Money
Pensions
Pound drags down pensions
The falling value of sterling is hitting the pockets of a million Brits who live abroad, writes Paul Lewis
The pound is sinking. And taking with it the pensions of a million British people on the continent. Saga Magazine reader Anne writes from Spain that the fall in sterling over the past six months means that she and her husband "are over 100 euros short each month". In September last year £100 of pension yielded 147 euros.
Today you will get just 132 for the same £100. That's a cut in your euro income of more than 10%. Pensioners who live in the USA are also suffering. Although the pound is strong compared with the dollar it has fallen by 8% from its high in November.
Even worse is the position of UK pensioners living in Australia. Their incomes have been slashed by nearly 14% in six months. They are doubly disadvantaged – Australia is outside the magic circle of 40 countries where the UK state pension is increased each April as it is back home.
In Australia and most of the rest of the world the UK state retirement pension is frozen at the rate it is first paid abroad. Many UK pensioners living in Australia get a pension of just a few pounds a week – despite paying contributions for most of their working lives. Now even that small amount is worth much less than it was six months ago.
Apart from moving back to the UK, little can be done about these problems. People living in 37 countries, including Australia, Canada, the USA and much of Europe, can get their pension paid automatically into their foreign bank account in the local currency. The Government gets a good rate of exchange, so that is usually the best way to receive a pension abroad.
Pensioners in the rest of the world can have their pension sent as a payable order which they have to pay into their account abroad. Or have it paid into a UK account and transfer it themselves.
Either way charges will be high and exchange rates worse.
* This article first appeared in the April 2008 edition of Saga Magazine. Paul Lewis is the editor of Saga Magazine's Money News section and the presenter of BBC Radio 4's Moneybox. Paul's opinions are his own and for general information only. Always seek independent financial advice.
