Saturday, 25 June 2016

Brexit vs FIRE to the Med

So the UK has voted, Article 50 of the 2009 Lisbon Treaty will soon be invoked and over the next couple of years we’ll negotiate (hopefully sensibly) our way out of the European Union.  Of course I have no idea what those negotiations are going to result in but I also don’t really want to hang around and wait.  After all I’m trying to become financially independent in less than 6 months from here and retire early to the Med in less than 12 months.

It therefore seems worthwhile to get my initial thoughts down on paper which can then be modified as I learn what is happening and being negotiated.

Wealth to FIRE

Post referendum there was plenty of economic doom and gloom around however there was also plenty of exuberance in the days prior.  Priced in £’s my portfolio actually ended the week 1.9% higher than my position at the end of last week and priced in Euro’s I’m down 1.2%.  Hardly FIRE destroying leaving me very much still on for financial independence in less than 6 months.

My path trodden to financial independence
Click to enlarge, My path trodden to financial independence

As a person positioned as a UK investor right now I’m also stress testing my portfolio against a £ to Euro exchange rate of 1.123.  It’s currently 1.2307 so this is still also looking good.

Getting in the door

One of the founding principles of the European Union was the free movement of its people across its countries borders.  The RIT family were planning on taking advantage of this to enable the move to the Med.  I would say there is a definite risk now, that with us Brexiting, this right will be taken away for UK passport holders not already resident in their new EU country.

So what are we going to do?  As a family we’re fortunate to average more than one passport per family member and one of those will still be an EU country post Brexit.  Fortunately, the EU allows non-EU family members to register for residency after 3 months in their new country and after 5 years of residency allows permanent residency.  This looks like the easiest way for us to make it to Malta, Spain or Cyprus.

If we didn’t have that passport I think a move would still be possible, at least to some countries, for UK passport holders.  For example, Cyprus has a Category F Immigration Permit available which allows migration if you “possess and have fully and freely at their disposal a secured annual income, high enough to give them a decent living in Cyprus, without having to engage in any business, trade or profession. The annual income required should be at least €9568,17 ... for a single applicant and moreover at least €4613,22 ... for every dependent person, but the Immigration Control Board may demand additional amounts as necessary. Most applicants come under this Category, the majority of them being pensioners or retired persons.”  For somebody on a journey not dissimilar to mine that does not look arduous.

Malta seems to have two schemes for non-EU nationals – the Global Residence Programme and the Malta Residence and Visa Programme – although a cursory glance shows these to be a lot more arduous than the scheme in Cyprus.  I haven’t done any legwork on whether Spain has a scheme.

The way I think about this though is that I can’t see why these Med countries would not want financially independent Brits buying homes and spending their investments into their economy.  The countries already have form for special arrangements so I wouldn’t be surprised to see more schemes appear to still encourage us to retire to the sun.

State pension

In all of my financial planning I am not banking on receiving the State Pension as I still believe that in due course I will lose the right to it through for example means testing or by continually raising the age at which you can have access to it.  I was however planning on paying Class 3 NI contributions during FIRE to build my 35 years required for a full pension.  This was my insurance policy against it all going wrong.

I think we all know the damage that inflation can do to the value of money and I’m also sure we’re all aware of the current pension triple lock to ensure the value of the State Pension at least rises with inflation annually.  What is not quite so well known is that increase is currently only paid if you live in the EEA (obviously including the UK), Gibraltar, Switzerland or a handful of other countries.

One thing I’ll therefore be watching is if that is retracted for those resident in EEA countries or maybe even those resident after a certain date to protect those who have already established their new homes.  For now I’ll plan on continuing to pay in but if it is retracted it might be prudent to ‘buy’ insurance in some other way.


This is a big one for me.  My current thinking was:
  • Cyprus.  Buy private health insurance until we reach State Pension Age and at that point complete an S1 certificate of entitlement which would entitle us to state healthcare.  In my financial modelling I have assumed that private premiums continue to be paid ad infinitum as I wanted to also give myself the option to at least try and have private healthcare, albeit with a big excess post State Pension age, just in case the public system was poor.
  • Malta.  As a “self employed person” as far as Malta is concerned I was just planning on paying Class 2 Social Security Contributions (SSC) which would also enable me to build a Maltese State Pension.  Again at State Pension Age those contributions would stop post S1 form completion even though my model assumes they continue.
  • Spain.  Buy private health insurance for the first year then register for the Convenio Especiale which for a contribution gives access to the State System.  Then at State Pension Age again go for the S1 and stop contributions.

After a little research my current thinking now is that in the run up to State Pension Age nothing really changes.  At State Pension Age I suspect we may end up with a problem as I can’t see the S1 still existing for UK passport holders and as no contributions have been paid in our single EU passport country that may be out also.  Even today, without any renegotiations, there looks to be options even without the S1 though.

For Cyprus we’ll become permanent residents after 5 years and up until then we’ll just buy private insurance as originally planned.  As the premiums increase it looks possible to again have a big excess here (which may eventually become unaffordable or unavailable as we age)  and then in parallel register for a State Medical Card which looks to require permanent residency, 3 years of social insurance scheme contributions prior to the application (a small self-employed side hustle?) and meeting the criteria “Members of families whose annual income does not exceed €30,750.00, increased by €1,700.00 for each dependant child”.  If my investments perform well then some financial rejigging may be required but this looks entirely possible.

For Malta we may become entitled to public healthcare without SSC contributions at State Pension age through our Maltese SSC contributions but if not we could just keep paying those contributions.

For Spain it’s possible to just keep paying the convenio especiale although at age 65 the premiums to take a jump from EUR60 per month per person to EUR157 per month per person which will need to be taken into account but is hardly move threatening.

So unless a black swan appears from left field, even with what is out there today, it looks like the RIT household will still be moving to The Med.  Brexit has created some more planning work that I’ll need to do and now requires a watching brief to understand how any changes will affect us.  Hopefully they won’t block the move.

As always DYOR and this research is hot off the press so if you do spot an error please do leave a comment so that I can correct the post for all (and make sure I’m not making a mistake somewhere).


  1. Good to hear your plans are still basically on track - enough Brit retirees lived in Continental Europe before 1973 so it should still be possible after!

  2. RIT - you are in a fortunate position indeed to have almost reached FI before this firestorm hit. You are also lucky to have an EU passport in the family which will make the process of moving somewhere better much more straightforward.

    I think we can forget any concessions from the EU to Britain (or what remains of it after it disintegrates) in terms of pension or healthcare arrangements. They will want to make an example to others not to follow suit. The economic consequences are also likely to include cuts or further postponements to the UK state pension age so you are right not to rely on that in your financial planning.

    1. It is certainly going to be interesting to see how this plays out. I'm not going to assume anything as we all know how that ends up. Instead I'm going to listen intently and try and do what's right for my family. Right now it's still looking like good news.

  3. Surely you don't propose to live in a country for years without naturalising anyway?

    1. From what I can see naturalising doesn't give much/if any benefit as you have to be in for a period of time before you can naturalise. The only help I can see is that it would be now prudent to naturalise for an EU passport so that you can get back to the free movement of people benefit which we have just surrendered in the referendum.

      In a lot of Europe it's contributions based healthcare and/or related to permanent residency not naturalisation. The permanent bit is a critical bit. Domicile also makes a big difference when it comes to taxation.

      Can you clarify what you were thinking of when you mentioned naturalisation?

    2. "prudent to naturalise for an EU passport": that's it. Plus the feeling that if you are going to live there indefinitely, shouldn't you naturalise, learn the language and so on? Are you any good at difficult semitic languages?

    3. Thanks for clarifying.

      Agree if you are going to live somewhere 'indefinitely' and call it home then the least you can do is go as far as possible to becoming a local.

      As far as language goes I fear with Malta I'd become lazy as English is an official language. It's one of the negatives. Spain is kind of exciting as the language would be within my capability, I think, and it would also open up a large part of the world if I could become fluent with time. This is definitely where I would be spending plenty of my free FIRE hours in addition to some other early priorities. Cyprus is a little concerning as Greek looks more difficult and includes a new alphabet adding additional complexity. That said I'm not going to be a victim but I do think it may take a little longer than Spanish although I do also have time on my side.

    4. As a half-Cypriot RIT:

      1. Greek is much harder to learn that English. From my experience it is easier to read than learn to speak and listen due to the emphasis basis of the language (same word different emphasis have different meanings). I can just about read greek but can't speak or understand spoken greek.

      2. Almost everybody under the age of 30 speaks fluent English in Cyprus. The vast majority are genuinely bilingual. Given the two major industries are tourism and finance, most people speak with native fluency.

      3. As a throw back to the colonial era most records and official things are in both greek and English. Business is easily accessible to non-Greek speakers.

      4. Cypriots are generally very friendly so even if you try to speak greek to them they will speak back to you in English.

    5. "includes a new alphabet": the least of your worries. Anyone who's done much maths will have absorbed the alphabet without any probs.

  4. As usual you are very measured with your thoughts and potential actions, I am sure that it will work out well for you. I live in France and there is a load of rubbish being spoken without any hard facts, it is good to read your clear and prudent thoughts. Thank you.

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  6. I didn't think Brexit would have a huge impact on your plans but it's nice to see you've covered all the major bases. Plus, this is a helpful post for anyone wishing to also retire from the UK to that faraway place called Europe.

    1. The UK is in Europe. The facts of geography haven't changed.

    2. Hi RIT

      Good to hear that your plans can be flexed to accommodate and that you are being proactive in looking at contingencies.

    3. dearime,

      Geography is one thing, but culture and people's perceptions are an entirely different matter. My wife (who is German) still speaks with amazement about the year she spent as an Au Pair in England, and the number of English people who spoke of "the Continent" as if it were some exotic and distant land.


  7. I had vague plans of moving to Belgium in around 5 years. I am wondering now whether to try and bring this forward so that I can get in during the two year negotiation window. It all depends really on what type of Brexit is implemented. If they stay committed to the common single market, then free movement of people should be allowed and it'll be possible for us to live in continental Europe. If they go for a total departure things will be a lot more tricky.

    Honestly speaking, I despair for the future of the UK.

    1. Merceron ... since part of the debate was over competition for low paid jobs in the UK, I sincerely doubt free movement of people will be on the table, although one could always hope for an exception for those lucky enough to be Financially Independent!
      You may be wise to bide your time to see what the impact is on the EU itself - from the rest of the world's perspective, the UK vote to leave EU is bound to be seen as a sign of dissatisfaction; then again, Brexit might be just the wake-up call for the EU to re-focus on the pressing priorities of it's member states (e.g. unemployment), rather than federal ideologies.

  8. I would have thought that a far greater risk to be considered in moving to the Med' area is the instability of the Middle Eastern countries.
    No, I'm not thinking of the usual suspects here - I'm thinking Egypt.
    Already only surviving on handouts from the USA and Saudi and suffering rampant inflation as imported food prices soar. An Egyptian governmental/societal collapse leading to perhaps half of their near 100m population deciding to "emigrate" would or maybe will be interesting to watch - preferably from as far away as possible.

  9. Hi RIT,

    Funnily enough I was wondering how this would affect you give your plans, but great to see that you have a number of back up options regardless of what comes out over the next weeks, months and years.
    Sensible to not rely on the state pension as its always changing, just make sure you have what you need, anything above is a bonus!

    Fingers crossed it all works out..
    London Rob

  10. Good luck RIT, hopefully you can make the move without too much movement in your plans.
    Mr Z


  12. Just posted a link to FT article which mentions Cyprus, Malta and Greek regulations for residency.

  13. No Brexit, please, we're British : FT 29th June.
    Just realised that the above link may not work - and you may not be able to access unless you are a subscriber . But you can buy a copy of the FT today - if you are worrying about your status as regards living - or continuing - to live in the EU post-Brexit - it may be worth your while.

  14. If you have any Irish relations, you could go down the route of securing an Irish passport. I read there is a mad rush of folks now looking to get one given our precarious situation in EU.