It’s a beautiful day. Brits fill the outdoor café. Most drink coffee while they read the Daily Mail.
I take a quick look at the menu and decide on an English breakfast. A waiter takes my order – in perfect English.
The only indicators that I’m not in Britain are the blue skies and the bright sun.
I’m in Marbella, a white coastal town in Southern Spain.
Spain is the top country for British expats to retire in the European Union, followed by Ireland and France. The official number of Brits living in the country is 380,000, but most of them do not register. The estimate is closer to 800,000.
It’s a nice place to retire.
The weather is good, living is cheap (a latte only sets you back AU$1.50), and there are plenty of other expats to meet.
Most of them have no need to learn Spanish — there are English supermarkets, pubs, schools, newspapers and radios.
Life in fact, is very similar to the life they would have had if they had stayed in the UK.
Except for the weather.
While most retirees in Britain spend the day at home watching TV and freezing, pensioners in Spain are always out and about.
As I lay back to take in the morning sun I can’t help overhearing the tense conversations going on around me. They are all about the upcoming Brexit referendum.
On 23 June, Britain will decide if it stays or leaves the EU.
A lot of Brits want to leave for several reasons. Mainly, the many rules imposed on business and the large membership fees. Britain also wants to limit immigration and to drastically reduce the number of people that come to work in the UK.
Most pensioners don’t know what will happen or how it will affect them. There is no information. They worry that they will have to leave their homes and move back to the UK.
And many of them don’t have a say. The only British expats allowed to vote are those who have been living abroad for less than 15 years.
For many of these pensioners, the idea of a Brexit is unthinkable. The ideal retirement they spent years building would be gone in a split second.
But there is a real possibility that it may happen. According to a poll by the financial times, 46% of Brits want to stay, 40% want to leave and 13% are undecided.
It’s going to be a close call.
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What Happens After The Brexit?
The main concern is how their visa status will change if the UK leaves the EU. If the UK retains the freedom of movement aspect they can stay where they are. But this is highly unlikely since one of the objectives of the Brexit is to restrict migration.
Most likely, the UK and the EU will make a deal. However, any deal may have special conditions. It could, for example, require pensioners to fulfil integration requirements — like proving they can speak the language — to keep living in the country.
Even though these pensioners are living abroad, they remain financially involved with the UK. They receive pension income and have investments.
British pensioners living in an EU country receive a yearly 2.5% rise in state pension in accordance with wage increases. It’s called the triple lock agreement. If the UK leaves the EU, this agreement is void. The UK would have to negotiate reciprocal agreements with each individual EU country or pension payments would be left frozen.
Another worry is health benefits. Spanish health care is currently free (and arguably better than in the UK) and medicines have a small co-pay. The health system is financed by the Spanish Social Security who then charge the British government.
If the Brexit was approved, these pensioners would have to pay for their own health care. Most of them would not be able to afford it.
Heck, many of them would not even be able to afford moving back to the UK.
Many British expats retired to Spain before the financial crisis in 2008. They sold their homes in the UK and bought overvalued Spanish properties. Since then, property values in Spain have fallen by 45%. It’s impossible to sell the property at the price it was bought.
And if the Brexit goes through, can you guess what will happen to house prices in Spain if all these pensioners put their properties on the market at once? That’s right. House prices in Spain would plummet.
The referendum is already triggering a massive exodus due to uncertainty — 100 expats are leaving each day. Many are already selling their houses in anticipation of a price fall.
In the south of Spain, the departure of the British expats could mean financial ruin. The global financial crisis savaged the country and the economy is still extremely delicate.
In 2015, Brits bought almost 30% of all properties sold to foreigners in the southern Spain region of Andalucia.
Anyone that was looking to buy in Spain is holding off in fear of what may happen. Real estate agencies are already seeing a decline in sales.
The tourism office is expecting 40% of Brits to leave if the referendum goes through. Whole residential areas would be left empty. Pension money fuelling the economy in the southern Spanish towns would dry up.
No country has ever left the EU before. What happens if the UK votes in favour of the Brexit is a complete guessing game.
The UK leaving the EU could spark another European crisis. And that will affect us here in Australia as well.
My colleague, Vern Gowdie, spends most of his days working out ways for ordinary Australians to protect their wealth from unexpected downturns, like the global economic slump a Brexit could cause. You can learn about his strategies here.
Junior Analyst, Markets and Money