Two thirds of pensioners are financially less well off than they were a decade ago, according to a new survey.
Pension payments firm Equiniti has looked at how pensions paid in Sterling are faring against other currencies.
Although the pound is growing stronger and buys more foreign currency in many countries, the bad news for expat pensioners is most of the firm’s 60,000 clients live in the Eurozone.
Although the pound has increased in value by 10% against the euro in the past year, they are still worse off than 10 years ago, as a £5,000 pension is worth 6,548 euros today against just over 7,000 euros in 2005.
Director Andy Brown said: “Expat pensioners always have to consider how foreign exchange volatility will affect their income.
QROPS solution
“A stronger pound is a benefit to many, but many live in destinations such as the United States, Canada, New Zealand and Australia, where local currencies are performing better against Sterling and spending power is being eaten away.”
The countries where expat pensioners face financial difficulties due to rising local currencies are those in Switzerland, Thailand or the Philippines, explained Brown.
One way expat pensioners could escape exchange rate fluctuations affecting their incomes is by switching a UK onshore pension paid in pounds to a Qualifying Recognised Overseas Pension Scheme (QROPS).
Most QROPS pay benefits in a range of local currencies.
This would wipe out the exchange rate problem, but might leave expats at a disadvantage if they want to change their cash back to Sterling. Most UK pension companies will not pay pension benefits in foreign currency.
The solution does not apply to the State Pension, which is only paid in Sterling.
What a £5,000 buys for expats
| Currency | Where Equinit's expat clients live | What a £5,000 pension buys in local currency | % change 2005 to 2015 |
|---|---|---|---|
| South African Rand | 6% | 89,281 | 55% |
| Jamaican Dollar | 3% | 868,755 | 51% |
| Eurozone Euro | 12% | 5,963 | -7% |
| Australian Dollar | 9% | 9,076 | -21% |
| Canadian Dollar | 8% | 8,561 | -22% |
| US Dollar | 10% | 8,145 | -23% |
| New Zealand Dollar | 8% | 8,957 | -38% |
| Thailand Baht | 4% | 265,285 | -45% |
| Philippines Peso | 3% | 363,477 | -53% |
| Swiss Franc | 3% | 7,285 | -59% |
| Source: Equiniti |
