Property sale and the euro
Having decided to settle in Cyprus, it is quite common for retirees to sell their UK residence to allow either a purchase of a new home here in Cyprus or to release capital to in turn increase their income. The following was a typical scenario I came across recently that is worth sharing with other readers:
Joan and Andrew retired to Cyprus in 2007. They kept their UK home and rather than purchase in Cyprus, elected to rent their property here due to the uncertainty with the local property market and because they were not certain if they would settle in Paphos. After two happy years on the island, they decided to sell their UK home and to continue to rent here. As Andrew retired five years before State Pension Age, it was important to enhance their income for at least the next five years. As their savings were held on deposit, they have seen their income drop substantially and now need to use their property sale proceeds for income purposes. As most of their expenses are now in euro, they are also wary of the poor rate of exchange they will receive when bringing money across to Cyprus. They sought my advice last month on these issues.
Rate of exchange
We are all conscious of the decreasing value of the British Pound against the Euro, especially when remitting pension income on a monthly basis. Just over a year ago, we were receiving Euro1.30 to the Pound. This reduced to 1 for 1 in January this year. At time of writing, we have seen a reversal of this trend with the present rate now standing at Euro 1.18 to the Pound.
For Joan and Andrew, they do not need to bring the entire sale proceeds from their UK house to Cyprus as they have no capital expenditure. They do however need to manage their income needs carefully to take advantage of improvements in the rate of exchange. My advice was therefore to bring in their required monthly expenditure every 3-4 months, rather than exchanging a large lump sum for example once a year. This way, you are in control of when to exchange, i.e. you can follow the rates of exchange and decide when is a good time. For example, this year, I suggested individuals kept their funds in sterling until the rate improved to Euro1.15 and next when it reached Euro1.18. This has made a significant difference as you have received over 15 per cent more for your money than had you exchanged at the start of the year.
Saving for income
With bank rates at between 0.5 – 1.0 per cent, I advised Joan and Andrew to maintain £50,000 from the £250,000 proceeds on deposit to act as an emergency fund. The balance of £200,000 was invested into a spread of income producing investments that provided a combined yield of 6 per cent. This provided an annual income of £12,000. The investments were into capital protected high income notes, corporate bonds and guaranteed return bonds. The net effect is that they now have more than enough income to live off and have their original £250,000 still intact.
Mark Hollingsworth, Director, Hollingsworth International Financial Services Ltd
Tel: +357 99066840, +356 21316298
e-mail: info@hollingsworth-int.com
Website: www.hollingsworth.eu.com
Authorised by the Malta Financial Services Authority to provide investment services, license IS/32457
Having decided to settle in Cyprus, it is quite common for retirees to sell their UK residence to allow either a purchase of a new home here in Cyprus or to release capital to in turn increase their income. The following was a typical scenario I came across recently that is worth sharing with other readers:
Joan and Andrew retired to Cyprus in 2007. They kept their UK home and rather than purchase in Cyprus, elected to rent their property here due to the uncertainty with the local property market and because they were not certain if they would settle in Paphos. After two happy years on the island, they decided to sell their UK home and to continue to rent here. As Andrew retired five years before State Pension Age, it was important to enhance their income for at least the next five years. As their savings were held on deposit, they have seen their income drop substantially and now need to use their property sale proceeds for income purposes. As most of their expenses are now in euro, they are also wary of the poor rate of exchange they will receive when bringing money across to Cyprus. They sought my advice last month on these issues.
Rate of exchange
We are all conscious of the decreasing value of the British Pound against the Euro, especially when remitting pension income on a monthly basis. Just over a year ago, we were receiving Euro1.30 to the Pound. This reduced to 1 for 1 in January this year. At time of writing, we have seen a reversal of this trend with the present rate now standing at Euro 1.18 to the Pound.
For Joan and Andrew, they do not need to bring the entire sale proceeds from their UK house to Cyprus as they have no capital expenditure. They do however need to manage their income needs carefully to take advantage of improvements in the rate of exchange. My advice was therefore to bring in their required monthly expenditure every 3-4 months, rather than exchanging a large lump sum for example once a year. This way, you are in control of when to exchange, i.e. you can follow the rates of exchange and decide when is a good time. For example, this year, I suggested individuals kept their funds in sterling until the rate improved to Euro1.15 and next when it reached Euro1.18. This has made a significant difference as you have received over 15 per cent more for your money than had you exchanged at the start of the year.
Saving for income
With bank rates at between 0.5 – 1.0 per cent, I advised Joan and Andrew to maintain £50,000 from the £250,000 proceeds on deposit to act as an emergency fund. The balance of £200,000 was invested into a spread of income producing investments that provided a combined yield of 6 per cent. This provided an annual income of £12,000. The investments were into capital protected high income notes, corporate bonds and guaranteed return bonds. The net effect is that they now have more than enough income to live off and have their original £250,000 still intact.
Mark Hollingsworth, Director, Hollingsworth International Financial Services Ltd
Tel: +357 99066840, +356 21316298
e-mail: info@hollingsworth-int.com
Website: www.hollingsworth.eu.com
Authorised by the Malta Financial Services Authority to provide investment services, license IS/32457
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