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Retiring in Spain







While the Foreign Office has expressed its concern about thousands of British retirees living in penury in places like Spain, agents, developers, IFAs and banks can all help to prevent, or ease, this situation.




The Foreign and Commonwealth Office estimates that around 13 million British nationals live abroad and recent research from the Office of National Statistics (ONS) suggests that 350,000 people are moving abroad every year. Data from the ONS also shows that one million Britons have retired abroad over the last decade - with Spain out on top with 74,433 pensioners moving there since 1996. This is followed by France (which attracted 34,051 pensioners), Italy (32,795) and Portugal (6,165). This leaves 703,900 who have retired to other parts of the world.




While many Brits are opting for places like Turkey and Malta as retirement destinations because property, and the cost of living, is so cheap, others are looking at more expensive homes in locations like France, Spain, Italy and Portugal. Unfortunately, bad financial planning means that many of these retirees find themselves in dire straits. With people now living a lot longer, especially in healthier climes, impoverished retirees are finding it hard to sustain the dream lifestyle.




Commenting on the situation in Spain, Bruce McIntyre, British Consul in Malaga, said: “Sadly now, in Malaga, we spend much of our time dealing with elderly British nationals who moved out here ten or fifteen years ago and now cannot manage alone. Sometimes a partner has died and the other is too old or infirm to go out and buy food; sometimes people have made bad property investments or have not budgeted their pensions sufficiently and are living in extreme poverty.




“British retirees need to realise that not many European countries have welfare provisions like the UK - there are often no old people’s homes, no district nursing, community care or meals on wheels. We provide help where we can but there are just a few steps you can take to ensure that it doesn’t come to this.”




Steve Jewitt-Fleet, a spokesperson from the Foreign Office, added: “It is astonishing how many fit and healthy retirees make no plans or provisions of any kind for their future health and wellbeing when they retire abroad. The majority of British nationals do not register with local authorities when they move and often the FCO often only hear about these people when they get into serious difficulties. We are not trying to warn people off retiring overseas – we just want to advise people to make sensible precautions in order to enjoy their retirement abroad.”




As part of its ‘Know Before You Go’ campaign, the Foreign Office has produced a guide called ‘Going To Live Abroad’ which is available at . Agents should also make their clients aware of the UK government’s one-stop shop website at for advice on how to plan a permanent move abroad.




The costs of retirement in Spain


Having questioned 800 Britons and 800 Germans over 50, Madrid-based property consultants King Sturge found that 22% of Britons said they were considering moving to Spain, while 35% of Germans said they had considered the same option.




However, with healthcare and social services facilities high on the list of incentives for these potential buyers, Spanish property lawyer Mark Wilkins (from The Rights Group SL) recently drew attention to another key area that they may have ignored - actually paying for it. He also highlighted a worrying observation from the US with a financial planner pointing out that 40% of those who retire aged 55 with over $1 million need to return to work 5 years after they retire to fund their lifestyle.




“With a growing number of property millionaires in the UK, who may be able to realize the full value of the property when they retire, how much would someone need to fund their retirement - £1 million, £2 million, more?” asked Wilkins. “Based on the equation that you need to multiply your required income by 25, £1 million would give you £40,000. Amazingly, many experts suggest that a retired couple will need at least £2 million (€2.9 million) in the bank to give themselves a pre-tax income of £80,000 - and that's without the costs of acquiring the retirement apartment or villa in the sun."




Retirees will need to buy, maintain and furnish their overseas property, and pay all relevant taxes and fees, in addition to domestic costs, leisure activities (green fees, etc), transport, food and entertainment. While the cost of living still compares favourably with the UK, it is rising.




How can the industry help?


Among the tips in the FO’s guidelines is a recommendation that retirees work out a retirement income and determine what their financial situation is.




Sol Andalusi, which specializes in retirement or ‘lifestyle’ communities, is very conscious of the solvency of its clients and is working with a number of finance partners to not only ensure that they can afford to buy but also have an exit strategy if they need it.




“For early retirees in Spain, inflation is definitely taking its toll,” said Coen Moonen of Sol Andalusi. “Many are experiencing either a solvency problem or a liquidity problem and we have been working with local banks on solutions for both of these.”




In terms of solvency, Spanish banks have traditionally been more conservative than the UK and other markets. However, the Halifax recently launched an interest-only mortgage for people up to the age of 80 and Barclays Spain has an interest-only mortgage which extends to people aged 75 with a standard term of 10 years.  




Moonen points out that there is a wealth of wealth management advice in Spain but many buyers are not affluent enough to benefit from it. “Wealth managers expect wealthy clients but banks will now consider less affluent people,” he observes. Sol Andalusi works with BBVA and Solbank to advise its buyers on a range of options.




A new liquidity solution is now available from Solbank which is similar to the ‘home reversion’ schemes in the UK. Under the terms of Solbank’s Spanish version, it will buy the property (which must be worth no less than €450 million) from someone who must be at least 65 years of age. The bank then pays a monthly income until the ‘owner’ dies at which time the property goes to the bank. “A single woman in her 70s would receive €1,536 a month net under this deal,” Moonen explains. “It also helps out with property taxes that would have to be paid after the death of a partner. Since the bank effectively owns the property, the resident would no longer be liable for these costs.”




Alliances do not merely extend to finance professionals. Saga Holidays recently chose Medsea, the Spanish estate agent, as the provider of overseas homes for its customers. Under the deal, all properties, whether purchased 'off-plan' or on completed developments, will be subject to Saga's stringent quality checks, as will the overall sales operation. Saga customers wishing to make an inspection trip will be provided with flights, transfers to and from the airport and to the properties, and up to three night's accommodation in a minimum four star hotel on a bed and breakfast basis. These trips will be protected by Saga's ATOL bond and operated in conjunction with Medsea.




An opportunity for IFAs


It’s not just the over-fifties that the industry should be focusing on. A new survey by Halifax reveals that 68% of UK residents under the age of retirement would like to live in Spain, compared to 14% who were over 65 years of age. Commenting on these findings, Ian Smith, head of European operations at Halifax, said: "It has long been assumed that only the older generation is buying property in Spain, but this is far from the case, as it is also proving to be a popular location among younger age groups."




With more people in the UK looking at second homes as the main element in their long term retirement planning, this is an ideal opportunity for IFA partners to work with agents and developers to qualify buyers and build lucrative relationships with investors over the long term.




Commenting on this in relation to the FO report, Colin Barrett-Treen, managing director of Blue Horizons Overseas Property Network said: “This is a perfect example of how IFAs and overseas property agents can work together for the benefit of people buying overseas. IFAs have the necessary skills and services available to ensure that purchasing clients get thorough financial advice in connection with their planned move overseas.




“There is no good reason why people end up in poverty simply because they received bad (or even no) advice prior to buying their new home abroad. Arguably, every overseas property agent should have a strong link with an IFA firm that can ensure that their clients get professional advice about such a life changing event as emigration. With careful and prudent planning, every client who moves overseas can look forward to a comfortable and secure future.”




IFAs will also be able to advise on tax liability, all relevant insurances and setting up accounts overseas for bills and expenses. They already have some competition as well, and not just from other IFAs. FX specialists have been working with agents for some time to offer a range of tailored services for such buyers - from savings on regular transfers to mortgages and some insurance products as well.


Risk and reward

Market forces seem to be pushing IFAs and property companies together but a lack of understanding of this market and caution about unregulated partners are still holding back new alliances. As ever, it will be the innovators who pioneer in this market but they must manage new relationships carefully, as Jag Sodhi of Fidentia explains: "The smart companies will realise the long-term benefit of working with IFAs to build capital and tax efficient property solutions for their clients. Others may see a potential conflict of interests between best advice and highest commissions.


"Unlike conventional asset classes, such as stocks and other financial instruments, it is actually very difficult to measure risk within direct or indirect property. This also gets very complicated when you throw into the pot the need to balance investment and lifestyle considerations. In any case there is real merit in both the IFA and property communities continuing this debate and working together for the common benefit of the client. The customer is king and those companies that focus on providing best advice will win out in the end, even if regulation is the stick that is used to bring this about."


Responding to the demands of more investment focused clients, the overseas property industry continues to work on new property investment options. Companies like Oceanico are offering a new Overseas Property Bond to replace cash deposits and fractional ownership is providing options for both affluent and less wealthy buyers.



Just as agents are evolving their services to offer a growing range of property investment vehicles, IFAs and mortgage brokers are being asked for advice from a range of buyer types. With the number of retirement and emigration buyers on the rise, they not only represent the prospect of more sales for agents but opportunities for long term wealth management services for IFAs.




“Far from being competition,” says Barrett-Treen, “IFAs could become valuable partners for overseas agents. I believe that over time we will see many IFAs and overseas property agencies forging strategic alliances, with client introductions flowing in both directions”.


What do you think? Should agents and developers be doing more to advise retirement buyers, and what should they do? Are you already working with an IFA/agent/developer to ffer a more comprehensive service for your clients? Tell us about it now by replying to




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