No-deal Brexit could cut British expats' pensions by 20%

No-deal Brexit could cut British expats' pensions by 20%

British pensioners living abroad risk losing over 20% of their pension because of the fluctuations in the pound value as the no-deal Brexit scenario keeps pushing the sterling down.

There are an estimated 247,000 British retirees living abroad with pensions paid in sterling. However, pensions held in sterling but drawn in foreign currency via ATMs or bank to bank transfers are always open to currency exchange fluctuation risks.

One example shows how the plunging pound cut the expats spending power in just two years.

At the beginning of 2007, one pound was worth €1.48, but by January 2009 it had fallen to just €1.06. On a £2,000 a month pension, a retiree living in an EU member state would have initially received €2,960 a month, dropping 28% to €2,120 two years later, according to specialised media outlet Emigrate.

Given that the exceptional nature of the fall was linked to the 2008 financial crisis, it is an illustration of the worst scenario but it is also a warning that currency stability in the future is a long way from being guaranteed.

Financial advisers suggest that those planning to retire overseas in the near future should begin hedging against the risk of currency fluctuation by designating either all or part of the pension amount in different currencies.

One plan is to decide on where you would like to retire and transfer your entire pension to the relevant currency.

For instance, if you have already purchased a second home in Spain or France, the euro is the obvious choice.

Of the 300,000 UK nationals officially living in Spain, almost half are over 65. The number of retired Brits living there more than doubled in the 10 years to 2016, according to figures produced by the UK’s Office for National Statistics and Spain’s Instituto Nacional de Estatistica.

This article was first published on the website of InvestmentEurope’s sister publication, International Investment.

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