Expats hit by continuous sterling erosion

According to Equiniti, one of UK’s largest pension administrators, British pensioners living abroad are broadly much worse off than they were ten years ago.  A decade of a weakening pound has left many expat pensioners with up to 50% less purchasing power from their retirement income.  These statistics reveal the full extent of the decline of the pound and how, on a global level, it has eroded the wealth of the Britons.

Equiniti, which has compiled the figures for the top ten most popular expat destinations, oversees work pension payments to more than 50,000 expats.   Many of these payments are for former public sector workers who receive an average pension of around £5,600 a year.

The significant proportion of these – 12.5% of the 50,000 pensioners – has retired to the Eurozone. The research shows that pensioners in the Eurozone have lost 22% of their purchasing power due to changes in currency markets.  Someone who retired in 2003 with a £5,000 pension would receive just under €7,300 ten years ago, while the same sum would now only get €5,692.

The biggest losers are people who moved to Australia who have seen a £5,000 pension plunge from AUS $13,625 to AUS $7,253, a drop of 46.7%. These expats are additionally affected because their British pension is frozen – a double impact despite often a long track record of building up the payments.

What have been the main reasons for such wealth erosion?  The policies of the Bank of England in recent years, in particular, have put pressure on sterling.  Quantitative easing and the policies of low interest rates have weighed strongly on the currency.  According to the economic theory, when a pound is weaker, it helps to boost the economy and make British exports more competitive.

Keith Boughton, director of Equiniti Paymaster, said: “Ten years ago the value of sterling was significantly higher than it is today, and those emigrating abroad for their retirement enjoyed considerable value from their pension.  He adds:  “A plummeting pound has left many expat pensioners unable to make ends meet and struggling to find other ways to protect the value of their pensions.”

It is not all bad news however.  The study by Equiniti revealed that there are still pockets of opportunity – expat pensioners in South Africa and Jamaica have both seen an increase in the buying power of their pension.

Do you want to maximize the value of your pension?  Please call one of our advisors for impartial professional advice.

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