Retirement in Spain
Brits retiring will find that their pound (or euro) goes further in Spain, thanks to the country's relatively low cost of living, especially when compared with other established countries in Western Europe.
Financing your retirement
There are a number of key areas relating to retirement finances that you should consider when you are moving to Spain, such as checking to see what impact a move will have on the benefits and pensions that you are entitled to receive in the UK. When thinking of retiring to Spain, it is essential that you “seek independent advice" when it comes to your private pension and UK state pension, according to Spectrum's Jonathan Goodman, who adds: “This would ideally happen before arrival in Spain." It is important to inform the Department for Work and Pensions that you are moving overseas and provide them with contact details.
Because Spain's currency is the euro, it is important to take the sterling-euro exchange rate into consideration, and what impact any major fluctuations between the two currencies may have on your ability to survive in Spain. (see page 11 for more details on getting the best value out of currency exchange)
In addition to a private pension, you could potentially claim a UK state pension while in Spain, but you should check with the International Pension Centre (IPC) to ensure that you are eligible. You can contact the IPC by email or phone, or fill in the international claim form. If you have not yet reached your state pension age, you should be sent a claim form four months before you hit the milestone. Contact the IPC if you have not received a letter three months before you reach state pension age.
A 'life certificate' is a form the Department for Work and Pensions might send you to check you are still eligible for the state pension. If you get sent a life certificate, you will need to get it signed by a witness – the list of people who can do this is the same list of people who can countersign a passport photo – and send it back, as instructed on the form. Your payments may be suspended if you do not comply.
Rates of state pension
Your state pension will rise annually, even if you live in Spain as it is within the European Economic Area (EEA).
Payment of your pension
Your state pension can be paid into a bank in Spain or a bank or building society in the UK. But you cannot choose to have it paid in to one country for part of the year, and a different country for the rest of the year. You can use an account in your name, a joint account, or someone else's account – if you have their permission and keep to the terms and conditions of the account You will need the IBAN and BIC numbers (both of these are international bank codes) for payments for some countries outside the UK, including Spain. You can choose to be paid every four or 13 weeks and will be paid in local currency – the amount of money you get may change slightly due to exchange rates.
Tax on your state pension
You may have to pay UK tax on your state pension over a certain amount. This will depend on your taxable income and whether you're classed as a UK resident or non-UK resident for tax purposes.
Non-UK residents don't pay UK tax on their state pension but may pay tax in Spain. You don't have to pay tax in both countries because there is a double taxation agreement between the two nations.
Spain has a well-developed national health system that is available to all, even those from abroad, although there are some limitations to this latter group. However, the health service in Spain does experience high demands for services and there are often long waiting lists for treatment and operations. Many people opt for private healthcare in order to avoid this and people who are seriously considering retirement in Spain may want to research the cost and availability of such care, in which case adequate health insurance that is valid for retirees would be advisable. You also need to be aware of emergency procedures; who to call in an emergency and which hospitals that will be the most suitable for your needs in the event of an emergency. Spain's emergency number is 112, although in some places it is better to phone the hospital direct.