UK expat pensioners living in Europe have suffered significant drops to their income thanks to Sterling's recent depreciation and a failure to take the necessary steps to mitigate against negative FX trends.
The GBP/EUR currency pair’s devaluation has been so extreme, that some British expats living abroad may have to return to the British Isles.
The scale of the currency's fall is notable.
The best British Pound to Euro exchange rate of the year to date (past 365 days) was 1.432 achieved on 2015-11-19.
Today's exchange rate is at 1.1107, this is 22.44% off the best exchange rate of the past year-to-date.
The best British Pound to Euro rate of the last month (last 30 Days to date) was at 1.1873, today's conversion is 6.45% off that rate.
Recent studies have found that the fall in the Pound to Euro exchange rate has caused pensioners abroad to suffer losses, sometimes worth hundreds of Pounds each month.
The GBP/EUR decline can have a massive impact on a £50,000 pension pot, which is the average for many Britons choosing to withdraw a percentage of their pension to buy a foreign property or live abroad.
There’s been a reported loss of around £8.9 billion for British pensioner expats since the event that shook global economic markets.
Now, the +-400 000 British pensioners living in Europe are losing significant amounts of money from their pension funds being paid into a UK bank or overseas account and being transferred from the weak pound into euros with an unfavourable GBP/EUR exchange rate.
The currency pair’s value has been so varied it’s caused concerns amongst resident Britons as to whether to make the move abroad in their retirement years at all.
However, it is worth noting the loss in income thanks to currency devaluation started with the global financial crisis in 2007 when sterling weakened against a host of its major peers.
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast
Further Brexit volatility can be expected and as the pound weakens further and industry experts are even discussing the possibility of GBP/EUR parity.
The pound recently hit a three-year low versus its euro counterpart after Theresa May confirmed a date by which Britain would trigger Article 50 and begin the process of leaving the European Union.
Furthermore, May’s recent comments have led the FX market to believe she could steer the country in the direction of a ‘hard Brexit’, which has been a contributing factor in the pound's drop as there’s the possibility the UK would only have limited access to the European single market.
- Get Guidance on Maximising Your Pension Income from a Leading Foreign Exchange Specialist
- Gov.uk guidance on State Pension if you Retire Abroad
As a result of May’s comments, sterling slipped significantly against the euro registering lows not seen since mid-2011 at 1.1308 and currently remains hovering uncomfortably near that five-year low.
Meanwhile, the pound has also tumbled to a 31-year low versus the US Dollar (GBP/USD).
Santander’s Stuart Bennett suggests that perhaps the foreign exchange market may have doubted whether a Brexit would actually take place, saying:
“The moves may imply that the FX market was thinking this would never happen. All that uncertainty of when the UK leaves, what its place will be, is just pushed to the forefront again.”
Can British Expats Prevent Further FX-Inspired Losses on Pension Incomes?
With the pound sterling to euro (GBP/EUR) exchange rate expected to suffer from further volatility in the foreseeable future, it’s advisable that pensioners abroad seek out a reputable currency broker to discuss their options.
With a regular overseas payment scheme, British expats could help to protect themselves against volatile currency market movements by securing a fixed exchange rate for anything from a few months to three years.
This means that any major movement due to Brexit could be avoided and prevent further heavy losses.
Reputable brokers can discuss a range of options best-suited for your move abroad or overseas house purchase, as well as how to maximise your funds when making a foreign money transfer.