Portugal’s breath-taking coastlines, delicious cuisine and diverse, beautiful culture makes it a great destination to consider retiring to. Combined with the fact that the cost of living is comparably less expensive than much of Western Europe and the US, and the Portuguese government has, for many years, actively encouraged and welcomed investment into Portugal with ‘foreigner-friendly’ incentives and simplified requirements, you will find that even in a post-Brexit landscape it is more than possible to make the move and enjoy your best retirement life.
That being said, you will want to make the most of your assets and ensure that the process of retiring to Portugal is as smooth as possible, so a little planning is required to make your dreams a reality – which is why we’ve put together this guide detailing the latest considerations.
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Visas and Residency
Retiring to Portugal is a relatively undemanding process if you are from an EU member state under the right to enter, remain and reside. You are able to stay in the country for 3 months, after which point you can head to a regional office to obtain your Registration Certificate that formalises your right of residence in Portugal. It costs 15 euros, and you only need ID and proof of sufficient income.
US Citizens also benefit from a streamlined process – you can apply for a 120 day stay visa in Portugal where you’ll need to show proof of income of at least $1,070 per month throughout your stay. If you’re enjoying Portugal and would like to stay, then you can apply for a 1 year residence permit, after which point you can renew for two year permits successively. After 5 years, you can apply for permanent residency.
Other options for those outside of the US and the EU - which now includes UK nationals post-Brexit - do take more work, but it is still possible with a bit more time taken to prepare.
Depending on your financial circumstances, you may be able to take advantage of Portugal’s ‘Golden Visa’ scheme, for Non-EU residents only.
The Golden Visa allows residency in Portugal after undertaking a qualifying investment in the country. Qualifying investments can take a few forms, with the most popular being to purchase real estate property with a value equal to or above €500,000, or real estate property for refurbishment that has construction dating back more than 30 years and is located in urban regeneration areas – this has a reduced price tag of €350,000.
The rules for this scheme changed recently, meaning some ‘high-density areas’ that were very popular, including Lisbon, Porto and parts of the Algarve region are, as of 1st January 2022, not eligible for residential real estate investment, and some of the qualifying financial thresholds have been increased. However, it remains a viable route if you have the means, and some areas within the sought-after Algarve region are still eligible for the scheme.
The fees for the application itself are just shy of €6,000, with further renewal fees and legal fees payable depending on your type of investment. You can also extend the application to include your spouse or other eligible family members. The visa is valid initially for one year, and then you can renew it every two years, providing you’ve maintained your investment.
The other route to residency in Portugal is the D7 Visa and Residence Permit, otherwise known as the visa for passive income holders - this can include your pension, making it a popular option amongst those retiring to Portugal.
It is a two-step process – you apply for the visa first, which if granted gives you 4 months to apply for the residency permit (the application must be done in Portugal). No investment is required and application fees are significantly less than the Golden Visa, though you do need to gather relevant documents and satisfy a few requirements, including a minimum annual income which is currently set at €8,460 for the applicant, plus 50 percent of this amount for a spouse.
All options will allow you to enjoy free travel across the European Schengen Area, and after 5 years you are able to apply for permanent citizenship of Portugal.
How much money will you need to retire to Portugal?
Portugal is regularly featured in the top 5 on lists of countries to consider retiring to, and with good reason – as well as being a desirable destination, it is affordable. Not cheap, but estimated to be around 30% less expensive than living in the UK. Depending on where you want to live, you can expect a very comfortable cost of living of between €1,500 and €2,200 per month, including accommodation, food/drink, eating out, utilities, etc. If you want to experience bustling city life in Lisbon, you should expect to spend a bit more.
Accessing your UK pension
Before moving to Portugal and if your UK pension scheme is eligible, you’ll want to think about taking advantage of the 25% tax-free withdrawal of your pension so you can withdraw up to 25% of your pension as a tax-free lump sum. You will need to weigh the tax vs investment implications, but it might be worth considering, as the option may not be there after you become a resident of Portugal.
If you would like to move your pension pot with you to Portugal, you could look at a Qualifying Recognised Overseas Pension Scheme (QROPS), which is a foreign pension scheme that essentially enables you to transfer your UK pension with you abroad without a tax penalty. There are currently no approved QROPS within Portugal available, so you would need to find an eligible scheme in another EU/EEA member state to avoid penalties.
It is worth noting however that post-Brexit, though the UK Government has not made any announcements yet, there could be future changes to this option that may potentially mean the introduction of a 25% Overseas Transfer Charge (OTC) on any QROPS within the EU.
If you decide to keep your pension based in your home country, it is important to note that the Non-Habitual Resident scheme, allowing a 10-year tax-free period on all foreign-sourced income which used to include pensions, changed in 2020 to introduce a 10% tax on pension income. You will also need to think about exchange rates and fees when withdrawing your pension to use in Portugal.
Portugal’s National Health Service, known as the Servico Nacional de Saude(SNS), provides most essential medical care available free of charge, with non-essential services being subsidised and available for a small co-payment.
If you are drawing a state pension from the UK or another country belonging to the EU, you may be able to submit an S1 form to register for healthcare in Portugal, which essentially will entitle you to healthcare on the same basis as a Portuguese citizen.
If coming from outside of UK and the EU, then you will need to acquire health insurance and need to have proof of this as part of your visa application. It’s worth considering this even if you are covered via the S1, as health insurance can give you faster and better care, covering a wider range of procedures that will not be covered by free healthcare. Though some insurers will start to restrict policies to those aged 55 and over, you will still be able to find a selection of local providers who cater for over 55s.
It is definitely worth getting your will professionally reviewed to ensure that all is in order if dealing with assets in multiple countries. Portuguese civic code means that the laws of the ‘home’ country apply when dealing with inheritance, though you can specify in your will which country’s law you will fall into.
Portugal’s inheritance laws are relatively simple; Portugal has no inheritance tax on real estate property, though there is a flat rate 10% stamp duty payable that spouses, descendants and ascendants are traditionally exempt from.
To conclude…
There are many pros of living in Portugal; at first, the warm climate, beautiful landscapes and rich cultural scene are enough to make any retirement a happy one. When you are then presented with the affordability of everyday living, the reassuringly advanced and robust healthcare system and favourable tax incentives, it can become a real and viable option for a lot of retirees. Though there have been some changes in recent years applied to tax, visa and retirement policies, there remains a very compelling case for those with a bit of bureaucratic determination to live their dream of retiring to Portugal.
Hello Gilles, thank you for the suggestion! I will raise this with the content team and will reach out to you via email when an update is published.