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British pensioners are ditching their retirement homes in Spain because the value of their pension has been eroded by more than a quarter by the sliding pound.
Neville Hopkinson, 73, and his wife Maureen, 67, have returned to Newark in Nottinghamshire after living in Playamar near the Costa del Sol in Spain since 2003.
They had bought a villa for €250,000 (£165,000) and relied for income on the British state pension and a private pension from food company Heinz, for which Neville worked for 31 years.
"When we first moved over we got about €1.50 to £1 but, about a year ago, the euro strengthened. Before long it was near parity. When you're on a fixed income that means you lose a third of your spending power and we couldn't realistically live with that for very long," says Neville.
"There are no real offers on food in Spanish supermarkets or cut-price products in other shops to encourage spending. So the cost of living there, which had been good compared with Britain, began to appear high.
"Many other Britons living there feel the same as us and want to come back, but not many can sell their homes. If you think the housing market is bad here, over there it's 10 times worse and getting worse by the day."
The Hopkinsons are now living in a small flat in Newark which they kept while they lived in Spain. They sold their Playamar villa - after it was on the market for more than a year - for €250,000, the price they paid in 2003.
"But after legal fees and the estate agent's costs, we made a profit of about £35,000 because when you transfer euros back to pounds the exchange rate currently works in your favour," says Neville.
The pension problems experienced by the Hopkinsons are commonplace.
The Department for Work & Pensions says there were 252,000 Britons living overseas and claiming British state pensions in 1981. By 1991 that was 594,000 and in 2006 the figure had topped a million. Not all live in the eurozone, but most major currencies have appreciated strongly against sterling in the past year.
"Pensioners living abroad are caught two ways. The value of their home is falling, as it is everywhere, but uniquely their liquid money - the pension - is down dramatically," according to Stephen Hughes, a director of exchange specialist Foreign Currency Direct.
The basic British state pension for a couple is £628 a month, which was worth €961 in January 2007 when £1 bought €1.53. But now, with £1 worth €1.11, the pension of £628 buys only €697 - a drop of 27%.
Many British pensioners abroad who want to sell up cannot do so because housing markets have ground to a near halt in many countries. But those who do find buyers and exchange their euros for pounds are quids in.
"People can afford to reduce euro house prices by 10% if they get an extra 25% or more thanks to the exchange rate when they bring the money back to Britain. There's been a 10% surge in inquiries from across the eurozone but a 25% increase from Spain, where so many are worried about the value of their home," says Hughes.
Villa and apartment prices on the Spanish costas are down as much as 45% from 2006 highs. Even before sterling's slide it was common for some homes to take two years to sell - and things are getting worse. "We've lost more deals from the exchange rate than from the credit crunch," claims James Stewart of the Costa del Sol branch of Savills estate agency. And those pensioners who choose to keep their homes abroad are having to make sacrifices as they see their spending power diminish.
"I used to go out to dinner once or twice a week but now I can't, and I have to be careful where I shop. Supermarkets selling mainly to Spaniards are cheaper than those which have a lot of British products," admits Sandra Wild, 66, who has retired to Moraira, a resort on Spain's Costa Blanca between Valencia and Alicante.
She moved from Greater Manchester to Spain four years ago because she wanted to retire to a warm climate. In 2007 she bought a home for €210,000 and her only income is her British state pension.
"Over the past 18 months the real value of my pension has diminished by a third because of the pound and, at the same time, Spain's cost of living has risen. There are Britons all around me moving back home or at least considering it. I'm going to try to brave it out but if things get worse I may have to reconsider my options," Sandra admits.
Yet there are some benefits for British pensioners living abroad, apart from escaping snowy winters and soggy summers. The Fuel Poverty Advisory Group says 50,000 people living permanently in EU countries automatically get the winter fuel allowance worth £200 to £300 each - although many live in areas with warm winters and relatively low energy costs.
And in the short term at least, those living in the eurozone who can sell their homes and change the proceeds to sterling will benefit from the strength of the euro against the pound.
But for those like Sandra Wild, reliant wholly on a fixed income paid in sterling, the current position is grim and the demographics suggest there will be more like her in the future.
The Institute for Public Policy Research, a think-tank, says the number of Britons living overseas and claiming state pensions will be 3.3 million by 2050 - although that forecast was made before house price falls slashed the equity in the homes of Britons approaching pensionable age, and before the exchange rate made properties overseas appear relatively more expensive.
• If you are retiring permanently overseas visit www.hmrc.gov.uk, write to HM Revenue & Customs (Residency), Room BP1301, Benton Park View, Newcastle-upon-Tyne, NE98 1ZZ or call 0191 203 7010.
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