British retirees who have made the move to Spain, France, Italy or Portugal (and even the USA) are reaping a financial windfall that few could have predicted just a few years ago. Those receiving their triple lock pension overseas have seen their incomes rising sharply since 2023 – at a pace far outstripping local inflation in their adopted overseas homes.
Although the talk has been of British millionaires fleeing the country to escape higher taxes, those on more modest incomes can also improve their finances with a move overseas. It’s all down to the differential between low inflation in the eurozone and rising UK pensions based on the UK’s pension triple lock.
A decade-defining pension boost
The triple lock guarantees that the state pension will rise each April by the highest of:
- UK inflation (measured each September),
- average UK earnings growth, or
- 2.5%.
Given high UK wage increases, the rise from April 2026 looks likely to be 4.7%.
The mechanism has already meant significant increases in recent years: 10.1% in 2023, 8.4% in 2024 and 4.1% in 2025. Cumulatively, that means a pensioner receiving the full new state pension in 2022 (£9,627 annually) will, by April 2026, be receiving £12,534, an increase of £2,300 now and £3,000 the following year. That’s an extra £6,000 for most couples per annum – assuming they get the full state pension.
Moreover, based on current predictions, it looks like the average UK earnings element will take it to a 4% plus rise in 2027 too.
Eurozone inflation – a very different story
Compare that to the inflation picture in the eurozone, which is running at 2% across the bloc but as low as zero in Cyprus, 0.9% in France, 1.6% in both Italy and Ireland. Inflation in Spain, Portugal, Greece and Malta is all around the 2.5-2.8% level. In the US it’s a little higher at 3.3%, but still below the UK.
Eurozone-wide, inflation has remained under 3% since 2023. For retirees whose day-to-day spending is in euros, prices have therefore been relatively stable.
So British retirees in Europe are enjoying the best of both worlds:
- Big increases to their sterling-based UK pension income,
- Low local inflation keeping the cost of living manageable.
Will that continue, or is it a flash in the pan?
If it were based purely on inflation (a ‘single lock’), then a rise in eurozone inflation would cancel it out, and that can happen. However, the triple lock means it is likely to stay ahead of living cost rises in those countries.
Although many analysts have pointed out that such rises may be unsustainable in the long term and a move to a double or single lock is inevitable, no political party seems to dare bringing this in as a policy for the foreseeable future. And if they did, such a change would likely be phased in over a long period, maybe decades.
Those retired in the USA and Ireland also get the pension upgrade, but for those who moved to Commonwealth countries, this will all rub salt into the wound, as they miss out on pension upgrades.
Indeed, this was highlighted in the Property Guides Easiest Place to Retire Overseas index.
A golden period for British retirees abroad
That £2,300 per person annual pension rise since 2022 doesn’t just cover higher food or energy costs – it leaves extra euros available for travel, dining out or helping family.
For retirees who took the step of moving abroad, the effect has been especially pronounced. They have avoided the UK’s cost of living crisis, which has been longer and more severe than in much of Europe, in particular with electricity prices which are generally higher in the UK (even without the effects of chillier weather).
Looking ahead, pension rises are forecast to moderate, but the gap of the last three years has already left many retirees substantially better off.
The sterling-euro advantage
The other major factor is currency exchange. While pensions are paid in sterling, retirees spend primarily in euros. Exchange rate movements can make a huge difference.
When you move overseas the British government will transfer your state pension to a foreign bank account automatically at the prevailing exchange rate.
But what of those who keep their bank account at home, or who receive private pensions? They will need to be proactive in creating a currency plan – something they can do with the assistance of the Smart Currency account manager.
Daily exchange rate changes will mean that you never know from one month to the next what you will have to spend in euros, making budgeting very difficult, unless you fix your rate for a period.
Making the most of your pension abroad
Getting your triple lock pension overseas is one benefit, but it can easily be lost through poor planning elsewhere. If you’re already living overseas, or planning to retire to Europe soon, managing your pension income carefully is essential. Smart Currency Exchange can help you:
- Fix exchange rates with a forward contract, so you know exactly how much you’ll receive in euros each month.
- Time your transfers to take advantage of favourable movements.
- Protect your lifestyle against currency volatility.
