Can You Afford to Retire in France?

The short answer

For many people with a UK state pension, some private or workplace pension income and a home owned outright, retiring here is affordable, and often comfortably so. Day-to-day costs in this part of rural France are generally moderate, local taxes on a main home are usually manageable, and healthcare, once you are in the system, is good value.

But "affordable" hides a lot. The people who find retirement here a financial strain are rarely the ones with the smallest pensions. They are the ones who spent too much of their capital on the house, relied on a favourable exchange rate, or never costed what life looks like twenty years in, when the garden, the stairs and the driving all become harder.

What follows is not a budget line by line. For indicative running costs of a household in this area, from heating oil to the weekly shop, read our guide to the cost of living in Lot-et-Garonne. For visas, residence and how your pensions are taxed, read retiring to France from the UK. This article sits between the two: it is about whether the numbers add up for you.

Start with your income, not with houses

Most people start a retirement move by looking at houses. It is more useful to start with a sheet of paper and three columns: income that is guaranteed for life, income that depends on markets, and capital you could spend if you had to.

The UK state pension

For most British retirees the state pension is the backbone of the plan. It is paid to residents of France and, because France is in the EEA, it continues to rise each year in line with the UK's uprating, which is not the case in every country. Get an up-to-date forecast from GOV.UK before you decide anything, and check how many qualifying years you have. If there are gaps, find out whether and how they can be filled before you leave, because the rules for people living abroad have been tightened and can change again.

Remember that the UK state pension age is 66 and is rising to 67 for people born after early April 1960. If you plan to move before you reach it, you need a plan for the years in between, covered below.

Workplace and private pensions

A defined benefit pension (a final salary scheme) gives you a known income for life, which is exactly what a retirement abroad needs. A defined contribution pot is more flexible but less certain: how much it delivers depends on how much you draw, when, and what markets do in the meantime. The main risk is a bad market in the first few years of drawdown, when withdrawals do the most lasting damage.

How these pensions are taxed once you are French resident, and the traps around lump sums and transfers, are covered in our retirement guide. For the affordability test, simply estimate what each pension pays after tax and be cautious about drawdown assumptions.

Savings and investments

Savings are your shock absorber: the new roof, the replacement car, the flights home for a family emergency. They should not be quietly funding everyday living from the first month unless that has been planned deliberately. If you find that the only way the monthly budget works is by drawing on savings at a steady rate, work out how many years that lasts, and what happens after.

The S1 is worth real money

If you receive a UK state pension, you can usually apply for an S1, which gives you access to French state healthcare on the same basis as a French pensioner, with the UK meeting the cost. You still pay for a mutuelle, the top-up insurance most residents carry, but you avoid the cost of comprehensive private cover. The S1 can also reduce the social charges France levies on some kinds of investment income. In affordability terms it is one of the most valuable things a British retiree brings, and it is why the years before state pension age need separate treatment.

The years before state pension age

Moving before you draw the state pension is entirely possible, but it is the most expensive phase. There is usually no S1, so for the visa and your early months you need comprehensive private health insurance, and premiums rise with age. After about three months of stable residence you can generally join the French system through PUMa, but people with little earned income and significant investment income can face an annual contribution, the cotisation subsidiaire maladie, so check the current rules on ameli.fr before relying on PUMa being free. Your income in these years also has to come from pensions drawn early or from savings, which brings drawdown risk forward. Cost these years on their own and do not let them disappear into a lifetime average.

A simple affordability test

You do not need a spreadsheet model to get a first answer. Four steps will tell you whether the plan is comfortable, tight or unrealistic.

Step 1. Convert your guaranteed income into euros at a cautious rate. Take the state pension and any defined benefit pension, after tax, and convert at a rate meaningfully worse than today's. Do not use today's rate, and certainly not the best rate of the last few years.

Step 2. Estimate your running costs. Use the indicative ranges in our cost of living guide for a household that owns its home outright, and place yourself honestly within them. A large old farmhouse with oil heating, a pool and two cars sits at the top. A well-insulated village house within walking distance of a boulangerie sits near the bottom.

Step 3. Add the retirement lines a general budget leaves out. A mutuelle priced for your age, not a younger person's. Flights or ferries home, realistically several times a year if you have children or grandchildren in the UK. Help with the garden, the pool or the house, which tends to become a regular cost rather than an occasional one. An annual allowance for replacing the car.

Step 4. Compare, and look at the gap. If guaranteed income alone covers your essential costs with room to spare, the plan is resilient: investments and savings then pay for the extras. If guaranteed income covers essentials only when the exchange rate is kind, the plan is workable but exposed. If you need regular withdrawals from savings just to meet essential costs, the plan depends on markets and on you living less long than you might.

An illustration

Purely as an example of the method, with round numbers chosen for simplicity: imagine a couple whose two state pensions and a small workplace pension come to £2,400 a month after tax. At an exchange rate of €1.15 that is €2,760. At a cautious €1.05 it is €2,520. If their honest estimate of running costs, including the extra retirement lines, is €2,200 a month, they pass the test with margin even at the cautious rate, and their savings stay free for the roof and the car. If the same couple chose a bigger house and their costs came to €2,700, they would be relying on the exchange rate and their savings every month. Same pensions, same region, a very different retirement.

Your own figures will differ. The point is to run the test with your numbers, at a cautious rate, before you choose the house rather than after.

A single person is not half a couple

Many couples plan a retirement together without ever running the numbers for one. That is a mistake, both for single people planning a move and for couples who need to know what happens if one of them is left alone.

A single person's budget is rarely half a couple's. The house still needs heating, insuring and maintaining. Local taxes do not halve. A car is still essential in the countryside. Broadband, the boiler service and the gutters cost the same for one as for two. As a rough guide, a single person living alone in the same house might expect costs closer to two thirds or three quarters of the couple's figure, while income can fall by far more than half if one state pension stops and a survivor's pension is small or absent.

For couples, run the test for each partner as if they were on their own. If the survivor could not afford to stay, plan now for what would happen, whether that is a smaller house in town, a move back, or a different purchase in the first place. It is an uncomfortable conversation, and it is one of the most useful you can have before you buy.

What to budget before you buy

Affordability is not only monthly. The capital side decides how much protection you keep.

• The purchase and its costs. On an older property in France, notaire fees and transfer taxes typically come to around 7 to 8 percent of the price, and agency fees may or may not be included in the advertised price. Our buying guide explains the process and costs in full.
• Surveys and checks. An independent building survey, and specific checks on the roof, the septic system and the heating, cost little compared with what they can reveal.
• Works. Even a habitable house usually needs something: insulation, a more efficient heating system, a new fosse septique. Budget for the worst credible outcome, not the best.
• Setting up. Furniture, a French car or the cost of importing and re-registering yours, tools, a mower, and the first oil fill or wood delivery.
• A reserve you do not touch. Many people aim to keep a sum equivalent to at least six to twelve months of running costs in accessible cash, separate from the money set aside for works.
• An exit fund. It is worth knowing that, if the move did not work out, you could afford to sell and go back. Rural property can take time to sell, and the costs of moving twice are real.

The most common financial error in a retirement move is spending almost all the capital on the house and leaving too little for everything else. A slightly cheaper house with a healthy reserve is usually the better retirement.

The exchange rate is a permanent part of your income

If your pensions are paid in sterling and your bills are in euros, the exchange rate is not a holiday inconvenience; it is a line in your monthly income for the rest of your life.

The movements can be large. In 2007 a pound bought close to €1.50. By the end of 2008 it was close to parity. Since the 2016 referendum it has mostly moved somewhere between roughly €1.07 and €1.21. A change of 10 percent in the rate is a change of 10 percent in the euro value of your pension, and nothing in your own control can stop it.

Three practical steps help:

• Stress test. Run the affordability test at a rate around 10 to 15 percent worse than today. If the plan still works, you can stop worrying about the headlines.
• Hold a euro buffer. Some savings already in euros mean you are never forced to convert at a bad moment to pay a large bill.
• Choose how you convert. Regular monthly transfers through a specialist currency service usually cost less than a bank's default rate, and some people fix a rate for a period ahead to make budgeting predictable. Whatever you choose, make it a decision rather than a default.

Euro-denominated income, for example from French property let out or a pension from an EU country, reduces this exposure. Most British retirees will carry some currency risk; the aim is to make sure it cannot break the plan.

Costs that arrive later

Retirement here may last twenty or thirty years, and costs do not stay flat. The ones that rise with age deserve a place in the plan from the start.

• The mutuelle. Premiums rise with age, often noticeably from the late sixties onwards. Get quotes at your current age and at seventy-five so you know the trend.
• Help at home. Cleaning, gardening and later personal care are often employed through approved services or directly. France offers a tax credit on many such services, generally worth half the cost within annual limits, which makes help more affordable than many people expect. Check the current rules on impots.gouv.fr.
• Driving. In the countryside the car is essential. When driving becomes difficult, a house four kilometres from the nearest shop becomes expensive in taxis, deliveries and favours. A house in or near a town with a pharmacy, a doctor and a market within walking distance protects your budget as well as your independence.
• Adapting the house. A walk-in shower, a bedroom on the ground floor and rails on the steps cost less if you plan for them at purchase.
• Residential care. Care homes for dependent elderly people, known as EHPAD, commonly cost a couple of thousand euros a month or more, partly offset for some people by the APA, an allowance linked to dependency and means. Most people never need one, but it belongs in a long-term view, alongside the question of whether you would prefer that care in France or nearer family.

Red flags that the numbers do not work

If any of these describe your plan, pause before you buy.

• The budget only balances at today's exchange rate or better.
• Essential costs depend on drawing from investments every month from year one.
• More than about 85 to 90 percent of your capital goes into the house and its purchase costs.
• You have priced the house but not the roof, the heating, the drainage or the insulation.
• There is no plan for the years before state pension age, or for health cover in them.
• The plan only works for two, and you have not costed it for one.
• The house is chosen for a summer view and depends on long drives for every errand.
• You would not be able to afford to return to the UK if you needed to.

None of these means you cannot retire here. Each one is a reason to adjust the plan, usually by choosing a smaller, better-located or better-insulated house, or by keeping more capital in reserve.

Where the area helps

The Duras area tends to help retirement budgets in specific ways. Property in Lot-et-Garonne is generally better value than in the best-known parts of the Dordogne, so the same budget can buy a smaller, sounder house in or near a town and still leave a reserve. Towns such as Duras, Eymet, Monségur, Sainte-Foy-la-Grande and Marmande have year-round shops, markets and services. Bergerac, about thirty-five minutes away, has a hospital and an airport with UK flights, and Bordeaux is the year-round option for travel home. Our guide to the best places to retire in southwest France compares the towns.

Making the decision

Can you afford to retire in France? If your guaranteed income covers essential costs at a cautious exchange rate, your capital is not exhausted by the house, and the plan still works for one of you alone, the answer is very likely yes, and the life on offer in this corner of France is a generous one.

If it does not yet pass that test, the answer is usually not "never". It is "not this house", "not yet", or "not without a bigger reserve". Spend time on the numbers before you spend money on a property. The free relocation guide sets out what living in the Duras area costs and involves through the whole year, and questions are welcome at hello@southwest-france.com.

Nothing in this article is financial, tax or legal advice. Figures are indicative and change over time. On anything with a lasting financial consequence, take regulated professional advice on your own position.