Home » Currency 101 » How can you maximise your UK income and pension abroad?

For anyone buying a property and moving overseas, there’s a lot of financial planning to do. It’s not just the cost of the property – you need to work out how you’re going to afford to live there too. That means both understanding how to get your money across borders and how to maximise your income abroad. Here is what you need to consider.

Is there a risk in regularly sending money overseas?

There is a risk factor and that is the exchange rate. It’s constantly changing, all the time, and no-one can predict where it’s going. Take the recent defeat of Theresa May’s Withdrawal Agreement – all the experts thought the GBP to EUR rate would drop, and it actually rose.

What does this mean for you? Well, any UK savings and pension abroad will have a constantly fluctuating value. At home, you might receive £550 a month. In your new country, you wouldn’t have any guarantees if you sent it over at the day’s rate. One month would be different to another.

That’s why so many of our clients opt for a forward contract. For no extra fees, this locks in the exchange rate for up to twelve months. That means you know exactly how much your investments will be worth, month to month – so you can realistically plan and budget.

Which are the key areas to maximise a UK income and pension abroad?

Once you understand the risk of sending money, and how you can control this, then it’s time to go through your own potential income streams and decide how you’ll manage them overseas. They could involve the following:

UK pensions abroad

One of the most common areas we’re asked about is pensions. If you have a UK state pension, it will be paid directly into your bank account in your new country, so there’s nothing to sort out there.

If you have a private pension, then there’s a bit more to think about. You have two options. With some providers, it can be paid directly into your new bank account, or  otherwise it’ll be paid back into your UK one. If it goes directly into your new bank account, then you may find you’re charged extra fees, or it comes at a changing rate.

We normally recommend you withdraw a private pension into a UK bank account, and then use a forward contract to send the money. That way, you don’t lose out to changing exchange rates.

Income from renting out your UK home

Many British people buying a home abroad choose to rent out their UK property as an additional income stream. You can get excellent returns on this, but they can be reduced by a sudden drop in the exchange rate.

Again, this is easy to control. A regular payments plan is ideal for any of these sorts of transfer, where you’ve got the same amount coming in each month. Firstly, you can lock in the exchange rate with a forward contract. Secondly, you can automate the transfer process, so you don’t have to worry about organising it each month.

Keeping an ISA or other savings account in the UK

If you have an ISA in the UK, you don’t have to close it when you move abroad. However, do note that you cannot continue paying into the account after the tax year in which you moved ends. It will continue to sit there and earn interest.

If you do decide to remove money from the account, or transfer it out to a savings accounts in your new country, and you’re not necessarily in need of one date, then it could be a good idea to ask your Personal Trader to set up a rate alert. Once the pound to euro exchange rate hits what you’re looking for, then you can trade immediately.

Speak to your Personal Trader today on 020 7898 0541 about how you can make the most of your money when you move overseas. And, if you know anyone else who could benefit from Smart’s services – ranked no 1 in the UK for money transfer on Trustpilot – don’t hesitate to refer them to us. As a thank you, you can earn yourself Smart Rewards.

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