“Geographic arbitrage increasingly common” as Brits plan to spend time abroad to reduce energy bills and cost of living

A new survey of 2000 people, conducted by investment comparison site Investing Reviews, has revealed that 42% of Brits would prefer to leave the UK and live abroad for their retirement, in part due to the cost of living in the UK.

Following on from this, Newspage asked a selection of IFAs about their clients’ desire to move abroad, with one saying ‘geographic arbitrage’ is “becoming increasingly common” as energy bills soar.

Daniel Wiltshire at Bradford-on-Avon-based Wiltshire Wealth: “Dreams of retiring to sunny climes are nothing new, but the cost of living crisis has added a whole new financial dimension. So-called ‘geographic arbitrage’ is becoming increasingly common, particularly during the winter months. One of our clients claims the money he saves on heating alone offsets half the cost of being away in warmer climes.”

Simon Jones, CEO of Investing Reviews: “The cost of living crisis has highlighted just how expensive it can be to live in the UK, especially on a retirement income. This is particularly the case during the winter months, when energy bills skyrocket. By strategically selecting a country with significantly lower living costs and warmer weather, more and more Brits feel their pension income can go much further if they live abroad, if only for a few months a year. If they rent out their property in the UK, that will often more than cover the cost of a rental property abroad and also further boost their retirement income.”

Ross Lacey, director at Rayleigh-based Fairview Financial Management“Around a third of our clients plan to spend several months abroad during retirement. This will either be living in a property they currently own or are planning to buy, or opting for a long-term rental. The most popular countries are still France and Spain. We tend not to see many clients wanting to relocate abroad full-time. One of the key reasons for this is the desire to stay closer to family, particularly if they have children and grandchildren who they help with childcare, which is becoming increasingly common.”

 
 

Joshua Gerstler, chartered financial planner at Borehamwood-based The Orchard Practice: “The majority of our clients are planning to spend much more time out of the UK during their retirement. For some, this is simply a desire to travel regularly and to see more of the world. For others, they are planning to purchase, or have already done so, a holiday home abroad. Many have a desire to be able to spend more of their time in the sun and France, Spain and Israel seem to be the most common destinations for our clients. For those that are spending more than a few months abroad, they will often rightsize their home in the UK to something smaller to avoid the excessive cost of maintaining a property they are not always in.”

Wes Wilkes, CEO at the Newcastle-under-Lyme-based wealth manager, Net-Worth Ntwrk“Currently, only a very small percentage of our active clients live abroad fully but we have seen a growing desire among people to seriously explore overseas property ownership within retirement, if only to live abroad for several months. Reflecting this, about 15% of our clients currently spread time between the UK and overseas. Of the few clients that have completely moved, they initially retained a UK base but that eventually went, too, as they realised that they don’t want the hassle and the whole point was to move away in the first place.”

Samuel Mather-Holgate of Swindon-based advisory firm, Mather & Murray Financial: “We have a lot of clients who aspire to live abroad in retirement. Their reasons range from the better weather and more relaxed pace of life to the lower cost of living. Without doubt, the rate of inflation over the past 18 months has cemented their ideas and they are now even more rooted in those objectives. Spain is the number one destination for our clients, and although Brexit has put some people off, we are seeing the numbers start to increase again. A lot of our clients also have EU passports, with family links to Ireland, Italy and Poland. Some of our clients move, lock stock, to another country on retirement whilst others opt to let out their UK residence to supplement their income. This will likely become less popular, as interest rates are high and money in the bank might be a better option.”

Scott Gallacher, chartered financial planner at Leicestershire-based independent financial advisers, Rowley Turton: “While some of our clients own holiday homes abroad, with Spain by far the most popular choice, only a small proportion spend extended periods there or fully retire abroad. Whilst the cost of living crisis is felt by everyone, our clients are typically wealthier. Consequently, this has not had a major impact on their retirement plans and certainly not to the extent of forcing them to retire overseas. However, Brexit has had an impact.One client was buying a home in Spain as the referendum result went through and the fall in the pound cost them around £15,000. Also, the Brexit 90 days visiting rules have forced them to become official Spanish residents rather than utilising the previous Freedom of Movement rules.”

 
 

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