Is Expatriation The Only Answer To UK Inflation And Poor Investment Performances

Retiring overseas is a dream for increasing numbers of British workers, but what’s the financial reality necessary to make the dream come true?

Many Britons approaching retirement believe their later years would be best spent in a country with warmer weather and less rain as well as a cheaper cost of living. Spain is an all-time favourite, and several Southeast Asian nations also comply with would-be UK expats’ perceptions of the ideal life. However, the financial reality of a move abroad once your working life is over can, if not planned for well in advance, turn dreams into expats’ worst nightmares. In today’s world, what’s cheap right now isn’t likely to be so in the future.

A report from former UK government pensions minister Steve Webb reveals that, for the average wage-earner who’s renting his or her home, savings of around £445,000 will be needed in order to live a basic lifestyle post-retirement. Those who’ve bought their own home and managed to pay off the mortgage before retirement kicks in will still need a pension pot of some £260,000. Workers who’ve paid into the government’s auto-enrolment pension scheme will only have managed to put by about half the amount they’ll need.

According to the report, the average home-owning retiree will need around £9,000 per year plus their state pension to provide basic necessities and cover inflation over their retirement years. To achieve this, a pension fund of £260,000 is needed. Those renting their homes will need to find a further £6,554 per year on average, with the amount necessary to top up the state pension at over £15,000. The savings necessary for generating this amount of income are around £445,000. Renting social housing adds £125,000 to the original pot, with savings needed to generate the necessary income now at £385,000.

Statistics suggest the average pension fund at the point of retirement totals between £30,000 and £40,000 – a long way short of the amounts needed for a basic yet comfortable retirement. Of course, the answer to this disaster scenario is for workers to save more, but with wages stagnating, the cost of living rising and the average lifespan also on the increase, this goal is unattainable for the vast majority.

Another answer which might provide a decrease in the amounts needed above and beyond Britain’s miserly state pension is an increase in interest rates allowing more returns on savings. Even for those choosing emigration to a cheaper country, the figures just don’t add up as inflation is a world-wide problem.