Weak pound has cost British expats 'billions' in state pensions

24 June 2013

The weakness of the pound during the financial crisis may have cost Britons living abroad billions of pounds in state pension income, a currency exchange firm has claimed.

Based on analysis of figures relating to a million expats in 13 countries, foreign currency specialists HiFX estimates that the maximum amount they could have lost over the last six years totals £10.6billion.

Out of the countries surveyed, UK expat pensioners living in South Africa have fared the best during the financial crisis as sterling has not fallen as strongly against the rand since 2007, but those in Switzerland have taken a big hit as the franc grew stronger.

daily mailLoss of income: British expats have seen the value of their state pension decrease due to currency fluctuations.

In reality the amount lost in income will be much lower than the £10.6billion mentioned by HiFX, but it is still a source of concern for overseas pensioners at a time when state pension payments to expats has been thrust back into the spotlight.

The Government once more has been facing pressure to bring to an end a 30-year-old policy that prevents around 565,000 UK pensioners living in countries such as New Zealand and Australia from receiving increases in their annual state pension income.

HiFX found that state pension income for expats in the Eurozone fell from €655.60-a-month to just €440.60-a-month, as the pound declined from €1.49 euros in April 2007 to as low as €1.16 in April 2013.

Pensioners in South Africa have been the least affected, but South Africa is one of the countries affected by the state pension freeze. So while expats will have got more value out of their income, the amount they receive will not have increased year-on-year.

Mark Bodega, of HiFX, said: 'The global economic downturn hasn't settled down in any way.

'Unfortunately, Britons 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 and subsequently have a big hole in their pension income.'

daily mail 1Worst hit: How much less British expats are getting from their state pensions where they live now as a result of the struggling pound.

HiFX has suggested that sterling will remain volatile and those who cannot afford to see their income devalued further should consider fixing their exchange rate using Regular Payment Services run by currency exchange firms.

 It comes amid renewed calls from the International Consortium of British Pensioners (ICBP) for the Government to lift the restrictions that prevents expats from seeing their state pension uprated each year to reflect inflation or rising average wages.

The Government has previously suggested such a one-off uprating could cost it more than £650million, but research by Oxford Economics commissioned by ICBP claims that by prioritising the oldest expats the cost could be much cheaper.

If the uprating was focused solely on expats over the age of 90 living abroad, the cost to the Government would be just £50million.

Source: The Daily Mail

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