Paul Reilly

Paul Reilly

Chief Commercial Officer

9 min read

You’ve done the hard work and now it’s time to live the dream.

Living out your retirement abroad is a popular choice for Brits – of the estimated 1.3 million British expats living in Europe, around 200,000 to 250,000 are retired. For many of us, the lure of cheaper living (up to five times cheaper in some countries), sunnier climes and an idyllic setting is too much to resist – not to mention other benefits like good quality affordable healthcare, financial stability and the pure appeal of a new adventure.

But for all these undeniable benefits, many are still put off by the logistics such a move involves. From the initial question of renting or buying a house overseas to the longer term management of day-to-day living and accessing your pension, there are plenty of things to think about. With some thorough research and help from the right people though, you can overcome any problems as thousands of others do every year to live out your dream retirement overseas.

Here we look at the specifics of retiring abroad with a pension and how to best manage your money to make the most of every last penny.

Plan your budget carefully

The scenario of retiring somewhere in bliss only to be scuppered because you haven’t taken into account certain costs or the impact exchange rate fluctuations can have on your finances is all too real. First thing’s first then, plan your budget carefully. Here are some starters to think about:

  • Relocation and setup taxes, fees and duties
  • Mortgage or rent payments
  • Service and management fees
  • Legal and administrative costs – of the initial move and ongoing day to day
  • Health insurance and potential healthcare costs if you don’t qualify for free cover
  • Significantly different utility costs – if you’re moving somewhere much hotter or colder
  • Grocery and shopping prices
  • Socialising and eating out
  • Transport costs, including petrol
  • Unexpected repairs or bills – knowing roughly how much services cost can be invaluable
  • Tax liabilities from any overseas income you may have
  • Costs of visits home – just in case
  • Currency values and exchange rate changes

What type of pension do you have?

Depending on your circumstances, your pension options can vary considerably so it’s important to know what you qualify for and how that may affect your finances.

UK State pension

If you qualify for a state pension, which takes into account your National Insurance record up to when the new state pension was introduced in 2016, as well as contributions and credit since then, you can claim it no matter where in the world you live. Your pension payments will only increase in line with the UK if you live in the European Economic Area (EEA), Gibraltar, Switzerland or a country that has a social security agreement with the UK.

You can set your pension to be paid every four or 13 weeks (unless it’s less than £5 a week in which case it comes annually in December) and choose to have it paid directly into an overseas account in the local currency or into your UK account. Both of these options leave you open to inflated exchange rates and potentially hidden charges in order to get them into your overseas bank account, so using a dedicated currency specialist is the best option.

Multiple country state pensions

If you’ve been living and working abroad in one country before your retirement, you may be eligible to get a pension there as well as from the UK. As with the UK it will depend on the number of years you’ve worked in each country and their own rules around pension allocation, so you’ll need to speak to the pension service in the relevant country to find out more. If you’ve been working within the European Economic Area (EEA), Gibraltar, Switzerland or a country that has a social security agreement with the UK, you may be able to use this time to contribute towards the mandatory ten year pension qualification in the UK.

For example, if you have only seven qualifying years from working in the UK on your National Insurance contributions, but have 15 years working in an EEA country where you contributed to the state pension there, you would meet the minimum requirement to qualify for a UK state pension – although it would only be calculated from the seven years you contributed in the UK.

Private pension

Typically, any private pension you have set up will be paid into your UK bank account, leaving you to choose how and where to spend it. As always, relying on your bank to transfer your funds overseas is a costly mistake to make – and gets more expensive the bigger your pension – so your best bet is to use a foreign exchange specialist like Clear Currency to maxmise that precious income.

One of the big problems with regular payments is your long-term exposure to  currency fluctuations, which can have a huge impact on the real-world money you receive in your country of choice month on month. We can help with long-term strategies to mitigate your risks, including setting up forward contracts that fix your exchange rate so you know exactly what your income will be and can plan accordingly.

Does retiring early affect your overseas pension opportunities?

Potentially, yes. Retiring early and heading abroad will give you some decisions to make around how you treat your pension. First and foremost is whether you want to try and take your entire pension fund overseas using the catchily named Qualifying Recognised Overseas Pension Scheme (QROPS), which can be in the country you’re retiring to or another offshore location. Qualify and you may find more agreeable tax rates on your QROPS income than you’d find in the UK – you’ll also no longer be subject to a maximum lifetime allowance or UK inheritance tax (although your beneficiaries may be).

Another decision to make is whether you want to take a lump sum from your pension fund when you first retire. It’s all well and good to do that in the UK, where you can take up to 25% without paying tax, but that’s not always the case in other countries. France and Spain, for example, will both tax any lump sum you take out of your pension pot if it’s based there, meaning it could be wiser to leave it invested or withdraw it beforehand and use a currency specialist to transfer it to your currency of choice.

Five steps to minimise your overseas retirement costs

For simple now-and-again currency exchanges like going on holiday, it can make sense to go to a bank or post office or just use your card at local machines and suck up the poor exchange rate and bank charges. But for bigger and more regular exchanges, these costs can quickly grow to be big enough to impact your day to day budget. So it’s important to plan for currency risk and know how to make the most cost-efficient pension transfers.

By joining Clear Currency you can make your payments quickly, securely and, crucially, with complete transparency on the rates you’re getting and any fees you may incur.

1. Sign up to Clear Currency

Complete a quick online signup form telling us what your needs are and we’ll open an account for you and assign a dedicated foreign exchange specialist from our team.

2. Set your rate

A member of the Clear team will walk you through how the exchange process works, answer your questions and discuss how best to meet your needs and get the best rates for the currency you’re buying. You can do this over the phone or via your online Clear Currency account.

3. Transfer your funds

Once you’re happy with the exchange rate and quote, you transfer your funds to your Clear Currency account for us to convert into the currency you want.

4. Access your new currency

We send the converted currency to the overseas account you nominate, which usually arrives the same day – and then send you an email confirming everything.

5. Complete your purchase

With the money in your overseas account you can pay your bills safe in the knowledge you’ve made the most of your funds.

If you’re not quite ready to open an account but just have some starter questions, you can call or email us on 0207 151 4832 and

Make the most of your money

Clear Currency can help make your overseas retirement easier

To make the most of every pension payment, simply sign up for a free account. It only takes a minute or two and then we’ll get in touch to talk over exactly what you need and how we can help you keep more of your money when you transfer with us.

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