# Hedging to protect GBP income



## uk03878 (Jul 4, 2018)

Hello all
Just wondering what tools and strategies people are using to protect their GBP income base whilst in Spain ?
Checking some of the worst case scenarios it looks like a 17% drop in value in the GBP-EUR to 0.937 in 2021 then settling at around a 6% drop in 2022
Naturally all Brexit speculation but that 2021 drop is quite substantial


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## baldilocks (Mar 7, 2010)

uk03878 said:


> Hello all
> Just wondering what tools and strategies people are using to protect their GBP income base whilst in Spain ?
> Checking some of the worst case scenarios it looks like a 17% drop in value in the GBP-EUR to 0.937 in 2021 then settling at around a 6% drop in 2022
> Naturally all Brexit speculation but that 2021 drop is quite substantial


State pensioners can and do have their pensions paid in Euros in Spain. I have three small pensions which it costs too much to transfer individually to Spain so I use those to buy stuff in UK, especially when I know somebody will be coming this way who can bring stuff unobtainable in Spain.


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## Alcalaina (Aug 6, 2010)

I have savings in a UK bank and my occupational pension is paid into that bank as well. When the rate is reasonable, I transfer some over. My state pension is paid directly into my Spanish bank. We keep the Spanish account topped up with enough to live on for a year (our overheads are low as we own the house outright).

As for speculative worst case scenarios, I see no point in worrying about things I can't change. If the rate worsens, I just spend less.


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## Lynn R (Feb 21, 2014)

I agree with Alcalaina.

It's impossible to predict the exchange rate with any great degree of accuracy - in such volatile times, anything could happen. Imo the best policy is to live WELL within your means and tailor your lifestyle so that there is a comfortable surplus left over at the end of the month/year, so if your income does fall due to the exchange rate, you have room for manoeuvre without needing to start looking at where you can make economies. Been there, done that, got the T-shirt. We moved to Spain on a permanent basis at the end of 2006 and we all know what came next - we were living off capital until our pensions became payable and the value of our savings when exchanged dropped by around 30%, plus the income we were receiving in interest plummetted. But we are still here, still happy and now in receipt of all our pensions save for my UK state pension, for which I stilll have to wait a few more years. But if the exchange rate drops sharply in the meantime, at least we have that increase in income to look forward to.

I also have a SIPP pension from which I have not taken any income, nor will I unless it becomes really necessary. That's there as rainy day money.


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## mrypg9 (Apr 26, 2008)

Our UK income dropped in exchange value from 42 Czech koruna to 25 almost overnight when we lived in Prague. We had planned for every unwelcome event imaginable from earthquake to hostile coup d’etat and decided before we left the UK that we could survive on what we had in income and savings albeit in severely reduced circumstances. So we took the considered risk.

If the prospect of losing a percentage of your £ to € income is of concern, then better to reflect long and hard before moving here. Think carefully about how far you are prepared to lower the standards you have been used to. Are you willing to pay the price for living in Spain, or anywhere in the EU for that matter....


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## baldilocks (Mar 7, 2010)

If you are having to worry about it when the 'b' word hasn't even happened, then you have to consider the possibility that you cannot afford to move, especially with the potential uncertainty that the future holds.


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## Williams2 (Sep 15, 2013)

You could put your UK Savings into an Offshore Savings account. I think Skipton ( Channel Isles ) do 1 per cent fixed rate 
bond accounts which is greater than any UK Bank or Building Society interest bearing saving accounts.
Of course interest is paid tax free but you have to declare the interest payments to the Agencia Tributaria in
the annual Renta.

Maybe UK & Offshore saving accounts might get an interest rate hike after the BOE raised base rates to 0.75 per cent
on Thursday.

That could at least hedge ( by 1 per cent ) any large amounts of savings in UK pounds against depreciation of the pound.


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## snikpoh (Nov 19, 2007)

Williams2 said:


> You could put your UK Savings into an Offshore Savings account. I think Skipton ( Channel Isles ) do 1 per cent fixed rate
> bond accounts which is greater than any UK Bank or Building Society interest bearing saving accounts.
> Of course interest is paid tax free but you have to declare the interest payments to the Agencia Tributaria in
> the annual Renta.
> ...


If you're worried about the £:€ exchange rate, then put it into a euro savings account - then there's no exchange rate to worry about!


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## Isobella (Oct 16, 2014)

Stock market is the best hedge. Traditionally she the pound falls the market goes up. It's ok changing everything into Euro but one just never knows. When Spain entered the euro a lot of expats were talked into changing all their pounds to euro by financial advisors and lost out big time as the exchange rate went to £1.64 to euro.


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## snikpoh (Nov 19, 2007)

Isobella said:


> Stock market is the best hedge. Traditionally she the pound falls the market goes up. It's ok changing everything into Euro but one just never knows. When Spain entered the euro a lot of expats were talked into changing all their pounds to euro by financial advisors and lost out big time as the exchange rate went to £1.64 to euro.


That's the problem, unless you have a crystal ball then it's all a gamble.

The bigger the risk, the bigger the (potential) reward.


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## Williams2 (Sep 15, 2013)

snikpoh said:


> That's the problem, unless you have a crystal ball then it's all a gamble.
> 
> The bigger the risk, the bigger the (potential) reward.


Yes and thanks to Trump's trade wars & Mogg's dreams for a Hard Brexit, the risk is very much on the down side for
the Stock Market.


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## uk03878 (Jul 4, 2018)

Williams2 said:


> Yes and thanks to Trump's trade wars & Mogg's dreams for a Hard Brexit, the risk is very much on the down side for
> the Stock Market.


One of the main reasons I have converted 80% of my retirement funds into cash at the moment (in effect banking the 25% tax free cash as at last weeks prices,before this weeks mini fall)
On the FX markets long term GBP_EUR forecasts are a fall between 1.09 and 0.97 around 2022


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## Williams2 (Sep 15, 2013)

Williams2 said:


> You could put your UK Savings into an Offshore Savings account. I think Skipton ( Channel Isles ) do 1 per cent fixed rate
> bond accounts which is greater than any UK Bank or Building Society interest bearing saving accounts.
> Of course interest is paid tax free but you have to declare the interest payments to the Agencia Tributaria in
> the annual Renta.
> ...


I see Skipton International have upped their Offshore Notice accounts already since the move by the BOE with
some notice accounts offering upto 1.50 per cent and upto 1.90 per cent in Fixed Rate Bonds.


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## Horlics (Sep 27, 2011)

uk03878 said:


> Hello all
> Just wondering what tools and strategies people are using to protect their GBP income base whilst in Spain ?
> Checking some of the worst case scenarios it looks like a 17% drop in value in the GBP-EUR to 0.937 in 2021 then settling at around a 6% drop in 2022
> Naturally all Brexit speculation but that 2021 drop is quite substantial


I'm not using any apart from occasionally transferring more when the rate rises and bit and holding off as long as I can when the rate is low.

I think the GBP will slide a bit between now and the exit date, and will go worse than parity if there's a hard Brexit without an agreement, which I think will be the case.

If I needed to protect my position given this pessimistic outlook, I'd use a multi-currency account and shift from GBP to Euros at this point in time, but I don't so I won't.


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## DonMarco (Nov 20, 2016)

Agreed, future exchange rates for the Pound are difficult to predict except (long term) the Pound will fall against most currencies as it has done for the last 70 years. 

I use CurrenvyFair's forward order system to catch spikes in the value of the Pound. Off course this is only an option if you don't need a regular monthly income.


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