Prudential warns that currency fluctuations can seriously affect expat retirement income, and is urging anyone considering retiring abroad to seek financial advice before making the move, to ensure they have plans in place to protect themselves against currency fluctuations.
The pound has moved significantly against the Euro over the last 12 months – from a peak of €1.25 on 8 November 2012 it fell to €1.14 on 31 July this year before partly recovering to €1.18 by 8 October. For expat pensioners, the difference between those extremes on today’s State Pension is estimated to be up to €634 per annum.
Paul Fidell, investment expert at Prudential, said:
“Retiring abroad can involve riding an income rollercoaster, as the spending power of the State Pension is directly affected by currency movements. Anyone thinking of retiring abroad should consult a financial adviser to ensure that they are adequately prepared to cope with income volatility and an unfamiliar tax regime. Their adviser may recommend considering ideas like locking in to favourable exchange rates with a currency dealer to reduce exposure to volatility.”
State Pension recipients in the UK and in those countries which have a bilateral agreement with the UK, can expect a boost to their incomes every April when the UK Government increases the State Pension in line with the ‘triple lock guarantee’. This means payments increasing by whichever is the greater of the three measures – inflation, earnings or 2.5%. This year’s increase saw the incomes of Eurozone pensioners rise by nearly €3 per week, although this has been undermined by the fluctuations in exchange rates and the value of the pound.
Sources: www.pru.co.uk
