes it easier to integrate with the local community,” says Grahame Salt, co-owner of Frank Salt, an estate agency.
Alison and Paul Rutland, from Portsmouth, both 66, who retired to Gozo in 2013, would agree. They enjoy a busy social life with the expats based around Gharb that includes barbecues and sailing excursions to Sicily or Greece. “Language, climate, ease of access back to the UK to see our sons and the cost of living were all factors,” says Alison, a former sonographer. “The healthcare system is superb too — we pay €10 or €15 to see a GP and never wait long.”
Familiarity is one of the main drivers for Britons, who have a long association with Portugal through holidays, says Michael Reeve, CEO of the Association of Foreign Property Owners in Portugal (Afpop). “The climate and low crime are also a consideration, as is the language. The Portuguese are willing to speak English — a key reason we now have many Americans choosing to retire here.”
There’s also the Non-Habitual Residents scheme offering arrivals a tax rate of 10 per cent on their pensions, but they will also need a visa. If retirees apply for a D7 Residency Visa the minimum income required is €8,460 a year, or €12,960 with a dependent/spouse, confirms Joana Mendonca, head of legal at Global Citizen Solutions. “Once they have a residence permit they can register with the Portuguese National Health System (SNS).”
You’ll need to pay IMI annual tax on property owned in Portugal worth more than €600,000 (or €1.2 million for a couple) with rates of 0.4-1 per cent.
Best for low cost of entry
This former British colony offers a laid-back island lifestyle, a low cost of living and pension income taxed at only 5 per cent. Residency via the Category F visa requires purchase of a property for as little as €100,000 and an annual income of about €10,000 a year. “Through the S1 form over-65s can access the General Healthcare System (GHS) but they may be required to pay a small fee towards the cost of any treatment,” says Rob Johnson, managing director of estate agency RJ Overseas. “They will need a basic private healthcare policy when applying for residency. For those 55-59 years of age costs range from €118-€150 per month for premium cover.”
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