Falling sterling hits pensions of millions of expats
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