Currency fluctuations leave British expat pensioners £12bn worse-off

Currency market fluctuations caused by volatility has left British expat pensioners £12bn worse off, new research has found.

Analysis over a period of 12 years by Hoxton Capital Management found that the average pension pot of over-65s living abroad has reached £210,000. However, the volatility seen in the markets has reduced British expats’ spending power by 20 per cent. Based on the amount of British citizens aged 65 and over living in EU countries having reached 247,000 (ONS, 2017) – this 20 per cent could represent a total of £10bn being wiped from British pension pots.

As a result, Hoxton has warned that Brits choosing to retire abroad that leave their pension in sterling are exposing themselves to currency risk. However, it noted that it can be easily avoided by switching their pension into the currency of the country they plan to retire in. This would ensure individuals could more effectively budget for the duration of their retirement.

Commenting, Hoxton Capital Management managing partner Chris Ball said: “In volatile years currency market fluctuations can remove as much as 20 per cent of a pensioner’s spending power and, in extreme cases, end the dream of retiring in the sun. That’s why choosing the right currency for your pension is all part of sensible long-term financial planning.”

“For example, in January 2007, one pound was worth €1.48, a figure that had dropped to only €1.06 by January 2009. This means that on a £2,000 per month pension the client would have received €2,960 per month in 2007 and just €2,120 per month two years later. That’s a difference of €10,080 per year to an individual’s budget, which is a significant amount of money.”

Hoxton said that people can remove risks by transferring their full pension to a self-invested personal pension (Sipp) or a qualifying recognised overseas pension scheme (Qrops), and plan effectively for their retirement whilst growing their pension in the clients’ ‘ultimate’ currency.

One of the key benefits listed for doing a Qrops is ‘choice of currency’, Ball said, yet most pensions are still left in sterling, leaving those who do not intend to retire in the UK exposed to the volatile currency markets throughout their retirement.

    Share Story:

Recent Stories

Podcast: The benefits of private equity in pension fund portfolios
The outbreak of the Covid-19 pandemic, in which stock markets have seen increased volatility, combined with global low interest rates has led to alternative asset classes rising in popularity. Private equity is one of the top runners in this category, and for good reason.

In this podcast, Munich Private Equity Partners Managing Director, Christopher Bär, chats to European Pensions Editor, Natalie Tuck, about the benefits private equity investments can bring to pension fund portfolios and the best approach to take.

Podcast - The power of three: Using Common Contractual Funds to improve tax outcomes for investors
Large asset owners are still investing in equities in a way where they are taxed on their income. The implication is that they get a poorer return. They need to, and can, improve this, but how?

In this podcast, AMX Head of Client and Manager Development, Aaron Overy, and AMX Product Tax Specialist, Kevin Duggan, discuss with European Pensions Editor, Natalie Tuck, about three options to help ensure good withholding tax outcomes for institutional investors.

Mitigating risk
BNP Paribas Asset Management’s head of pension solutions, Julien Halfon, discusses equity hedging with Laura Blows