It is therefore about choosing where you want to live and then seeing whether the cost of living there is viable given the income and savings you will be able to draw on to fund your retirement. The decision of where to retire tends to come first.
If you are purely looking at the cost of living you could retire to somewhere like Malaysia where consumer prices including rent are 48% lower than in the UK and you can enjoy a meal out for 69% less. This may give you an idyllic life and will be right for some people. Others may prefer to stay in Europe closer to home making it easier for family to visit and to return to the UK when desired.
How long would £1 million last in retirement?
Witt International recently published the results of a comparison of costs of living to a luxury lifestyle in the top 15 expat destinations in Europe, to find out where your money will last the longest. They assumed you purchase a 90sqm apartment just outside of the city centre at the start of your retirement, this is how long they say £1 million would last:
|Avg cost of property||Basic living||Luxury living||How long would £1m last|
Costs of retiring to Europe
The most popular destination for people retiring to Europe is Spain where consumer prices are 17% lower than the UK on average, rents are 27% lower and you can eat in a restaurant for 26% less. Portugal attracts considerably fewer British retirees although there are similarities between the two countries in terms of climate and lifestyle. Portugal has a lower cost of living with consumer prices around 8% lower than in Spain, rents marginally higher and you can eat in a restaurant for 19% less than in Spain. More fundamentally the Non-Habitual Residence Scheme means that you can arrange to receive your pension tax-free for ten years. Despite this most Brits choose Spain.
Retirement to France is not necessarily going to lead to a lower cost of living with consumer prices 13% higher than the UK. Although rental costs are 11% lower when this is combined with the consumer prices France’s costs are 6% higher. However, the costs will vary significantly if you look at different regions and at costs in a rural setting rather than in a big city. Thus if you compare Brighton a coastal town in the UK with Le Havre across the Channel, although the consumer prices are 8% higher in Le Havre, rental costs are 60% lower giving a combined cost 16% lower.
These comparisons come from the site, Numbeo, and you can use such sites to compare the cost of living, but you need to recognise that country averages or comparisons between cities may not reflect the costs you will face and costs vary from region to region. They can give a general feel for the cost comparison, but you will need to consider what is important to you to get a true comparison. The lifestyle will also be very different to the life you have led before in the UK both because you will be retired and because of the very different options available to you in a different country with a different climate, lifestyle and culture. Your spending habits will also have an impact, for example, if you choose to stick with imported brands the costs are likely to be higher.
The accommodation costs that you face will depend on the nature of the property and whether you choose to rent or buy. The primary determinant of the cost you incur will be the type, quality and location of the property that you decide to rent or buy. There are, however, undoubtedly cheaper properties available in many places in Europe.
It is very difficult to give realistic comparisons between countries on the purchase price of properties. Spainhouses.net, for instance, shows the average cost of a house in Spain at €378.076 and the price per square metre at €1,355. However, there are significant differences by region with the average in the Valencia region at €266,347, but the average cost per metre is higher at €1,788. Averages can be very misleading and a search of a property site, like Rightmove Overseas, for the sort of property you plan to buy will be the best way to find out how much you will need to pay if you plan to buy your home.
If you plan to rent property, GoingThere, who provide destination services around the world, publish a Global Leasing report bi-annually. This gives the current range of rents for various types of property in major cities. The cost of renting a three bedroom home according to GoingThere in these cities are as follows:
- London £2,710 to £6,000 (€3,060 to €6,800)
- Bristol £1,000 to £1,500 (€1,150 to €1,700)
- Barcelona €1,500 to €3,500
- Madrid €2,500 to €4,500
- Paris €2,200 to €4,500
- Strasbourg €000 to €2,000
- Nice €1,000 to €3,650
- Lisbon €1,300 to €2,500
- Rome €2,200 to €4,500
- Milan €2,500
This can give a guide, but rents outside the cities may be significantly lower and a search of regional property sites dealing with rental properties will give a feel for the price of renting the sort of property you are looking for.
Another variable that needs to be considered is healthcare. Currently as a member of the EU British citizens qualify to take advantage of the local state healthcare system, but for non-EU citizens and for British citizens after Brexit the position is less clear:
- Spain – All permanent residents who are paying social security in Spain qualify for access to the state healthcare system. Those who have retired from that system or who work, or have worked, in an EU country or other country with whom Spain has a Social Security treaty also qualify. The option to take out private insurance is also available. Although the cost of an international health plan can be high, providers like Sanitas provide specific coverage in Spain which reduces the costs.
- France – PUMA (Protection Universelle Maladie) grants all French residents (employed, unemployed, retired, expats) subsidised healthcare. Under PUMA, 70% of medical costs are reimbursed (100% for long-term treatment such as diabetes or cancer). Supplementary medical insurance is also available from groups called Mutuelles d’Assurances.
- Portugal – Everyone who is resident in Portugal, regardless of nationality, economic status or legal status, is entitled to access healthcare services for free or at discounted costs. State healthcare is well subsidised but you will need to pay higher fees for some treatments and services and may need to take out private health insurance.
- Italy – The public healthcare system is free or very low cost to all EU residents, but non-EU citizens must have full residency status to qualify. However, most Italian residents, including expats, also have supplementary private health insurance allowing them quicker access to specialist treatment and private hospitals.
International Private medical Insurance can be very expensive and wherever possible, a local policy covering the country where you will be resident is more affordable. Health insurance becomes more expensive and more difficult to obtain as you get older. It is best to take out the insurance while you are younger as most policies will continue to provide cover as you get older if you are an existing policyholder.