According to a leading British currency broker, there has been up to a 28% increase in the number of British retirees returning home to the UK from their new lives abroad in the past year, and the number one reason cited across the board was a financial one.
It has been a tough year for everyone in terms of economic woes, no matter where in the world you live it seems. However, there are 3 key costly issues that are most likely to affect you if you’re retiring overseas, and you really need to guard against them so that your retirement can be a secure and happy one.
In this report we’re going to highlight the 3 main financial concerns would-be expat retirees need to keep in mind when planning an overseas retirement. If you’re already living abroad, these 3 issues can still potentially be guarded against or at least managed…and ultimately, if you want to ensure you’re not forced to give up your dream and return home, read on to learn more about the costly mistakes you need to avoid.
Currency Fluctuations Can Erode Your Pension
Most British retirees receive their pension income in pounds sterling…however, those who retire abroad have to spend their pension income in the currency of their new nation. This requires currency conversion – and even when the pound is riding high (can you remember the good old days?) this still means fluctuating exchange rates and commission fees.
Britons retired in the eurozone have really felt the effects of a weak pound over the past 18 months. And even now that the euro is taking a battering, the pound is still not a strong currency for conversion. This has resulted in long-term British expats being badly affected: in real terms they have seen the buying power of their pension income fall to record lows.
This has had a direct impact on the quality of life for many – with some Britons actually being forced to abandon their dream of a new life abroad simply because they can no longer make ends meet.
If you’re planning a retirement abroad, there is no way you can foresee what the pound is going to be doing in terms of its relative value in relation to the currency in your chosen nation over the coming years. No one has a crystal ball that efficient unfortunately! However, you can 1) protect yourself against negative currency movements, you can 2) shield yourself from excessive exchange rate fees, and 3) you can consider moving or adjusting investments so that you have diversification across currencies.
1) Leading currency specialists offer you the ability to fix the rate of exchange you will get on your money for up to two years in advance on regular conversions using what are called ‘forward contracts.’ Basically you ‘buy’ your rate of exchange now and fix it for a set period…so that you know exactly how much you will have coming in every month for up to two years in advance. This can remove all the unknown from the currency conversion process.
2) Currency brokers also generally give a better rate of exchange and charge low or no fees compared to your bank for moving money abroad.
3) Once you have moved abroad you may wish to discuss your entire financial management with a regulated, experienced and professional financial adviser to see how you could potentially benefit from the likes of QROPS (qualifying recognised overseas pension schemes) and other offshore investment and savings options. In so doing you may be able to save tax, diversify your investments across currencies and even ensure you do not have to buy an annuity with your pension.
Affording Healthcare Can Cost You Your Retirement Dream
In the UK we’re all used to being able to rely on the NHS for our entire medical needs. However, as is being highlighted on a regular basis, the NHS is beginning to crumble under the demand as funding fails to keep up. Many speculate that healthcare provision in the UK will be forced to change, and that some form of compulsory insurance will become necessary. In the meantime however, British retirees moving abroad are still not always aware that they may need to buy insurance to ensure they are well looked after in their later years.
Yes, there may well be reciprocal agreements in place between the UK and some European nations so that those officially retired can get access to free care abroad too – however, even in such nations the care afforded and extended can be limited.
Therefore, if you’re thinking of retiring abroad you need to seriously consider your options when it comes to affording care and treatment and even perhaps long-term support.
As stated previously, there is no such thing as a crystal ball that can tell us how our lives are going to pan out. Therefore we have to be practical, realistic and even just reliant on stats and historical evidence. As a result we can deduce that as we age we are more likely to need medical care, medicine, home help and even perhaps frailty care.
As an emigrating Briton the financial onus is absolutely on you to make sure you are insured sufficiently so that no matter what may befall you in the future, you will have the insurances in place to look after you in the event you have an accident, fall ill or need long-term support.
Yes, if you return to the UK you will be treated in an emergency on the NHS, but there are no guarantees you will be taken in and cared for if you have an acute illness, life threatening condition or frailty issue.
Insure for the future and for the worst when it comes to your health if you’re planning on retiring abroad. I cannot overstate that fact, and I cannot put it any more directly! It is an unpalatable truth – but one we must all accept if we want to have a happy, carefree and secure retirement abroad.
If you fall ill and cannot afford care you will suffer – insure against this as a priority.
Frozen Pensions Can Put Retirement Dreams on Ice
It is estimated that up to 500,000 Britons are living abroad on frozen pension incomes, because of the British government’s direct discrimination relating to what they pay to retirees depending on where they choose to retire abroad.
Many assume that those who retire overseas are wealthy, footloose and fancy free – the reality is that many retirees go in search of lower living costs abroad because they are restricted in retirement because of poor pension incomes. This situation is compounded for Brits who inadvertently or ill advisedly take up residence in one of a handful of nations where the British government has decided to freeze its state pension payouts.
Countries such as Australia, New Zealand and South Africa, all popular choices with retiring Britons because of the lifestyle and good weather on offer in each, are nations where the state pension is frozen at the rate you are receiving it when you emigrate. This has left some in the situation where they are being forced to survive on as little as £17 a week.
Therefore, before you plump for a fixed destination in retirement, ensure your state pension will not be frozen in that country, and make sure you take a good long hard look at your financial position before you leave the UK to ensure you can afford your relocation, and afford to maintain a decent standard of living abroad.