How to prepare to retire in the EU after Brexit
Written by E4E Editor on 11 August 2018
While the actual implications of the UK leaving the EU are still unclear, it is possible to prepare for what may be required for British citizens to take into consideration if they wish to retire in the EU after 29th March 2019 – or whenever the UK actually leaves the EU.Brexit.
This article aims to look at the factors that should at least be considered, on the assumption that there will be no more freedom of movement between the UK and other EU countries, and how Brexit could affect the financial feasibility position of a British person looking to retire in the EU after the UK leaves the EU.
It is important to understand that everything in this article takes multiple factors into consideration, however, as no deal has yet to bebeen signed, nothing is guaranteed. We will aim to update this article as and when things become more definitive.
However, for the sake of clarity, this article is written on the assumption that there will be “some kind of agreement” between the UK and the EU, as the technicalities and implications of a no-deal scenario will eventually be superseded with by an agreement in the future and we believe that an extension to negotiations is more likely than exiting with no agreement in place.
In this article we will look at the following key matters for considerations:
- Currency and exchange rates
- Visas and right to livein the EU
- Income requirements
- Cost of living and quality of life
- Wills and death planning
- Difficulty of obtaining advice
Currency and exchange rates
Depending on which new publications you read, you would be forgiven to thinking that Brexit has either caused the complete devaluation of the pound or there has been no impact whatsoever.
The truth is that the vote to leave the EU did have a profound effect on the value of the pound, but that it was not Brexit that had that impact, but the lack of visibility aroundof what the future might looks like for the UK post Brexit. Even 24 months later, it is impossible to say just how the UK’s economy will look post Brexit, either immediately or longer term.
However, once the an agreement is made, however it looks, there will be a degree of clarity for how the economy will shape up. This clarity could have a positive impact on the value of the pound, but it is possible that value of the pound may still be subject to extreme fluctuations where it is not uncommon for it to gain/lose 1% to 2% against the Euro and other currencies.
The reason this is particularly important is that retirees will often receive an income from pensions in the UK, or other forms of income – such as income from renting a UK property. The impact of the pound losing 2% in value is that it means your income will not go as far and life potentially becomes prohibitively expensive, depending on the level of income.
Therefore, as a retiree it is important to be aware of what is happening to make future decisions about future implications. Our suggestion is to plan for the worst but hope for the best. Perform calculations based on an exchange rate far lower than you can currently get and investigate cost effective ways of exchanging GBP into Euros without getting charged extortionate fees. It is always worth shopping around for the best rates, but ultimately it is crucial to ensure that whatever the exchange rate, you have a plan to maximise your earnings and don’t get stung in the event of future devaluations.
For a vast number of years, it hasn’t been necessary to even consider any visa requirements due to the freedom of movement that UK citizens enjoy making it as easy to move to an EU country as moving to the British countryside (financial matters aside). While anybody retiring abroad in the EU would always look at the financial situation and evaluate living conditions, these are factors that would be considered for any retirement.
However, for people looking to retire from the UK into an EU country post Brexit, it is unlikely to be as easy as it has been.
Most countries outside of the EU will require people to be self-sufficient and not be a drain on the state in anyway before considering offering a visa to stay and live and we believe this will be the case for UK citizens looking to retire in the EU post Brexit will face similar scenarios.
As an example, if you wanted to retire to Spain post Brexit, you will probably be required to apply for a “permiso de residencia no lucrative” – i.e. permission to live in Spain but without the right to work.
To get such permission you would currently have to provide evidence that are financially self-sufficient by demonstrating you receive a monthly income of at least €2,130 (+ €532 for each of your dependents). You may also have to prove that you do not pose any risk to the public.
Of course, some countries will have more open policies based on the level of wealth of an individual (i.e. the more wealthy someone is, the more likely they will be granted a visa allowing them to retire somewhere).
For British citizens already living in the EU (whether retired or not) it is likely that there will be some form of application process, potentially with a fee, where they will be granted a right to stay under the same conditions they currently enjoy. The UK government has already announced a similar scheme for EU citizens living in the UK, which will be online, involve three questions and require a small fee to apply.
Income, pensions and tax
When you combine the previous two factors, the income that retirees receive is central to both factors – i.e. will the money you receive from your pension(s), rental income or other investments be sufficient in a range of scenarios to fund your retirement.
If your income is generally arising in the UK, for example from renting out your house in the UK or your State Pension, there is very little you can do to not be affected by currency fluctuations and therefore your degree of self-sufficiency could be affected on a day-to-day basis.
However, you may be able to change the source of your income enabling it to be paid in Euros. For example, could you sell any property and reinvest within the EU to generate an income through other means?
If you are planning to use your personal pension (not State) as your primary source of income, you may be able to transfer any funds out of the UK and into an EU or other country within the EEA (eg. Malta or Gibraltar) into a QROPS and therefore receive your income in Euros rather than GBP.
While QROPS have a range of benefits and drawbacks, the degree to which the rules around QROPS transfers will be affected by Brexit is unclear, but unlikely to be that great. Your biggest concern with such a transfer is using a reputable firm that will not charge extortionate fees or lock you into an agreement which is not in your interests.
You should also be aware that there are different tax rules in each country within the EU, however these tax rules are unlikely to change because of Brexit as they are down to each jurisdiction to manage. This is also true of any Double Tax Treaties that exist as the treaties themselves are between the UK and each specific country and will help ensure you are not subject to unnecessary tax in both jurisdictions.
Cost of living and quality of life
Having covered income and currency exchanges, it should already be clear that the cost of living could be open to significant change daily, depending on what your main source of income is and how the UK economy is fairing post Brexit.
However, you should also consider that while the trade negotiations may not impact you on a day to day basis, any tariffs that come into play between the EU and the UK could mean that buying UK products may also become more expensive due to the increased tariffs on specific product types.
Therefore, if you were planning to retire eating Hobnobs, baked beans and drinking Yorkshire Tea, just be aware that the import costs may increase. Most people retiring abroad are probably moving for a new experience, to try new foods and enjoy a different lifestyle, but many people like those creature comforts so it is important to understand that they might not be as readily available in the future as they are now.
It’s completely understood that as we get older our reliance on healthcare will increase.
Up until Brexit, and potentially within the transition period, using healthcare abroad has been a relatively straight forward experience, even without health insurance, as any healthcare that was required was simply claimed from the UK by the country where the healthcare was taken (eg. the Spanish authorities claimed any fees/charges from the NHS in the UK and vice-versa).
However, if British citizens live outside the EU, the same agreement is not in place and it is essential to have a complete understanding of the fees, charges and costs of healthcare and treatment wherever you choose to live. In many countries it is essential to pay for health insurance to ensure that you are eligible to receive healthcare without being hit with a charge at the point of use.
Post Brexit, the logical assumption to make is that the reciprocal agreements will halt for people retiring once the UK has left the EU – however, assuming an agreement is made between the UK and EU, it is also logical to assume that the reciprocal agreement will remain in place for people living and registered in the EU at the point of Brexit.
While this may sound a little convoluted, the safest option is to look to get health insurance that covers you and your family, as foreign nationals in your country of residence.
Wills and death planning
In truth, the impact Brexit will have on the rules around what happens to your estate when you die abroad will likely be minimal. This is because that while there are agreements in place across the EU about Will handling, every country has its own laws surrounding what happens to an estate when someone dies.
What is essential is that you have a Will in place that is legally binding in your country of residence – whether you’re retired or not.
Whenever anybody retires abroad, death is something that must be part of the planning process regardless of Brexit and it is vital to seek advice from a professional to ensure that the rules are known and ensure that the correct documents are in place to allow your wishes to be carried out.
Getting advice about retiring in the EU post Brexit
While we normally offer a free consultation covering all manner of financial matters, Wills or relocation, when it comes to Brexit it is impossible to know for sure what will happen.
Therefore, any consultation that is undertaken around Brexit will be theoretical guidance only and you should be prepared for questions that are generally going to remain unanswered for the time being.
All our experts can offer at this stage is assistance on how the rules are now, and what you should be considering. They can look at your risk profile and therefore factor in that if Brexit is a significant risk, what your propensity is to retire in the EU based on your current circumstances and the potential implications of the worst-case scenarios.