Top 5 considerations before retiring abroadPosted on: 21 March 2016 by Gareth Hargreaves
Jordan Tilley reveals five issues that are often overlooked when people plan to retire abroad
As the winter evenings grow colder and darker, increasing numbers of British retirees or those about to retire begin to seriously consider escaping the UK and moving to sunnier climes overseas. Last year, around 320,000 emigrants left the UK to live abroad, according to the Office of National Statistics. In addition to this figure, around five million Britons currently live abroad. With better than ever property values and affordable travel, it is unsurprising that many British pensioners are choosing to move to warmer climates upon retiring.
But before taking the plunge and moving overseas, there are some important decisions to be made, the most significant of these being the end destination. Spain and Portugal are two countries now topping the popularity lists of favourite destinations to retire to. Other common countries for setting up home overseas include the US, France, South Africa, and Australia.
Even if you’ve been holidaying in a location known for its expat community such as Malaga, Spain for the past ten years, there are unexpected differences that can emerge in the early days of a move and complicate the process.
From securing your healthcare to developing an awareness of currency fluctuations, the following tips make sure you don’t get caught out.
Check up on your healthcare
If you’ve been brought up with the NHS, it can be difficult to grasp the very different healthcare systems that operate in other countries.
In the US, healthcare is a significant financial consideration. Though the quality of care is world-class, it pays to be aware of the associated costs before committing to the American dream.
In contrast, accessing healthcare in Europe is more familiar. As a British citizen, receiving a UK state pension, you can benefit from healthcare in any EU country. You will need to apply for a certificate, officially called an S1 or E121 card, but once you have this you can register at your local GP to obtain a medical card. This card will then cover you for any medical treatment and treatment for any pre-existing medical conditions.
For those considering a longer haul relocation, Australia has one of the highest life expectancies in the world. The country has a similarly well regarded health care system which is provided by both private and government institutions. The UK and Australian governments have a reciprocal agreement to cover necessary treatments through Medicare, a publically funded service. However, the best option for permanent retired residents is to apply for private healthcare.
Consider the cost of living
If you factor the cost of living into your plans, you safeguard yourself from a surprise upon arrival.
It pays to be aware of local differences. Cost comparison sites like Expatistan can provide you with a good idea of the prices you can expect in different countries and how basic living costs match up.
If you’re considering a move to the rolling French countryside, for instance, it’s worth factoring in the cost of running a car – fuel efficiency, the distance to your nearest supermarket and the local price of petrol can all have an impact on your outgoings. These kinds of outlays could really make a dent in your pension.
Choosing an area popular with tourists can also significantly inflate the cost of living, so keep this in mind when searching for the dream retirement spot.
South Africa is another southern hemisphere destination that benefits from a lower cost of living compared to the UK. One is able to enjoy a comfortable lifestyle in this exotic and naturally diverse setting. Some of the most desirable areas that British retirees flock to include Constantia and the Atlantic Seaboard. Currently, there are no restrictions on non-residents owning property in South Africa –and given the buoyant exchange rate with the South African Rand, Brits would be wise to consider investing in a property in Cape Town. The flights back home to visit family or friends in the UK, however, will cost considerably more than those to Europe.
Australia can end up be an expensive place to retire to. However, the pound is currently fairly strong against the Australian dollar (worth around $1.79 for every pound you transfer) and Australia itself has some fantastic lifestyle perks. The laidback way of life is often a big draw for many Brits seeking more sun and an outdoorsy, sporty lifestyle. So, it may be that it is more cost-effective to stick to holidays in Australia as opposed to relocating to the country permanently.
Stay on top of local property taxes
If you choose the US for your new life overseas and you’re set on buying property there, be sure to familiarise yourself with the property tax that applies in your state of choice. Taxes could end up influencing your choice of location. Some states set much higher property taxes than others, with New Jersey and Texas at the top the list. Louisiana and Hawaii fall at the other end of the spectrum, paying significantly less.
Property tax in Spain also varies by region. Huelva comes top with a base rate of 1.16%, more than twice that of Albacete, the lowest at 0.4%.
Meanwhile, if you’re looking for the some of the lowest property fees going, Barbados is a great place to consider. Properties in Barbados are not subject to capital gains tax, and mortgage availability is usually very high. While properties are currently quite expensive, the savings you’ll make on property tax alone could make up for this over time. In addition, you can get a lot of value from your pension in Barbadian dollars.
Brush up on your language skills
If you’re torn between two locations or struggling to decide whether to stay or go, it may help to consider the role language can have in helping you feel at home in your new country of residence.
One advantage to living in the US is its shared language. Making new friends and getting on with day-to-day tasks are much easier when labelling and signage is understood. Similarly, English is the common language spoken in public and commercial life in South Africa, particularly in areas like urban Cape Town.
If you choose Spain, things can be quite different. While many expats do get by without learning the language, it’s always an advantage to have a little Spanish under your belt. If you don’t, you might find yourself having to employ a translator to help you through certain important interactions, such as visits to the GP or hospital.
Beware of hidden costs when transferring money
After moving overseas, you will likely have to transfer regular sums of money such as pension contributions, mortgage payments or grandchildren’s school or university fees. If doing so, it is important to be aware of the deductions made from the amount you are transferring when sending money via a bank.
Setting up a regular payment plan with a currency exchange company is a sensible way to pay your mortgage payments without losing out. This means you can pay your regular bills quickly and easily, payments can be deducted every month, and the currency transfer company can provide advice to minimise potential cost increase that could happen if currencies start to fall over a long period of time.
Jordan Tilley is Head of Alliance Partnerships for UK and Europe at OFX, part of the OzForex group, one of the world's largest online money transfer companies.
Last edit March 2016.
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