UK expat retirees navigating economic volatility and the widespread effects of global inflation constricting their fixed income budgets now have a new concern—the falling sterling. According to a new report, expats living in the Eurozone have been hit especially hard, with the purchasing power of their pensions dropping by 17% over the last seven years.
Analysis by fintech company, Ebury, also found that the pound has fallen significantly against other currencies around the globe. Faced with Brexit, the worldwide pandemic, and economic instability over the past seven years, British pensioners living abroad on fixed incomes, like an annuity, paid in local currency have lost out significantly compared to those in the UK.
Using data from September 2015 to September 2022, Ebury estimates over 1.2 million UK pensioners living abroad have been impacted by the downward movement of the pound against their local currency. Pensioners being paid in Euros have seen a reduction of around 17% since 2015. Following significant gains posted by the US dollar recently, pensioners being paid in this currency would now be 27% worse off. Retirees in Canada, Australia, and New Zealand have also seen their purchasing power drop by at least 20%. Pensioners in these countries are also squeezed by frozen State Pension rates which do not benefit from the triple lock or any incremental increase.
Inflationary Pressures are Squeezing Budgets Further
The financial services firm reported that this is even before inflation is factored in. Currently, inflation in the UK is nearly 10%, the US is seeing an inflation rate of around 8%, and across Europe, inflation sits at around 9%.
Owain Walters, Managing Director of Ebury Mass Payments, said the data demonstrated the need for pension schemes and administrators to ensure they are taking every step to mitigate the impact of unfavourable trends in the pound’s value for overseas pensioners. “Expat pensioners have long been vulnerable to movements in currency markets. Unfortunately, for those moving away from the UK for their dream retirement abroad, the drop in the value of the pound on the back of the recent political and economic turmoil will significantly decrease their living standards.”
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