Times Online Article

Revealed: 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

Jessica Bown

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.

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."

CYPRUS 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. Tax 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 costs

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.

Healthcare 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

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