Why the UK is the worst European country to retire in

British weather

Quite aside from the weather and the daytime TV, retiring in the UK is a far worse prospect than in a number of other European countries. A new survey has revealed we will be worse off financially, face a much smaller state pension, and die earlier than many of our European counterparts.

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The study, by myvouchercodes.co.uk took into consideration the maximum state pension, the average life expectancy and the average cost of rent and food. It found that people who don't make any provision for themselves in the UK could face a stunning retirement income deficit of £252,740. This is by far the worst situation of all the European countries it studied.

In France, there's still a shortfall, but its just £55,590 - which seems like the kind of sum we might be able to save up during our working lives. In Spain, meanwhile, they run an incredible surplus, so after feeding and housing themselves, they will have £300,880 to spend on themselves. And the best situation is in Germany, where there's a surplus of £308,920.

Why?

We can't lay the blame on longevity, because the researchers found that later retirement ages in the UK mean we have a far shorter retirement to look forward to - at an average of 15.5 years. This compares to Spain with 16.6 years, Germany with 17.6 years and France with an astonishing 22.1 years. The long French retirement owes much to a retirement age of 60.

A big part of the problem lies instead in the fact that the UK state pension is far lower than the maximum possible elsewhere in Europe. In the UK it's £7,440, while in France it's £15,811, Germany it's £26,366 and Spain it's £26,630.

Over the long term, every government is under pressure to reduce the cost of state pensions, so these larger payouts may fall. However, they clearly have far further to fall than in the UK - where the government is still considering squeezing pensioners.

Another issue is the cost of residential care. The study looked at the cost of a day in a care home, and found the UK was mid-table, with a cost of £78. France has the highest costs at £79.54 and Spain the lowest at £51.32, while Germany comes in at £71,85.

What can you do?

There's very little that we can do to change our position when it comes to state pension age and payments. However, the researchers suggest that if you have a shortfall, you could consider spending at least part of your retirement somewhere with lower living costs.

The researchers looked at the cost of a 2-bedroom flat in various potential retirement spots, and found the cheapest in Spain at £30,000, followed by Cyprus at £45,000. There were also a number of destinations where a flat of this size would set you back £60,000 - including France, Italy and Ireland. It also looked at the minimum monthly spend on food, and found the cheapest destination was Portugal at £132. This was followed by Croatia at £133, Greece at £146, Spain at £153, and Cyprus at £159.

It starts to help explain why Spain and Cyprus make such attractive retirement destinations - even before you consider the weather. The daytime TV there, however, is not guaranteed to be any better than the UK.

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How we spend our pensions

Figures from Saga show that the over 50s now account for the majority of money spent by Brits on travel and tourism. They have the time to spare, the money, and they are healthy enough to take on the world.

A poll from Abta found that in the wake of pension freedoms, 35% of people were considering cashing in at least part of their pension to travel. A separate study by Senior Railcard found that pensioners take an average of three holidays a year, plus two weekends away, and 17 day trips.

Research from Senior Railcard found that retirees eat out an average of three times a month. However, one in ten do so more than twice a week, and one in three people said that one of the first things they did when they retired was to go out for lunch with their friends.

Of course, just because retirees want to enjoy themselves, it doesn't mean they are happy to throw money away. The vast majority are keen to eat at lunchtimes, when a fixed lunch menu tends to be cheaper, and canny retirees are skilled at tracking down pensioner special offers too.

Figures from the Office for National Statistics show that on average nearly a fifth of the money spent by people aged 65-74 is on leisure. This includes everything from the cinema and theatre to golfing and gardening. They spent more on this than on food, energy bills and transport.

A report by Canada Life found that retirees are spending £4,279 a year on having fun - that’s more than £1,000 more than they spend on boring essentials, and is a 74% increase over the past ten years. It went on to predict that this trend was set to continue, and that pension freedoms would encourage people to spoil themselves a bit more in retirement

Pensioner property wealth is now over £850 billion, and all these family homes don’t look after themselves. The Senior Railcard survey put home renovations in the top 20 activities people got stuck into on retirement, and figures from ABTA found that almost a third of people who were considering raiding their pension pots under the new pension freedoms planned to spend the cash on their home. This seems like an eminently sensible investment - looking after what is undoubtedly their most valuable asset.

Unsurprisingly, while some pensioners are very well off indeed, others are struggling with debt. Figures from Key Retirement found that the average retiree has £34,000 of debt.

Most of this is mortgage borrowing - in many cases driven up by the number of people who unwittingly signed up to an interest-only mortgage. However, credit cards, overdrafts, and loans are also common. It’s why so many pensioners have used pension freedoms to access enough cash to pay their debts.

The day to day basics are swallowing up their fair share of pensioner cash too. On average, people aged 65-74 spend a third of their weekly income on essentials like food and bills - which is hardly living the high life.
The bank of gran and grandad has become an increasingly vital source of cash for families. According to Key Retirement, of those who release equity from their property, 21% of them use the cash to treat their children and grandchildren. This includes an average of £33,350 to help children get onto the property ladder, £6,000 to buy them a new car, £11,000 on family weddings, and £24,780 giving grandchildren a helping hand.

While retirees are quite rightly spending what they need to enjoy retirement, they are hardly all throwing caution to the wind, buying flash cars and spending the kids' inheritance.

Most expect to have something left over to pass onto their family after their death. Some 69% expect to leave property in their wills, and 75% expect to leave cash - according to Unbiased.co.uk - because while baby boomers know how to have fun - they also know how to save for the future.

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