Global downturn dashes retirees’ dreams

By Brinley Bruton
June 2009

The plight of British retirees in Spain underscores the global nature of the economic contagion, with expatriates in the EU squeezed between fluctuating currencies and the collapse of housing markets.

SAN MIGUEL DE SALINAS, Spain - Sunlight was the main reason Gill Burden left Britain to retire in Spain.
“I always intended to come here because of the weather,” the 68-year-old says in her house in San Miguel de Salinas, a town on the southeastern coast. “I like being able to get up in the morning and the sun is shining, and to go out and not have to wear a coat.”

So about three years ago Burden and her partner of ten years, Michael Trump, 73, packed their belongings, sold their homes in Bristol, England, and moved to Spain’s Costa Blanca in search of a comfortable but affordable retirement.

Burden’s own love of sun is obvious – her skin is tanned dark brown, something she tends to accentuate by wearing clothes the color of ripe lemons. That the two former members of the Royal Navy are house-proud is also clear - their orderly home is full of mementos from their travels, such as a Turkish prayer rug and old snapshots of them with friends. Carefully tended trees and flowers sprout and wind up the walls of their tiled garden.

What is not obvious from Burden’s sunny exterior and Trump’s toothy smile is how the global economic meltdown has conspired with issues related to growing old, pushing the couple to the financial tipping point.
“I have now gotten to the position where I don’t make plans,” Burden says. “I never know what’s around the corner - I just live from day to day.”

The plight of retirees like Burden and Trump underscores the global nature of the current economic contagion, with expatriates in the open-bordered European Union squeezed between fluctuating currencies, the collapse of national housing markets and the dissipation of the dreams of millions who thought that financial security during their Golden Years was possible.

Incomes fallen by 30 percent
In the decade or so until 2008, when Britain’s economy roared and the pound and U.K. housing prices soared, thousands of Britons fled their country’s gray skies for the sunnier climes of Europe’s Mediterranean. More than 350,000 now live permanently in Spain, about 135,000 reside in France, and tens of thousands in Greece, Cyprus and elsewhere, according to statistics from the EU and the British government.

But since the boom times came screeching to a halt last year, the pound’s depreciation against the Euro - the currency used in Spain and most of Europe - has sliced about a quarter off the income from U.K.-based pensions, retirement and savings accounts.

“This means people paid in sterling, such as pensioners, have seen their income fall by 30 percent,” says Barry Davis, a financial adviser at Spectrum IFA Group, which caters to English-speakers in Europe.

To add insult to injury, “interest rates have fallen to near zero, which has decimated the income from their savings in their bank accounts,” he adds.

Spain’s property market has worsened people’s woes. After years of being fed by easy credit and high demand, the real estate bubble burst with a mighty bang in 2007. Prices are expected to slump by 10 percent this year, after falling about 30 percent from their peak, Spanish bank BBVA says.

Meanwhile, rampant building around towns and cities and along Spain’s coasts - the sort of area where Burden and Trump live - have left about 1.2 million unsold new homes, according to the bank.

The worsening economy has left many British expatriates in dire straits and in need of help, says Tony Aldous of the Spanish branch of U.K. charity Age Concern.

“The cost of living in Spain is increasing dramatically and Age Concern has seen a doubling in the number of referrals since June last year,” he says.