British people planning to retire in Portugal in 2014 should be extra careful about how they use their pension, after a report last week has shown that annuities may not be good value for money.
Many British expats in the Algarve rely on regular income from an annuity after cashing in their pension pots, but unrealistic expectations about what today’s annuities deliver could lead to financial hardship once you’ve moved to Portugal.
The report by the Financial Services Consumer Panel highlighted how hefty fees charged by some annuity brokers can eat into a pension pot. For retirees living in Portugal, these effects can be compounded by a swing in exchange rates, when expats’ pounds buy them less euros. Portugal Property Sale recommends that British people planning a move to Portugal speak to a financial planner that specialises in helping expats.
Meanwhile, good news for anyone planning to purchase a property in Portugal in 2014 is the strengthening pound. As the year comes to an end, the pound is not far off levels last seen in January with £1 worth around €1.19 – compare this to the start of August when the rate had fallen to a dismal £1/€1.14. The effect of this is cheaper property for UK buyers. For example, a €219,000 apartment in the Algarve is around £8,000 cheaper than it was at the start of August, purely down to movement in the exchange rate.
Property buyers are advised to send payment to Portugal using a currency exchange specialist, they consistently offer better exchange rates than banks and can assist with making regular payments between the UK and Portugal, such as pensions.