British expats in the Eurozone have seen their incomes from the State Pension vary by almost 10 per cent over the past year, according to analysis by Prudential. They are also worse off than a year ago despite the £2.70 per week increase in the State Pension in April this year.
Prudential 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 could be up to €634 per year*.
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 those in countries having 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 raising payments by whichever is the greater of inflation, earnings or 2.5 per cent.
This year’s increase saw the incomes of Eurozone pensioners rise by nearly €3 per week, although this has been undermined by the fluctuating value of the pound.
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