Expat state pensioners on a fixed income are at the mercy of the ebbs and flows of fluctuating foreign currency exchange rates.
As the pound rises and falls against other major currencies, the spending power of retirement savers can suddenly shrink or grow, making financial planning a real headache.
Meanwhile, many of the 550,000 British expats over 65 living outside the Eurozone who have no other income than the state pension face budgeting on a diminishing fixed rate payment that is not rising with inflation.
Best off are British state pensioners in the Eurozone and a handful of other countries where the governments have reciprocal agreements with the UK to uplift the payment in line with any cost of living increases.
Around 445,000 British expats in favourite European retirement destinations like Spain, France, Italy and Cyprus have seen almost a 10% rise in their state pension due to index-linking and the pound strengthening against the euro.
Eurozone expat winners
A study by financial firm Prudential shows the British standard state pension is worth 7,345 euros – more than 660 euros up on a year ago.
Although state pensioners have seen a cost of living rise in April, most of this increase is due to the rising pound, now worth 1.25 euros against 1.17 euros compared with a year earlier.
The trend is not a recent phenomenon. British state pensioners in Eurozone countries have seen their payment increase by more than a quarter over the past five years. This adds up to an extra 1,500 euros a year going into the bank, says the firm.
Unfortunately not every British expat pension is so lucky.
Many Commonwealth nations are also popular retirement havens for British state pensioners, but for most of them, the state pension is frozen at the value of the first pay-out
Unfair payments
For example, the state pension in Australia has lost around 10% in value over the past five years, while expats in Canada have seen their state pensions erode by 5%.
Expat pensioner spending power is further eaten away by inflation – which has average between 3% and 3.5% in Australia and Canada during the past five years.
International Consortium of British Pensioners (ICBP) chair Sheila Telford is campaigning for the British government to index all states pensions for expats.
“Some pensioners are winners and some are losers as the pound’s rate changes against other currencies,” she said. “It would be fairer if all state pensioners had their payments index-linked.”
I will just point out Lisa that the DWP have had to confess that their claim that reciprocal agreements are needed to up-rate annually all expats, and by implication it’s the fault of the ‘frozen’ countries, is untrue. It is entirely down to the UK government who are being allowed to carry on discriminating against just 4% of state pensioners. ALL state pensioners by virtue of their contributions to the NI scheme are entitled to cost of living increases and to exclude the minority is an outrage and a disgrace to British reputation abroad for fairness and justice. Where one lives once retired is irrelevant to ones right to a pension one has paid for.
I have to support protempore’s argument and comment here about the need for any agreement in order to pay the frozen few their rightful uprating.
It seems to be a contradiction when the regulation that imposes the freezing calls upon the reciprocal agreement that ‘allows’ the pension to be uprated when admitting that there is no need for one, playing with words and I suppose the fact that pensions are not always included in any agreement made. Very underhand treatment by our honest and respectable representatives in parliament conveniently forgetting their commitment on our behalf to stop discrimination and reduce poverty as written into so many agreements and the Charter of the Commonwealth in particular.
We have letters confirming that Canada’s Ministers have consistently confronted the UK government on this issue but they refuse to talk and these are friends ?
Not just friends, Morgeo, fellow Commonwealth citizens no less and war time allies. Our Queen in fact refers to all Commonwealth countries as being part of one big family and I have even heard Cameron and Hague say this too. I’m assuming your comment about “our honest and respectable representatives in parliament” was said tongue in cheek, as a better description might be “our hypocritical two faced” representatives who proclaim that “fairness is at the heart of every thing we do” all the while knowing full well that they are robbing 4% of state pensioners of their rights.
I have to confess that I was being less than truthful in respect of the politicians, so it must be catching. Could be from reading their abysmal responses to any queries.
Lisa, thank you for highlighting this problem although whether it is appropriate to describe the UK government’s discriminatory frozen pension policy simply as “every Brıtısh expat pension is not so lucky” is debatable!
Certainly the exchange rates do affect the pension for those living overseas but, of course, these affects are not restricted only to pensioners but to anyone who has a source of income regularly transferred to another country. In 2004 the exchange rate in Thailand was 70 Thai baht to one British Pound; it is now 54 Thai baht, having crept back from 44 baht and Thailand does not benefit from pension index linking!
This latest change is not a boost but a recovery.
It also needs to be remembered that the frozen pension policy applies to not only Commonwealth countries, although clearly Australia, Canada, New Zealand and South Africa host the majority, but to around 120 other frozen countries…and the myth of a “need” for a reciprocal or bilateral agreement has been well and truely exploded!.
Others have outlined how, having made their contributions to the NI Scheme in their working lives on the same terms as everybody else the now retired frozen pensıoners are denied the right to withdraw from the Fund on the same terms as everybody else.
This policy currently affects one in twenty-fıve pensioners and the travesty is that in the New Pension Act Clause 20 condones this practice and future emigrant pensioners will be similarly victimised.
Regarding the picture associated with this article I just wish that the recipient of that punch was called Steve Webb, Minister of Pensions – he deserves nothing less.