Expat Banking and Finance


Retired British expats warned over currency fluctuations

by Ray Clancy on July 15, 2014

Retired British expats in the Eurozone who are currently benefitting from a strong pound are being urged to remain cautious of potential currency fluctuations by a senior analyst at one of the world’s largest independent financial advisory organisations.

The warnings from Tom Elliott, international strategist at deVere Group, which has 80,000 (mainly) expatriate clients globally, come as the pound has reached a 21-month high of €1.26 in recent days.

money

The pound has reached a 21-month high of €1.26

‘The strong pound has significantly boosted expat pensioners’ incomes, assuming their income is coming from the UK. Clearly, this is welcome news for those British retirees living in Eurozone countries, many of whom, in effect, lost up to a third of their income with the drop in the value of the pound following the global economic crash,’ explained Elliott.

‘Whilst it is likely that the pound will continue to rise against the euro, largely due to the European Central Bank wanting a weaker euro to help boost the economy and the Bank of England looking to raise rates later this year, I would urge expats to remain cautious and not become overly complacent by the current upward trend,’ he added.

Elliott pointed out that currency forecasts are notoriously difficult to get right. ‘You can have a perfectly rational stack of arguments against a currency for years, based on current account deficits [and] interest rates, amongst other factors, and nothing happens. Then the currency collapses, but it’s for a totally different reason than had been widely predicted,’ he said.

‘As such, it is highly recommended that British expats take precautions against currency fluctuations. For instance, holding a diversified portfolio of equities, bonds, property and cash, will typically offer protection from currency surprises,’ he added.

The deVere Group reports that another increasingly popular way for those who have a pension in the UK and are living overseas to help mitigate currency volatility is to consider an HMRC-recognised QROPS” (Qualifying Registered Overseas Pension Scheme), which provide the pension holder with a flexible choice of currencies.

‘QROPS are continually becoming an ever more mainstream pensions option with UK residents living overseas or considering a move abroad.  Since they were established in 2006, QROPS have experienced an annual rise in popularity and the market continues to mature,’ said Reece Fallaize, the organisation’s global technical manager.

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