Some people decide to blow the kids’ inheritance on a round-the-world cruise or a fairytale chateau in France. Good luck to them! But some unfortunate pensioners end up spending a whole load of money on nothing at all.
We’re not talking about playing the lottery, or getting caught out by scams like ostrich farms or jatropha plantations. It’s worse than that – if you’re not wised up, between the tax man and high bank charges, you can end up just throwing your money away. That’s particularly the case when, like many retirees, you decide to use your new-found leisure to go to some of those places you always dreamed of visiting, or even retire abroad.
Just retiring can cost you money. Believe it or not, if you go for income drawdown, choosing the wrong provider could knock £10,000 off the value of your pension fund according to a Which? Report. That’s a shockingly large amount of money considering how hard you worked for it!
Then there’s the whole question of foreign currency charges. We’re a nation of travellers – but oh boy do we pay for it.
The overcharging starts before you even leave the UK. Go to your local Post Office or an airport currency change kiosk and buy some foreign currency with a Co-Op debit card, and you’ll pay 2% of your money away in commission. If, on the other hand, you went to an ATM, took your money out in cash, and then used the cash to buy your foreign currency, you’d get away scot free.
2% may not sound much. But for an average two-week break for a family of four, you’re looking at over £1,600 in spending money. That’s £32 gone already. You could have quite a few nice drinks in a beach bar for that!
If you take money out abroad, you’ll pay even more. Many banks charge 2.75-3% for using a debit card abroad, plus up to 1.25% on purchases and £2 on all cash withdrawals. In a society that’s increasingly cashless, that can really add up – if you tried paying for a EUR 1.80 Paris metro ticket with your card, you could end up paying £2.50 for it – and it’s only worth £1.60!
Figures from Which? show a shockingly wide range of charges. The magazine calculated how much you’d pay on two £50 purchases and three £50 cash withdrawals – most of us will spend significantly more than that on holiday – and the cost ranged from zero at one new challenger bank to over £15 at TSB, Lloyds, and Bank of Scotland.
If you have a holiday home on the Costa Brava, and want to pay your bills from Blighty, transferring money abroad can Costa Lotto! Many banks charge £15 to £30 for setting up a foreign transfer, and they don’t have particularly good foreign exchange rates, either. Send £10,000 to the US and the average High Street bank will only give you $13,550 – when you should be getting over $14,000.
It’s even worse when you make monthly transfers, for instance moving your pension money into a foreign account. £30 a month adds up to £360 a year – if you retire abroad, that’s £3,600 in your first ten years. For that, you could buy a 2CV to tootle around France, or a couple could take the Transiberian Railway from Moscow to China and still have enough money left for a week in Beijing.
Spend the money on something worthwhile, instead!