Falling sterling hits pensions of millions of expats
25
Feb
Recent falls in sterling have meant that British expat pensioners in Europe have seen their monthly retirement slashed by an average of 8 per cent since the beginning of the year.
The alarming figures, calculated by the deVere Group, are based on the UK state pension that on 1st January 2013 was worth €577.37 per month for the average pensioner and today is worth €530.81. In November 2008, when the pound hit a high against the euro, it was worth €597.41.
More than a million Britons who live abroad, receive the state pension and these people – unless they’ve set up a system to transfer their pension at a fixed exchange rate every month – will be worse off each month because of the weakening pound.
Sterling has recently hit a 16 month low against many major currencies and has plummeted 8 per cent against the euro since the beginning of this year – and has, overall, fallen 9.5 per cent since last summer when it rose to €1.26 in July 2012. Naturally, Britons living in Europe and receiving a fixed income through their pension are particularly adversely affected by this.
With the government and the Bank of England seemingly more than content with a lower pound at the moment, and with Moody’s downgrade of the UK last week, it is likely that sterling will remain reasonably low for some time.
With this in mind, and to avoid being subject to further volatility in the currency markets, those who are living abroad and claiming a UK pension should consider the various ways to mitigate the fluctuations with their financial adviser.”
This is another hammer blow for pensioners who are also having to cope with the low interest rate environment.
Nigel Green deVere Group
Blog written 25th February
All expat Brits it seems get a raw deal but less than half of expats do not even get what they have paid for, a state pension with annual cost of living increases. Around 500,000 of them are penalized by this government just because of where they live. If one retires to a “wrong” country the state pension is frozen at the amount of the first payment. This is not only theft but also discrimination, which by the way is unlawful. ALL have paid into the NI fund ALL are entitled to annual uprating to treat just 4% in this way is shameful. There is no logic in uprating annually the state pension of a retiree in the USA and withholding uprating to the retiree in Canada. Steve Webb and David Cameron made a promise to right this wrong before the last election but have broken that promise. One is left assuming they lied to get votes from the victims of this outrageous injustice.
Two points here. The variation in the exchange rates are not limited to the European Market but affect world wide. I am a pensioner living in Thailand. When i became entitled to my pension the exchange rate was around 68 Thai Baht to £1 sterling now it is running at 46 Thai Baht – a drop of 32%.
Second point. At least pensioners in the EEA and a select group of countries like Macedonia, Herzegovina and even the USA benefit from the automatic annual uprating of UK State Retirement Pensions. I, in common with 4% of the total UK pensioner population world wide, do not. Our pension is frozen at the rate it first becomes payable in the host country; never to increase – ever. This iniquity applies to pensioners living in, for example, Australia, Canada and New Zealand. There is no legal, moral, financial or administrative justification for this discrimination. what makes it even more galling is the hypocritical attitude displayed by government who, when in opposition, vowed to end the regulation but now, when in a position to do so reneged on that promise…Steve Webb, the Pensions Minister even tabled an Early Day Motion calling for the abolition of the frozen pension policy when on the Opposition Benches…Labour did nothing.
Some sympathy for our European counterparts on the exchange rates problems but they are receiving your full entitlement and not suffering the double whammy inflicted on our living standards by a frozen pension.