With Brexit around the corner, Britons in Spain should act now to secure residency, healthcare and pension benefits under current rules.
With Brexit around the corner, now is the time for Britons living in Spain to prepare by securing residency, healthcare and pension benefits.
December brought reassuring news for expatriates as the UK and the EU27 agreed to maintain existing residency rights. A joint statement confirmed that citizens “lawfully residing” on both sides can continue “to live, work or study as they currently do under the same conditions as under Union law”.
So as long as you are legally resident in Spain at the Brexit cut-off date, you should keep the right to stay and access the same benefits as today for as long as you remain resident.
A secure position is permanent residence, available after five continuous years living in Spain. Although Spanish citizenship can be obtained after ten years, you would have to give up your British passport to qualify.
What about if you have not been living in Spain for that long? If you have been in the country for more than 90 days and have not already registered as a resident at your local police station (Comisaría de Policía) or Oficina de Extranjería, do this urgently to ensure your position is formally recorded at the Registro Central de Extranjeros.
You should also register on the electoral roll (padrón municipal) at your local town hall, as all residents are officially required to undertake this process (known as ‘empadronarse’). This can help demonstrate that you are legally resident in Spain before the Brexit cut-off date and therefore eligible to benefit from the citizens’ rights agreement.
Those thinking about moving to Spain should act fast. While Brexit may seem a long way off, there is likely to be a surge of interest and an administrative backlog for residency applications as the cut-off date draws nearer. Consider relocating and starting the residency process – under current rules – as soon as possible. Post-Brexit, we can expect the requirements, time and expense for acquiring residency to be less straightforward than today.
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The Brexit deal on the table enables residents legally settled in Spain to continue receiving reimbursements for certain healthcare costs. This means the Form S1 system will carry on providing free cover in Spain for British pensioners, and the European Health Insurance Card (EHIC) maintains access to free or reduced healthcare when holidaying in another EU country.
To secure residency in Spain, you may be asked to show evidence of comprehensive health cover (either private or public). If you do not hold Form S1, you may therefore need to join the Spanish healthcare system or prove you have sufficient private health insurance to qualify.
The UK has committed to continue yearly cost-of-living increases to State Pension payments for retired Britons living in the EU pre-Brexit. As a result, British pensioners in Spain will receive annual increases linked to the ‘triple lock’ – whichever is highest out of the rate of inflation, earnings or 2.5% – until 2022.
When it comes to private pensions, current opportunities may not survive Brexit. Today, UK pension contributions and growth both benefit from tax relief in Britain, and can potentially be accessed by expatriates without paying UK tax (under double tax agreements). It is also possible for Spanish residents to transfer UK pension funds to a Qualifying Recognised Overseas Pension Scheme (QROPS) in the EU or European Economic Area (EEA) – including Gibraltar – tax-free. Doing this can unlock tax efficiency, estate planning advantages and currency flexibility. However, since 9th March 2017, transfers to QROPS outside the EU/EEA attract 25% UK taxation (unless you live in the same jurisdiction as the QROPS).
Post-Brexit, the UK could potentially limit how expatriates can access their pensions by widening the taxation net, or by making it harder to cash-in UK ‘final salary’ pensions tax-efficiently. Consider acting now under current rules, but take personalised, regulated advice to ensure a suitable approach and avoid pension scams.
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A realistic timeline
Although the Brexit date is currently set for 29th March 2019 – and could potentially be extended by a transition agreement – it is sensible to work towards a much shorter deadline. Pension transfers, for example, can take several months, so it is a good idea to act as far ahead as possible.
With just a few months of certainty left, now is also the time to explore your estate planning, investments and general tax planning options. A locally-based financial adviser who understands the interaction between the UK and Spain can help you take advantage of opportunities and find the best solutions tailored for you as an expatriate, during the Brexit countdown and beyond.
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Blevins Franks accepts no liability for any loss resulting from any action or inaction or omission as a result of reading this article, which is general in nature and not specific to your circumstances. Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.