South Africa bucks plunging purchasing power trend

South Africa is a boom location for expat British pensioners, with the purchasing power of pension pots there having doubled over the past ten years, thanks to currency fluctuations, data just published reveals.

However, British expats in many other countries are significantly less well off by comparison, with huge drops in the purchasing power of their pension pots, in such countries as Thailand, the US and Switzerland, according to research undertaken by Equiniti Group plc, which manages the payments of more than 60,000 expat pensioners.

Equiniti looked at the purchasing power of a £5,000 pension pot in 2006 and compared it to its value now, calculating the change in 10 major currencies.

According to Equiniti, the majority of British expat pensioners are finding that their pensions are buying less in the countries in which they live than would have been the case a decade ago.

British pensioners retired to South Africa, however, are benefiting from a 93% increase in the purchasing power of their pensions, with Jamaica the next best location, due to a 48% increase in the purchasing power of their pensions there.

Of the 60,000 pensioners Equiniti has on its books, the largest group live in eurozone countries, where market uncertainty and the threat of Brexit have led to a 4% fall in the purchasing power of their pensions over the past year.  Over the 10 years the decline is closer to 11%, the Equiniti data shows. In other words, a £5,000 pension would have bought an expatriate living in a eurozone country €7,030 worth of goods in February 2005; €6,551 worth of goods in in February 2015; but just €6,288 worth in February 2016.

Purchasing power hit

Equiniti said currency fluctuations are a major cause of financial pain for expats in many countries. “Expat pensioners are always at the behest of the currency exchange rollercoaster, but after a period of the pound strengthening, the retirement income that they receive has dipped again for most,” said Andy Brown, managing director of Equiniti International Payments.

“Our advice to anyone thinking about retiring abroad is to understand the implications of currency exchange rate movements, and also [to] look at the numerous ways in which to receive international payments, as the ‘headline’ exchange rate is not necessarily an indication of the total transaction.”

Other Equiniti findings:

*  British expats who retired to Switzerland were the worst hit, with the buying power of their pensions having decreased by 37% in 2016, compared with 10 years earlier

*  Those in the Philippines have also seen their UK pension pot pounds buying fewer Philippine pesos, as the purchasing power declined by 34% from 2005 levels

*  In Thailand, the UK retiree’s pension pounds are buying 30% less than they would have in 2005

*  Brits in the US have seen their pensions buy 24% less than they would have in 2005, while those in New Zealand are finding their pensions 19% weaker than they would have been 10 years ago

*  British pensioners in Canada are buying 16% less than they would have in 2005

Gary Robinson
Head of Video and Ezines at Open Door Media Publishing. Deputy Editor, International Investment. An experienced journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as a fully qualified IFA, Gary works across both International Investment and InvestmentEurope titles. Previous video production credits include projects on BBC, C4 and SKY.

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