Living overseas not getting any easier for British pensioners, research suggests

by Ray Clancy on June 22, 2011

British pensioners feeling currency pinch

Whilst economists and UK exporters have welcomed the weakening of sterling as heralding a much-needed correction to the UK’s chronic trade imbalances, it is not good news for expat pensioners, new research shows.

For the hundreds of thousands of British pensioners who live abroad in Europe and claim the UK state pension their average monthly pension income has dropped by over €250 since the global recession started, according to research from foreign exchange firm HiFX.

It also found that the average pensioner abroad wastes £300 a year in bank charges and British pensioners living overseas have potentially lost out on over €13 billion of their income since the global recession hit due to the falling strength of Sterling.

Since the beginning of this year, due to volatility in the markets between January and May, an average couple living in the Eurozone could have seen their monthly pension income of £628 worth anywhere between €756 in January to €698 in May, a difference of €58.

‘Over the last couple of years everyone has felt the pinch of the global economic downturn. Unfortunately, Brits living abroad and receiving a fixed income in Sterling have been hit particularly hard, and could not have failed to notice that they are now receiving less from their pensions,’ said HiFX director Mark Bodega.

‘For pensioners in Europe, 2011 certainly started off on a more positive note, with the exchange rate for GBP to Euro hitting a 16-week high of 1.2045. However, the celebrations were short lived, as the prospects of an interest rate hike in the UK waned and with the European Central Bank raising interest rates in April, the Euro has continued to strengthen against the Pound,’ he explained.

‘Looking ahead, we see the potential for Sterling to weaken further. With this in mind, those individuals who are budgeting for the coming year will be well placed to set up a regular payments abroad system to transfer their pension income at a fixed exchange rate each month. This will also protect against their pension income decreasing if Sterling hits a particularly volatile patch in the near future,’ he added.

It is not just expats in Europe that are suffering from Sterling’s continuing weakness. The worst hit is pensioners in South Africa, New Zealand and Australia who have seen the domestic value of their State Pension in their countries of residence slashed by market volatility.

‘With further sterling volatility predicted, any pensioners who cannot afford to see the value of their pension income decrease any further should consider using one of the Regular Payments schemes offered by many currency specialists in the UK,’ said Bodega.

He pointed out that HiFX runs a regular payment service to enable British people who have emigrated or retired abroad to manage their currency payments via direct debit and protect themselves against currency fluctuation by fixing exchange rates for between six and twelve months. HiFX do not charge their customers to send money overseas through their regular payments plan and they also eliminate all receiving charges by foreign banks.

HiFX has calculated that, each month that the average retiree living abroad claims their pension through their bank they are charged anything between £10 and £30. On top of this, many overseas banks charge average receiving charges of 0.4% of the total value of the monthly pension. This means in a typical year pensioners living abroad are paying over £300 in bank charges and fees just to be able to spend their pension abroad.

Bodega added that those who are uneasy about fixing the exchange rate for up to 12 months and are more bullish about Sterling’s future should at the very least shop around for better exchange rates and compare the rates offered by their high street bank with a currency specialist particularly one which offers an online service for smaller amounts of money.

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