Panama: one of the best places in the world for retirement
Do you feel you’ve had enough of the rat race and want to jet off to a life in the sun? Here are your options
RECORD numbers of Britons are fleeing the country for more appealing climates, lower taxes, more affordable property and fewer traffic jams.
Latest figures from the Office for National Statistics show that 200,000 people left Britain for good last year, and the majority of them were retirees.
However, many of those who live the dream underestimate the financial implications. Many couples retiring to Spain, for example, think they will pay lower tax, only to be hit by a wealth tax of 0.2% to 0.5% of their worldwide assets.
And many couples fail to realise that in Spain and France, unlike in Britain, inheritance tax can be levied on assets passed between a husband and wife – and the rate is 30% on average.
* Pensioners prove it is never too late to emigrate
Today, we reveal the best places in the world to retire, based on eight key financial categories – income tax, inheritance tax, property tax, property costs, ease of gaining residency, healthcare, climate and culture.
The comprehensive research, conducted by the Homebuyer and Property Investor Show, gave the 10 most popular retirement countries a mark out of 10 in each category, to come up with an overall score out of 80.
Cyprus tops the list of destinations because it has an income-tax rate of just 5% on pensions for retired residents, as well as low property prices and no inheritance tax. It also scores highly on related issues such as ease of gaining residency, low property buying and selling costs and benefits for pensioners.
Nick Clark, managing director of Homebuyer Events, said: “Not only does Cyprus offer a warm, sunny climate, it also benefits from favourable taxation and healthcare policies.”
Panama, now infamously the chosen destination of “back from the dead” canoeist John Darwin and his wife Anne, comes a close second. This is largely thanks to its pensionado scheme, which offers attractive discounts for pensioners (see below).
Southern Cyprus is a four-and-a-half hour flight from Britain. It is favoured by retirees because of its hot, dry summers and mild winters – not to mention its preferential 5% tax rate on pensions.
English is widely spoken and they even drive on the same side of the road as in the UK.
Retired residents from overseas are taxed on their pensions at the rate of 5% above about €3,417 (£2,554) a year, whether it is a state, company or personal pension. To qualify for the low rate, you must have lived in the country for at least 183 days.
Alternatively, you can pay the normal rates, in which case the first €19,500 is tax free, rising to 30% on €36,301. So the smaller your income, the better off you are under the normal system.
Remember that if you continue to have assets in Britain, such as bank accounts or an investment portfolio, you will still be liable for UK tax on any income, even if you are resident in Cyprus. Many retirees therefore move their assets offshore, and then bring the income into Cyprus, in which case there would be no tax to pay, according to Jonathan Spring-Rice of adviser Towry Law.
British retirees will also be attracted by the fact that Cyprus abolished inheritance tax in 2000. However, to benefit from this, expatriates will have to prove they have severed all links with Britain – and this may not be as easy as you think.
It can take more than five years and involves closing down all accounts and selling all UK property, and cancelling your registration with your doctor and dentist, among other things.
Property prices in Cyprus start from about £77,000 – although the island is rapidly catching up with prices in more established retirement hotspots such as France and Spain.
Stamp duty is 0.15% for properties worth up to about £130,000 and 0.2% on more expensive homes, compared with 1% to 4% in Britain.
However, there may be property transfer fees of 3% of the first £65,000 or so, 5% on homes worth between £65,000 and £130,000 and 8% on those valued at more than £130,000.
Ease of gaining residency
Retired EU nationals do not require a visa to move to southern Cyprus, but they do need a temporary residence employment permit that should be applied for on arrival.
Those wanting to buy property must also prove they have adequate income or financial resources to live without working. The minimum requirement is about £8,000 a year.
Now that southern Cyprus has joined the European Union, pensioners from other EU countries are entitled to use the public health system.
However, there are few state residential nursing homes or hospices for the terminally ill on the island, so many people needing long-term care simply return home to Britain.
Panama’s main attraction, apart from its year-round 30C temperature, lies in the fact that English is widely spoken.
Other benefits include a low cost of living, a minimal crime rate and, for retirees, its “pensio-nado” scheme – which offers discounts on services such as healthcare, travel and leisure activities.
Panama’s main currency is also the US dollar, so with just under $2 to the pound it has become increasingly attractive for British retirees recently.
Income from assets outside Panama, whether they be your pension, bank deposits or your investment portfolio, is completely free from tax.
However, there is a 5% transfer tax on goods and services, which is roughly equivalent to British Vat.
Don’t think you will escape tax completely, however. While there is no inheritance tax as such, gifts of property attract rates from 4% to 33% depending on your relationship with the beneficiary.
Panamanian property is not as cheap as you might think, with a typical property likely to set you back about £110,000. However, there are some useful perks for people who intend to rent out property there.
If you receive rental income from a property, you will normally be liable for income tax up to a maximum of 27% on income of more than $30,000 (£15,000).
If you invest in one of Panama’s special “tourism zones”, though, you may be exempt from income tax for 15 years.
Ease of gaining residency
Anyone buying property may apply for permanent residence one year after having applied for a residence visa, as long as the value of the property and any local bank deposits equal $200,000 or more.
Five years on, it is then possible to apply for Panamanian nationality.
Under the pensionado system, pensioners get 15% off the cost of hospital services in private clinics, 10% off medicine, 20% off medical consultations and surgical procedures and 15% off dental and optical services.
Quality of life is one of the main reasons so many Britons choose to retire to France. You can get a good three-course meal, including wine, for about £14 in many villages and many regions have an established English-speaking community.
While it is true that the top rate of income tax in France is 49.8% – against 40% in Britain – retired couples with income of €70,000 or less would stillbe better off making the move because in France there are lower rates the lower your income.
Emma Lawrence of Key 4 International said: “In France you can have a joint income between you as pensioners of almost €50,000 and your top rate of income tax would be 14 per cent – whereas in the UK it would be 22 per cent. Thus being a pensioner in France is pretty tax efficient.”
The average price paid for a typical property in France is £140,000 – double that in 1997 – and prices show only modest signs of slowing, so it is one of the most expensive destinations in our survey.
Anne-Marie Garcin of Côte D’Azur estate agent Michael Zin-graf, said: “Prices are still rising in the luxury market, but have stagnated somewhat in the residential sector.”
Buying costs stand at about 7% for older properties and 3% for new-builds, and the price you pay typically includes agency fees of about 6%.
Ease of gaining residency
Retired EU nationals do not require a visa to move to France. In fact, if you spend longer in France than in any other tax jurisdiction during the space of one year, you will automatically be considered a resident for tax purposes.
Bill Blevins of Blevins Franks, a specialist financial adviser, said: “You are also considered a tax resident if your spouse is a French resident.”
As a British citizen, you are automatically entitled to free basic healthcare in France as long as you have a European health insurance card.
However, any EU expatriate not officially retired and not working will have their right to French state healthcare taken away unless they have lived in the country for at least five years, under new rules introduced at the start of the year.
This has caused consternation among the British expat community, some of whom have been forced to get private medical insurance, which can be prohibitively expensive.
Belize, with its tropical climate, may seem something of a left-field choice, but it has always been a popular destination for American retirees.
It has average temperatures ranging from 24C to 27C.
English is the official language and the cost of living is low. However, the pronounced rainy season is likely to put off some people.
Ben Mason, partner of Some-place Else, a property company in the country, said: “Currently, the majority of retirees to Belize are from the US, but with its slower pace of life, lower cost of living, and retired person’s incentive programme, it is a Commonwealth country that is rapidly attracting interest from British expats looking to make it their home.
“We have sold properties to clients who have brought property in Belize with the aim of retiring there when the time comes – it’s a big change of lifestyle which is proving very popular.”
The income tax for normal citizens is set at 1.75%, but income such as pensions is totally untaxed. There is also no capital gains tax or inheritance tax for people retiring to Belize.
For those dreaming of an early part-retirement, the rules are also advantageous.
Investors in the island can direct foreign business activities from the country, as long as they have an income of $2,000 a month and are at least 45 years old.
They can also import a car, light aircraft, boat and any personal belongings duty free. The maximum tax per item is $15,000.
Property prices in Belize are low relative to other Caribbean islands.
A three-bedroom beachfront property costs from around $375,000, while luxury villas with private beaches go from about $500,000.
Buying and selling costs include stamp duty of 5%, legal fees of about 2% and a 1.5% transfer tax when you sell a property.
Ease of gaining residency
Anyone aged 45 or over can apply for residency through a retirement programme set up by the Belize government.
Pensioners who qualify are then known as “qualified retired persons” and are eligible for benefits including tax exemptions and incentives.
There is a national, tax-funded healthcare service in Belize. Remember, though, that it is a third-world country, albeit a progressive one.
Fortunately, private healthcare is also relatively inexpensive. The cost of a visit to a private doctor or health practitioner is about $15.
Spain is one of the most popular retirement destinations – and as in France there are good-sized British communities around the country.
But it has several tax traps for those planning to move there which is why it comes no higher in our survey.
If you are resident in Spain – in other words you spend more than 183 days there a year – you must pay tax at up to 40% on any income from your UK pension, bank accounts and investment portfolio.
Capital gains tax on the sale of Spanish assets was reduced from 35% to 18% last year – the same as in Britain if the UK government proceeds with its 18% flat tax in April.
However, expats are liable to pay Spanish inheritance tax, regardless of the country in which the inheritance is situated.
The rate ranges from 7.65% and 34% depending on the size of the gift and your relationship with the person from whom you are inheriting the money.
Spanish residents must also pay a wealth tax of 0.2% to 0.5% of their worldwide assets.
A typical retirement property will set you back £137,000 and property costs normally add up to around 10%, which is higher than in many other countries.
A spokesman for Premier Property International said: “Most fees were traditionally based on the ‘declared’ value of the property, which was traditionally much lower than the actual price paid.
“However, it’s no longer possible to declare a very low figure and there are severe penalties for gross undervaluation.
Local authorities maintain tables to calculate the current fiscal value (valor catastral) of properties and it is this price (or the actual price paid) which should be declared.”
Ease of gaining residency
Retired EU nationals do not require a visa in order to move to Spain.
Providing that you have paid tax in the Britain in the past year, you should be entitled to two years’ health cover under the national tax-financed scheme.
However, if you are not of pen-sionable age, then you will need to start working or take out private health cover after two years in most parts of the country. Dental and eye care is also only ever available privately.