Written exclusively for Expat Network by Luis da Silva, Managing Director of Algarve Senior Living
Over the last four decades or so, citizens of the UK have become accustomed to easy travel within Europe, seeking work and holidays outside their home country without a second thought and more recently, talking on their mobile phones abroad, as if they were at home. It has become normal to use the health care system of a foreign country knowing that the bill is covered by the UK, whether under the short-term EHIC program or a longer-term agreement between the UK and other EU countries when living abroad. And when nearing the end of a working life under grey skies, many decide to live and receive their pensions in a sunny foreign country, while benefiting from inflationary adjustments just as if they were at home.
In 2020, at the end of the so-called “transition” period, the current way in which UK citizens live and travel throughout Europe will end. It may even happen earlier, on the 30th March 2019, if no deal is reached between the UK and the EU and there is a “cliff edge” Brexit, or later if a deal is reached and more time is needed to fill in the details. Huge uncertainty remains as to which, if any, of the benefits will remain, and in what form.
Under the provisional agreement reached by the UK and the EU, UK citizens will be entitled to remain in the country in which they have settled, but currently no onward movement rights are guaranteed. Although the payment of pensions abroad will continue, there is no guarantee that the UK government will increase pensions paid to UK expats in Europe in line with inflation. There is a risk pensions could be frozen, as they are for UK expats in many Commonwealth countries such as Australia, Canada and New Zealand. Travel visas and other documentation such as insurance policies may be required when travelling to Europe.
In order to address many of these concerns, the best solution appears to be to “lock in” current rights ahead of the UK’s effective departure from the EU. Many advisors are encouraging clients to take decisions ahead of March 2019. As we have seen from the events of the last two years, verbal assurances by politicians are not worth much, and unfortunately often misleading. With the current degree of uncertainty, there is no guarantee that taking action before March 2019 will offer increased certainty if the UK and the EU do not reach an agreement, unless a UK citizen takes action in line with legislation that also applies to non-EU citizens (and is therefore unlikely to change).
As there is insufficient time for anyone to consider citizenship unless due to family or religious link (for example, Sephardic Jews have a fast-track citizenship path, for historical reasons), the key aspects of health, travel and pensions are likely to be resolved via residence.
The UK is and will remain (regardless of the outcome of the referendum) outside the Schengen area and therefore border controls (both outbound and inbound) will continue to exist. With Brexit, additional documentation such as a physical visa form may come into effect.
UK-Europe tourism will continue. Taking a holiday may become more bureaucratic and costly. The EU will be implementing an advance visitor registration system or ETIAS. Multi-country travel within the EU should still be possible as few internal border controls exist.
What is likely to become more difficult is staying indefinitely, or even settling, in a European country that is not the one to which you originally move. The best solution in this regard is to opt for residence of your preferred country before March 29, 2019. Acquiring permanent residence of an EU member state will allow you the right of movement to other EU countries, although this may not be the case if you move during a possible transition period.
There is always the option to acquire residence in the same way as third countries (outside the EU) do. Two broad possibilities exist: residence by investment, the most common of which is to purchase real estate; or to apply via a means-tested application, with income equivalent to about twice the national minimum wage – a solution which applies to retirees. Again, either of these solutions will provide the right to move freely within Europe, but will not provide settlement rights in another EU country. This will only be possible with citizenship (typically in the 6th year after the start of residence).
The residence by investment programme will allow people to lock in their right to residency, regardless of the outcome of Brexit, under a programme called the Golden Visa (GV). Historically Portugal has been among the more expensive GV destinations, requiring a real estate purchase of €500,000. However, the “discounting” by 20% for anyone buying in low-density areas, and the introduction of a €350,000 level for any property purchased in older buildings, means that it is now more affordable to get a residence via investment.
Notwithstanding the above, the hard reality is that many people who move abroad, do so not only for lifestyle reasons, but because they need to manage a pension pot which is under increasing pressure on different fronts. UK residents have suffered a double whammy as a result of Brexit. The cost of living has increased as a number of items including food and imported goods have seen steep price growth, coupled with international travel becoming more expensive. The Pound is also worth around 15% less than it was before Brexit. A combination of the above factors may drive UK nationals to seek alternative residence options in Europe.
For retirees, thinking ahead means considering what social care options are available. While all of us would like to live independently in our own homes for as long as possible, the reality is that health can be unpredictable and many will find themselves needing support or care. The cost of quality rental-based independent senior living, assisted living or care home care in Portugal is at least 50% cheaper than a comparable solution in the UK. A purchase of a suitable property will be less than half of the cost of a comparable property in the UK. Although limited options for expats currently exist, some solutions are starting to emerge, targeted at the evolving needs of an ageing expat population.
With a lifestyle of much greater quality, English widely spoken, lower costs of living, better healthcare than the UK, less expensive private insurance, lower taxes and no need to return home for essential services, Portugal is a very attractive option as a retirement destination.
Portugal is among the world’s top 10 retirement destinations, and the Algarve has been voted the “Best Place in the World to Retire” four years in a row. Portugal’s Golden Visa and tax-free NHR programs should be considered by retirees during any retirement planning process, especially where protecting access to the EU is an important consideration.