Plunging Pound Hits Expat Pensioners Spending Power

Plunging Pound Hits Expat Pensioners Spending Power Retiring overseas has cost thousands of British expat pensioners around £10.6 billion since the credit crisis due to the falling value of the Pound worldwide.

Most pick up the state pension and other income in Sterling and have to switch to a local currency to pay bills and expenses, which is where the main loss comes in.

Expats living in the most popular overseas retirement destinations have all seen their spending power reduce.

Pensioners living in the Eurozone have seen their monthly pension income worth £440.60 in Britain drop from 655 euros in April 2007 to 510 euros in April 2013, claims foreign exchange firm HiFX.

The picture is the same in Australia, South Africa, New Zealand, Canada and Switzerland.

Significant losses

Along with Eurozone countries like France, Spain and Cyprus, these nations are home to around a million British expat pensioners.

“The global economic crisis is ongoing, which has seen many expats who receive their pension payments in Sterling lose a significant amount of money,” said Mark Bodega, of HiFX.

“We reckon the downturn has cost pensioners around £10.6 billion since 2007. They can all look at their bank accounts and see they are receiving less, can afford less and that the situation has got progressively worse.”

Pensioners approaching retirement or who have not drawn down on their pension could look at a Qualifying Recognised Overseas Pension Scheme (QROPS) to ease their finances.

QROPS let expats with pensions in the UK transfer their funds into an offshore pension which can pay out benefits in any major currency.

Exchange risks

This avoids exchange rate fluctuation risks and restores lost buying power resulting from falls in Sterling.

The currency exchange rate tracker shows how much more an expat could have received if their pension paid them in a local currency rather than Sterling.

The lowest exchange rate shift is for expats in South Africa – where the rand has slipped from 14.40 against the Pound in 2007 to 13.70 now.

Pensioners in Switzerland have taken the biggest spending hit, as their income has dropped against the strengthening Swiss franc, while the nation’s prices remain stubbornly expensive in comparison to other countries.

Exchange rate tracker 2007 – 2013

 Currency High (April 2007) Low (April 2013) Difference to average  state pension per month
GBP/EUR  1.49  1.16  -EUR145.20
GBP/ZAR  14.40  13.70  -ZAR308
GBP/AUD  2.45  1.44  -AUD444.40
GBP/NZD 2.75  1.77  -NZD431.20
GBP/CAD  2.29  1.53  -CAD£334.40
GBP/CHF  2.43  1.41 -CHF448.80

Source: HiFX

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