Expats expand horizons in the quest to live the dream


Adventurous Britons are seeking new places to settle, says Laura Henderson.

The global recession has cast a pall on many of life’s “big” adventures. Take the legions of eurozone émigrés who, until recently, were enjoying sun, sea and sand on fixed sterling incomes from savings and pensions. They’ve seen relative (savings) values drop by around a third in three years due to currency fluctuations, and they’ve also had to contend with depreciating local property values. It is an erosion of capital gains that may take several years to recover.

However, the dream of retiring abroad remains remarkably intact. The Centre for Future Studies confirms one in eight Britons over the age of 55 still intends to settle abroad by 2012, a trend that reflects the increased life expectancy among the silver generation, and which embodies the quality of life aspirations of British pensioners.

It’s a demographic shift that is being matched by a growth in location preferences.

Premier long-haul stalwarts Australia, New Zealand and Canada have recently been joined by newcomer “tax havens” Malaysia, Belize and Panama, with a growing number of escapees plumping for Malta and Cyprus in the Mediterranean. “The latter boasts excellent health care programmes with automatic residency rights easing the path to a brand new life,” says Peter McGahan, of independent financial adviser Worldwide Financial Planning.

The prospect of bargain property, as the likelihood of countries dropping out of the euro becomes clearer, is also likely to affect migration volumes in ailing eurozone countries, suggests Marcus Carlton, director of wealth management for HFM Columbus.

“There’s a chance that Spain, Greece and Portugal could crash out of the single currency and revert to their original currencies,” he says. “If that happens, we can expect mass devaluation, and a surge in demand for below- market value properties.”

Choosing a location solely on the grounds of price, however, is ill advised. “Pension arrangements should come first,” adds Carlton. “Individuals 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 be addressed from the outset.”

Health insurance can be a stumbling block. While many countries operate a national health service, they may not cover the total cost of health care, making it vital to investigate the entitlements. “Certain countries require you to take out private medical insurance,” says Karen Teasedale, 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. “Putting down roots somewhere should be because you really want to settle in that particular country,” adds McGahan, “not just for tax or cost of living reasons. Plan with that in mind and you can count on a rich and fulfilling retirement.”


40,000 lured by sunshine and perks

The Mediterranean’s third largest island is home to a large expat community, with more than 40,000 UK retirees arriving since 2000.

Prime retirement spots include the west coast yachting haven of Paphos. Spacious three-bed villas in the prestigious golf resort of Aphrodite Hills sell for £450,000, with renovated two-bed townhouses overlooking Kato Paphos harbour priced at £160,000. Turnkey beachfront apartments in Larnaca can be picked up for £100,000.

Boasting 320 days of sunshine a year, Cyprus has a low cost of living. Household bills are, on average, 20 per cent lower than the UK.

Favourable treatment of pensioners also applies to those who have taken early retirement. “If you live in the country permanently, or at least six months a year, you can benefit from becoming a tax resident, where any pension is taxed at a flat rate of five per cent,” says Nicola Goldsmith, of financial services group Blevins Franks.

“Interest and dividends are exempt from tax, but are subject to the Special Defence Contribution of 10 per cent and 15 per cent respectively. Those looking to retire must have a satisfactory financial standing and will not be allowed to work in Cyprus.”

Other incentives include index-linked increases to UK state pensions. Bank interest and share dividends can also be earned free of UK tax once you are officially recognised as a tax resident of Cyprus.

Further perks include no inheritance, wealth and gift taxes. To qualify, owners have to prove that they have severed all links with the UK to HM Revenue & Customs.


Tropical weather, excellent healthcare and a decent cup of tea

Sugar-sand beaches, island archipelagos and an up-tempo culture are not 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.

Many Britons are now finding Malaysia the ideal long-stay destination – a tropical climate, world-class health care, and one of the lowest costs of living in Asia, alongside steady property appreciation of six per cent per annum.

The government’s “Malaysia My Second Home” initiative launched in 2002, now has UK applicants driving the programme, many living 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 cost from £150,000.

“Of the 15,214 approved applicants to date, 1,674 are from Britain,” says Malaysia My Second Home director, Siti Nani Shaarani. To qualify, buyers over 50 must hold at least MYR 150,000 (approx £30,000) in a deposit account, but can use this to buy a property and keep a minimum balance of MYR 103,000 (£20,000).

Successful applicants, provided that they do not work in the country, benefit from a “rolling” 10-year residency visa and can bring spouses, unmarried children under the age of 21, and parents above the age of 60 as dependents.

Benefits include exemption from Malaysian income tax on pension and related income remitted into the country. There is no capital gains, wealth or inheritance taxes. Income tax for foreign residents on earnings made in Malaysia is levied on a sliding scale of 0 per cent to 26 per cent.


Hats off to the ‘pensionado’ visa

“Canoe Man” John Darwin drew the eyes of the western world to this Latin American hot spot when he faked his own death to scam insurance and pension companies, escaping to the country’s vibrant capital Panama City with his wife. Now, increasing numbers of UK migrants, lured by the country’s balmy climate, picture postcard coastline and relaxed banking laws, are calling it home.

A nation transformed since the Americans ousted military dictator Manuel Noriega in 1989, Panama has capitalised on high-spending empty-nester American and European retirees. Early arrivals invested in second careers – running start-up businesses, B&Bs and restaurants, and are now attracting more of the same.

While US expats account for over 30 per cent of the 190,000 overseas population, Britons are catching up. The majority settle along the Pacific Coast near the capital, Panama City, in Coronado, Punta Chame, Gorgona and Rio Mar, where new-build apartments with sea views are as little as £80,000. The exclusive Punta Pacifica district has architect-designed condos with concierge services. Two-bed new-build units sell for £225,000.

Retirees have plenty to smile about – no tax on offshore-derived income, be it a pension, bank deposits or an investment portfolio, and no capital gains or inheritance tax. Foreign owners of new- build properties are exempt from paying property taxes on a sliding scale of five to 15 years, based on the market value of the property.

“The easiest way of securing residency is with the pensionado visa, with low entry-level requirements for individuals that receive a pension for life in their native county,” says David Cox, of UK property consultancy Property Frontiers.

Applicants must demonstrate a minimum income of £600 a month and £150 for each dependent. Once the visa is approved (it takes about four months), pensionado perks include up to 50 per cent off services from doctor’s fees and hospital costs to public transport and airfares.

Income tax on a sliding scale of 20.5 per cent to 27 per cent is payable on Panamanian earnings (with the first £5,500 exempt). You can claim some exemption from tax on rental income should you let a property, and if you invest in one of Panama’s tourism zones, you may be exempt from income tax altogether for 15 years.

Retirees also receive a one-time exemption on the importation of household goods up to the value of £6,000.

Essentials for retiring abroad

– Inflation-proof your pension. UK state pensions rise every year to keep pace with the cost of living. But if you retire abroad, these increases only apply in the EU and European Economic Area, which includes Gibraltar, Switzerland, Iceland, Liechtenstein and Norway, and countries where the UK has a reciprocal agreement. Australia, Canada, New Zealand and South Africa don’t have an agreement with the UK, so your state pension will be frozen from the day you retire. Move abroad at 65, and your pension could be static for 20 years or more, by which time its value could have halved.

– Clue up on health care. If you retire in the EU or EEA, you qualify for free state health care, but it may not be as comprehensive as the NHS. If you are relocating outside the EU – especially to the US or Australia – you need private medical insurance. Make sure you can afford it.

– Factor in purchase costs. You may be able to sell your home in the UK, buy overseas and still have cash to spare. Legal and mortgage fees, removal costs, and property taxes in your new destination are likely to eat into any profits. Take advice from a trusted legal expert in your new country. Don’t go it alone.

– Don’t depend on double tax treaties (DTT). A DTT is an agreement between the UK and another jurisdiction stating that you cannot be a tax resident of both countries. If you are British, and you end up relying on the DTT, you are 95 per cent likely to be deemed a UK tax resident. Take all the necessary steps to be classed as a non-UK tax resident so you don’t have to rely on the DTT.

– Plan your exit strategy. Expat retirees don’t expect to return home, but many find health care isn’t as accessible, their spouse becomes ill, or they miss family. If house prices have risen, you may struggle to afford the same standard of property. Be ready for a change of personal circumstances.

This article was originally published in The Telegraph Weekly World Edition.

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