What you need to know about currency when retiring abroad

Money matters in retirement. Once you’ve stopped working, there’s little opportunity to replace what’s lost, and living on a fixed income makes careful financial planning essential.

If your income is paid in one currency but spent in another, things can quickly become more complex and unpredictable. Retirees who moved abroad before events like the 2008 financial crisis or the Brexit referendum in 2016 will know this all too well. The pound’s drop against the euro meant their monthly income in Europe shrank significantly compared to what they had budgeted.

Buying your property abroad

Selling the family home before moving abroad can be an emotional wrench for retirees, but this essential financial transaction typically funds their dream. So, ensuring the proceeds are transferred safely and cost-effectively becomes the top priority. To achieve this, you must overcome three main challenges when moving money for an overseas property purchase:

1.      Getting the best exchange rate: Large transactions are highly sensitive to rates. By avoiding high-street banks and working with a dedicated currency specialist, you can secure a far better deal.

2.      Ensuring security and peace of mind: When transferring such significant sums, safety matters. A currency broker that specialises in overseas property transactions can provide support and reassurance throughout your buying journey, including a dedicated trader available over the phone.

3.      Protecting against currency fluctuations: The biggest risk is often the pound falling in value before your purchase completes. Imagine the pound stood at around €1.18 when you had your offer accepted on a €200,000 property, but plummeted to €1.14 just before you were about to pay the remaining balance a few weeks later – which is perfectly feasible in the unpredictable currency markets. Suddenly, you would have to find an extra £6,000 than you originally budgeted for.

The solution? With a currency specialist, you can fix your rate in advance using a forward contract. That way, when you complete on your dream home, you’ll pay exactly what you budgeted, whatever happens in the currency markets.

Managing your pension abroad

Having successfully bought your retirement home overseas, your pension will need to come with you.

European countries that require visas for third-country nationals (such as Brits and Americans) typically offer a retirement visa. These usually come with a minimum income requirement, which can be fairly high. For example, retiring to Spain on a “non-lucrative” visa currently requires an annual income of around €28,800 – some countries may ask for more.

The good news is that your state pension can normally be paid straight into a foreign bank account. If you have an overseas account, simply provide the International Pension Centre with your IBAN and BIC numbers, and your funds will be deposited in the local currency.

Private pensions, investment income, or rental income from the UK can be trickier to manage. A currency specialist can make sure you receive your funds quickly and securely. For added peace of mind, they can help you lock in an exchange rate for the year ahead with a forward contract. This means that if you receive £3,000 a month, for example, you’ll know exactly how much you’ll get in euros each time – even if the pound falls.

With your income stable and predictable, budgeting for life abroad becomes far simpler.

Making regular payments abroad

If you need to cover bills or make other regular payments in another currency during retirement, don’t rely on making ad hoc transfers at uncertain exchange rates – it’s not only a lot of effort; it exposes you to currency risk. A Regular Payment Plan (RPP) with a currency specialist can save you a lot of hassle.

When you’re busy settling into your new home abroad, it’s easy for important ongoing payments to slip through the cracks. An RPP takes that worry away, ensuring everything is covered on time.

Your retirement abroad should be exciting, enjoyable, and financially secure. With a currency specialist, you can lock in the best exchange rates, keep your budget steady, and avoid costly mistakes – so you can focus on living the life you’ve planned.