Inflation clouds have a silver lining for expats even though the stuttering world economy is holding down interest rates.
While cash in the bank and index-linked pension payments are hardly growing, the good news for those on fixed incomes is neither are prices.
For British expats with state pensions linked to the triple lock, that means retirement payments are outpacing inflation.
The triple lock pledges to keep pensions increasing at a minimum of 2.5% a year until 2020.
Inflation in the UK is running way below that level, despite fears over the Brexit vote spooking politicians and economists.
Low cost of living
Low inflation is also dogging the Eurozone and other European countries.
Further afield, inflation is double that in the UK for Canada and Australia.
In Britain, the cost of living increased by just 0.6% in the year to the end of June, even though the Bank of England has triggered another round of bond buying to kick-start the economy.
The rate is the highest since November 2014.
In Europe, British expats are enjoying an average Eurozone rate of 0.2% – but this varies between deflation of -1.1% in Bulgaria to 2% in Belgium.
The latest EuroStat figures show 12 countries are in deflation, Lithuania has 0% inflation and 15 countries are seeing the cost of living rise from between 0.1% to Belgium’s headline figure.
In Australia, inflation is running at 1.6% and in Canada, 1.3%.
Record low interest rates
For expats on fixed incomes, this means prices are fairly static, mainly due to the falling price of oil, which has dropped from more than $100 a barrel two years ago to less than $50 a barrel today.
This has seen the cost of travel and energy drop in many countries.
Cheaper food has also contributed to the fall in prices as farmers have harvested bumper crops in the past year.
At the same time, central bank measures aimed at trying to improve growth has seen interest rates in the UK and Europe sink to record lows from which they do not look like moving for some time.
The US Federal Reserve has indicated a rate hike is on the way in the autumn, but no other world economy looks fit enough to sustain higher interest.
“inflation is double that in the UK for Canada and Australia” and yet the UK government withhold the indexation of state pensioners in these countries. So if one retires to most of the commonwealth countries ones pension is frozen even though everyone entitled to a state pension has paid NI contributions just the same as everyone else. Outrageous and blatant theft of pensioners rights and money, those who have been retired the longest have had thousands withheld by their own government and many live in poverty as a direct result. Shame on the UK government, and shame on the politicians who have done nothing to end this injustice.
Lisa Smith – There is one huge omission from your article which is that of the Frpzen Pension policy..
This is a diabolical and fraudulent policy made lawful by government to deny a fully paid up pensioner any annual increases imposed by section 20 of the Pension Act dependent on the country that they have retired to. Most affected are actually living in the Commonwealth countries with which the UK as Head of the Commonwealth has a special relationship !
Some relationship ?
The Charter of the Commonwealth signed by Her Majesty the Queen in 2013 on behalf of the Government and Mr Cameron as Prime Minister condoned this addition to the Pension Act in the full knowledge that it was discriminatory and contrary to the Charter which states categorically that “We are implacably opposed to discrimination of any kind”.
There is no mistaking the quote as it does not have any exceptions.
This policy is also contrary to the Code of Conduct of Members of Parliament where under Duties of Members it clearly says : 5. Members have a duty to uphold the law, including the general law against discrimination.
But seemingly a pensioner who retires abroad is fair game for discrimination but with exceptions like living in the USA or Israel or Macedonia and other countries similarly granted pension uprating to UK state pension retirees.
With the issue if Brexit and the pensioners In the EU, pension parity worldwide would solve the pension issue entirely especially considering that those currently frozen make up just 4% of pensioners worldwide – 96% being treated equally and fairly
It would be great if you could balance this anomaly by a follow-up Article from the government side giving us all the justification for such a policy. Thankyou.
Jane Davies and George Morley have highlighted a theft that many choose to ignore. Unfortunately this includes not only those in government (and opposition) but many in the media too.
Whether this is because of ignorance or just believing the government spin doesn’t matter. Section 20 of the 2914 Pension Act penalizes every man, woman and child (and future children) in the country.
Why isn’t this more roundly condemned than what it is? Is it because that law (Clause 20 as it was then) was never debated? Was it because Webb used smoke, mirrors, and levers to get it through Committee – saying that using Committee would save valuable Parliamentary time?
Was it because if it was debated – truthfully and without misleads etc, it didn’t stand a snowballs chance in hell of becoming law?
You tell me!!
“For British expats with State Pension linked to the triple lock that means that payments are outpacing inflation”….
“Yes” and “No”
I prefer the proper terminology, UK expatriates, and as has been pointed out such up-rating does not apply to 4% of UK citizens who are frozen out.
This article does suggest the author has fallen foul of the belief among so many MPs that nothing needs to be done to improve the lot of the pensioner because “we see them alright through the triple lock.” Clearly not the case for the 550,000 who are frozen and the idea is a false argument identified by Baroness Altmann
While increases in line with either Earnings or the CPI would help keep pace with inflation the purpose of the 2.5% as a minimum is, as Steve Webb, the former minister stated, to help make up already lost ground and to move the State Retirement Pension towards a more reasonable level of income from the position in which, in comparison wıth most other countries, it currently lags behind.
One factor the article has not taken into account is the effect the referendum vote has had on the exchange rates. The resultant weakness of the pound, of course, is reflected in any overseas financial transactions but for the pensioner a loss of between 10% and 15% simply adds to the problem of making ends meet – and more so for the one in twenty-five of all UK pensioners who endure the illogical and irrational frozen pension policy.