Pension planning for a retirement in France

Planning your currency transfers can help you to maximise your pension payments and get more from your retirement in France, says Laura Parsons

Whatever you want to get out of your retirement to France, from enjoying a more leisurely lifestyle to soaking up the nation’s rich heritage, having a little extra money at your disposal could really come in handy.

The majority of expat retirees use their UK pensions to fund their new life overseas, but it can be hard making those payments stretch. However, saving hundreds of euros a year just requires a little research and the adoption of a proactive approach to managing your foreign currency requirements.

If you live in France but have your pension paid into your UK bank account, you will want to convert the money to euros in the most cost-effective manner possible.

Using a credit or debit card to withdraw funds from your UK account through French ATMs is a convenient way of accessing your money, but as a charge will be levied every time you take money out, it isn’t a sustainable long-term solution.

If your stay in France is going to be of some duration, your best option is to open a French bank account and transfer your pension payments across on a monthly or quarterly basis. Many people assume that using their bank is the simplest and securest method of moving their money abroad in this way, but there are other avenues available and some can really improve your return.

Most banks will issue a transfer fee of anything from £10 to £40 on every foreign currency exchange, as well as charging variable commission costs. As a result this can set you back hundreds of pounds over the course of a year.

You could also miss out by failing to secure a competitive exchange rate, and this can make a huge difference to how many euros you receive for your pounds.

Instead of settling for the international money transfer service offered by your bank, take a little time to look into leading currency brokers. Using a currency broker might seem intimidating if you’re new to the process, but as foreign exchange specialists they can really open up your options and help you achieve a lot more for your money.

Currency brokers tend to work on smaller margins than most banks so they can secure more competitive exchange rates. Many also don’t charge transfer fees or commission costs, and can give you access to a range of services that can be tailored on an individual basis to meet your needs.

As an example, Jane is 67 and eligible for the maximum UK state pension of £113.10 per week, meaning she receives £452.40 each month. Shortly after retiring, Jane fulfilled her lifelong ambition of moving to the south of France. While the sale of her UK property helped her buy and furnish a new home abroad, she relies on her state pension payments to cover general living costs.

At first, Jane was using her bank to move her pension payments abroad as she wasn’t sure of her options. Her bank charged her a fee of £30 for every payment she moved to her French account, meaning she was losing out on £360 over the 12-month period.

When Jane factored in the extra commission costs charged by the bank and considered the exchange rate she was achieving, she realised that her current method of moving her money to France was eating up a whole month’s worth of her pension payments every year.

After talking to some fellow expats, Jane made enquiries with several foreign currency brokers. She found a broker that doesn’t charge transfer fees or commission costs and can secure an exchange rate up to 3% better than most banks. This 3% might not sound like much, but over time the difference can really start to add up.

If we use the pound sterling to euro exchange rate of February 2015 as an example, while Jane’s bank would have been able to offer her €1.2998/pound, a currency broker could have secured her €1.3400.

This means her pension of £452.40 would have been worth €588.02 with her bank, but €606.21 with a broker – a difference of €218.35 over the course of the year, even before you take into account the additional money saved by not having to pay transfer fees or commission costs.

Jane put the money she saved by switching from her bank to a broker toward visiting her family back in the UK.

With a currency broker you can also set up a regular overseas payment plan. This service means that your pension is transferred swiftly, securely and automatically on a pre-chosen date – so you never have to worry about being without funds.

Reputable currency brokers can also help you save a considerable amount of money on larger foreign currency transactions, from purchasing a foreign property to transferring savings overseas.

With their support you can defend such transfers against currency risk (the negative impact of an adverse shift in the market) and keep track of the latest developments – ensuring you don’t miss out on a favourable exchange rate.

As this year has already shown, the currency market is extremely volatile. When the Swiss National Bank (SNB) removed its cap with the euro and the European Central Bank (ECB) outlined its quantitative easing programme back in January, exchange rates shifted violently and the euro plummeted to a fresh seven-year low against the pound.

While some situations cannot be pre-empted, currency brokers employ analysts to track market movements and currency trends so you have the best possible chance of moving your money at the right time.

As well as keeping you informed about the latest market movements and exchange rate shifts through regular market updates, brokers can give you access to specialist services, such as the option of fixing a favourable exchange rate for up to two years in advance of a trade, so you can get the best return on your transfer.

Retirement gives you the time you need to get more out of life, to enjoy and explore all the things you’ve had to put on the backburner while pursuing a career and raising a family. Maximising your pension payments and making your money go further can enrich this exciting chapter of your life and give you peace of mind, so it really does pay to consider your foreign currency exchange options.

So take some time to research various foreign exchange providers, seek expert advice regarding the best way of managing your requirements and give your golden years a welcome injection of that all-important joie de vivre.

Laura Parsons is an analyst at TorFXTel: 01736 335233