Day when the sunshine retirement dream dies

The outlook was bleak after Judith Prescott's mother was left alone abroad
Saturday April 14, 2007

The Guardian

When my parents announced five years ago they were selling their house in the north of England and moving to Spain, the news was greeted by the rest of the family with a mixture of surprise and trepidation.

On the one hand the decision made good economic sense. The three-bedroom house where I grew up in a small town in Merseyside had massively increased in value. They could buy outright in Spain and still have money left over to buy a car and fund their new life. On the downside, they were both 75, didn't speak a word of Spanish and had never spent any length of time abroad. But putting these obstacles to one side, they went ahead and bought a two-bedroom property on the Costa Blanca for £44,000.

The move seemed a success. The cheaper cost of living meant they lived comfortably on their state pension. My father was very active and took advantage of the good weather to swim and walk every day. They soon established a group of friends among the other expats and enjoyed a varied social life.  All this changed abruptly two months ago, when my father died of cancer after a short illness. Now the choices my mother faces as a widow in a foreign country are decidedly bleak. Should she go or should she stay?

The question is one being asked more frequently, as the number of Brits buying a retirement place in the sun continues to grow. A recent report by the Institute for Public Policy Research shows that every three minutes a British national starts a new life abroad. Britain has more people living abroad than almost any other country and the report predicts one million more will make the move over the next five years. However, charities like Age Concern, which is active in Spain, says a growing number are being confronted with the problem of what to do when a partner dies. Some fall ill themselves and are left to cope on their own, while others fail to budget properly and end up living in appalling conditions.

Jacqui Morrissey, head of the European and International unit at Age Concern, warns that many middle-aged and older people head off for the sun without careful planning. "Soaring property prices and high taxes spur many to swap retirement in the UK for a sun-soaked life abroad," she explains. "But retiring to another country is very different from holidaying there. The key to a successful move is to know what to expect, so anyone who is thinking about retiring abroad needs to do their homework first."

When my parents moved to Spain, both were in rude good  health and practical concerns such as the proximity of local shops, transport and medical services were not uppermost in
their minds. As my mother explains: "We were at the beginning of a new life in Spain, so naturally we didn't want to think about how things would end. We didn't want to waste time talking about 'what if this happens or what if that happens'."

Now, it's different. Severe arthritis means my mother is virtually housebound. Like many women of her generation, she doesn't drive and without my father behind the wheel that five-minute jaunt to the nearest supermarket becomes an impossible two mile, uphill hike.

Visits to the medical centre or the local chemist present a similar challenge. Spain does not have the same welfare provisions as the UK; there is often no district nursing, community care or meals-on-wheels. These tasks fall to the family. As there are often no family members living in Spain, a return to the UK for people in my mother's situation is almost inevitable.

Jacqui Morrissey of Age Concern agrees. "If the reality does not live up to the dream, or circumstances change, returning to the UK may become the only available option to some," she says. "Managing a return can be traumatic and present great difficulties, particularly for people with ill health and scarce resources."

For people who take early retirement to Spain, the problems can be more acute. Some may find themselves in a healthcare "black hole": they are ineligible for treatment by either the Spanish or British healthcare system. For the first two years after leaving the country, British citizens can claim free healthcare under the terms of the E106 health insurance document.

But many people do not realise that this arrangement runs  out after two years. If they do not work, or do not qualify for a  state pension, they are not eligible for treatment under the  Spanish healthcare system. If they are absent from the UK for more than three months, they don't qualify for treatment back home on the NHS. Private health insurance is the answer, although this can be difficult to obtain and very expensive for people with an existing medical condition.

British people moving back to the UK on a permanent basis can be treated under the NHS after proof that they intend to stay in the country. This usually means showing a fixed address or employment contract. My mother says she has only one regret about spending the last five years in Spain - that she can't spend the next five years there as well! But circumstances dictate otherwise.

Her apartment has been valued and will soon be put on the market. Fortunately, it has almost trebled in value and is now worth between £115,000- £120,000 . But selling a propertyin Spain can be an expensive business. Estate agents charge around 5% commission and there may also be capital gains tax, inheritance tax and "land" tax to be paid.

Alex Chumillas is a Spanish tax expert based in Barcelona. He says the tax regime is difficult to understand because there are always exceptions to the rule. For instance, my mother inherited my father's portion of their property on  which she has to pay inheritance tax. The amount of inheritance tax, explains Chumillas, is based on a sliding scale, depending on what your relation was to the deceased. Spouses, for example, pay less than sons and daughters, who in turn pay less than nieces and nephews. It seems my mother, as a spouse, will be virtually exempt from paying this tax.

"The rules governing inheritance tax were transferred from central government to the regions," says Chumillas, "and some regions have not bothered to apply them at all."

Capital gains tax is also payable on the profit from the property. CGT in Spain for residents is a maximum of 15%, calculated as part of their Spanish income tax. As of January 1, 2007, CGT for non-residents has been reduced from 35% to 18%. Residents over 65 who are selling their principal residence of three years, are not liable to pay the tax in Spain. A land tax known as plus valia is also set by local authorities, and based on the increase of the value of the land from the date the owner acquired the property to the time of the sale.

It is determined by the local authorities and is not affected by the market value or sale price of the property. Following my father's death, there was one unexpected financial hitch. A joint bank account is normally frozen on the death of one of the account holders, although the bank will usually allow direct debits for services to be paid out of the account. This meant my mother had to make sure she had sufficient cash to live on while the will went through probate.

Two months later, the process is still not complete. Once the apartment is sold, my mother will have to find somewhere to live in the UK. With house prices continuing to rise, it's highly unlikely she will be able to afford a property of  a similar in the UK. Add to this the higher cost of living and she fears it will be back to "counting the pennies".


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Calle Escar, 18
08039 Barcelona | Spain

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