Residency , or not?

If you have S1's then you will be able to use the NHS although you cannot remain registered with a UK GP practice.

Note that residency is not a wheeze to override the 90 day rule as it requires you to spend the majority of your time in Spain and in fact in the first 5 years you are only permitted a maximum of 5 months away.

As Darro points out, taking out residency means making a commitment to living in Spain and not just a way to get over the 90 days rule. In the first 5 years, your passport should be stamped on entry and exit as this is classed as temporary residency. You cannot leave Spain for more than 6 months in any one year during those 5 years except in exceptional circumstances. During that first 5 years the total you can be away from Spain is 10 months.

You can get an S1 which transfers your healthcare to the Spanish NHS. Whilst, as pensioners, you can still access the UK NHS for emergencies, you will not remain registered with a UK GP once your S1 has been registered in Spain.

Only think of residency as a permanent method or retirement and you will be liable to income tax in Spain once you have been here for more than 6 months in one year. Income tax allowances are not so generous in Spain so you will end up paying more than in UK although other taxes, like council tax, are not so steep.

When UK was a member of the EU you could simply register your stay and remain for up to 6 months in any one go per year without becoming a tax resident. That is no longer possible if you are a UK passport holder. 

You cannot just decide residency at a whim. As UK passport holders you are now considered as 3rd party nationals, which means that you must go through a rigorous ordeal by applying for Non-Lucrative Visa's, which involves showing savings/non-working income of approx €35K (for 2 people 28+7) for the 1st year and €70 for year 2 and 3. If as  you say, both are over retirement age, you need S1 medical insurance, with no co-pay or exclusions. After the 1st year things relax a bit, but to continue to hold the visa the amount of time you are permitted to be outside Spain is very short, so you need to consider this

"you need S1 medical insurance, with no co-pay or exclusions"

The S1 healthcare covers everything so above statement is not entirely correct. 

Steve 

Granted, but just trying to inform/include those who do not qualify for S1

Thank you everyone , i certainly get the fuller picture now