New research from insurance giant Prudential reveals that British expat pensioners living in the Eurozone have seen a large rise in the buying power of their UK state pension. This is due to an improved pound to euro exchange rate.
The research shows that UK pensioners living in the Eurozone enjoy an income from the state pension equivalent to €7,344.44, an increase of €661.24 since the same time last year.
Twenty-six percent of the increase was put down to a rise in the basic state pension from £110.15 a week to £113.10 a week announced by George Osborne in his April 2014 Budget.
The vast bulk of the increase however, is due to an improving exchange rate. The value of the pound against the euro has increased markedly over recent months, with a pound being worth €1.25 at the end of June 2014 compared with €1.17 a year previously.
These are values not seen since November 2012 and a big rise on the lows of March 2013 when a pound was worth just €1.14.
Expat pensioners living in the Eurozone now bring in 26% more than they did just 5 years ago, equivalent to an increase of €1,530 per year.
Recent government figures show almost half a million Brits receive the state pension in the Eurozone.
Paul Fidell, investment expert at Prudential said, “The relative strength of the pound means that expat pensioners have effectively benefited from a pay rise over the last year.
“However, if they are totally or heavily reliant on the State Pension for their retirement income it is important not to fall into the trap of overestimating its buying power.
“The changes to pensions and how people can take their retirement income that were announced in the Budget in March will provide savers and retirees with more choices. However they don’t alter the fundamental fact that the best way to secure a comfortable retirement is to save as much as possible as early as possible in your working life.”
“Anyone considering retiring abroad should also be aware of the risks posed to their income by currency fluctuations and an unfamiliar tax regime. A consultation with a financial adviser or retirement specialist should help them to prepare a plan to deal with these risks.”
We would agree with Paul’s analysis here. Whilst an increase in the buying power of a state pension is good news, it is important that expat pensioners make the most of their pension provision.
Transferring a frozen UK pension into a QROPS is one way to ensure that a sufficient income in retirement is achieved.
Let us know if you would like to be put in touch with a pension transfer specialist.