Offshore Finance
Weak sterling forces expat pensioners home
Many UK pensioners are being forced to abandon their dream of retiring abroad because of the weakness of sterling, research has indicated.
By AP/Sean O'Hare 3:21PM GMT 07 Dec 2010
Specialist currency broker currencies.co.uk said it had seen a 28 per cent jump in the number of retired expats who were selling up and returning to the UK during the past 12 months.
The group blamed the situation on a combination of the weakness of sterling, in which most retired expats still receive their pension, and rising inflation.
A spokesman said during the past five years the value of sterling had fluctuated by up to 67 per cent against the currencies in popular retirement destinations, having a dramatic impact on the amount of money people had to live off each month.
For people who have retired in eurozone countries, such as France and Spain, exchange rates on a typical monthly transfer of £1,175 have varied by 49 per cent during the past five years, varying from a high of 1,793 euros to a low of just 589 euros.
Pensioners Paul and Cherie Ripley have been trying to sell up and return to the UK from Alicante for the last 18 months, having watched the value of their house fall by 50 per cent in the last six years.
Mr Ripley said: "A combination of the exchange rate and the economic crisis has meant that we have lost a hell of a lot of money. The catch is we can't really afford to stay and we can't afford to buy back home. The worry on top is that Spanish death duties are extremely fierce and we, like a lot of people out here, didn't really investigate these extra costs when moving out here. Retirement in the sun was a big draw at the time."
Pensioners in the US have seen a 53 per cent swing in the number of dollars they get for the same amount, while those in Australia have been the hardest hit, seeing the number of Australian dollars £1,175 buys vary by 67 per cent, ranging from 3,112 Australian dollars to just 1,247 Australian dollars.
To make matters worse, around half of people who retire abroad do not have a state pension that increases each year in line with inflation.
Pensioners who retire to countries such as Australia, New Zealand and South Africa, which do not have a reciprocal social security arrangement with the UK, have the value of their state pension frozen at the date on which they left the UK.
But even those who do have an index-linked state pension may still see it eroded in value over time going forward.
The Government recently announced that the state pension would rise each year in line with inflation, average earnings or 2.5 per cent, whichever is greater. But it is changing the measure of inflation that is used from the Retail Prices Index to the Consumer Prices Index, which tends to be lower.
Visit http://www.telegraph.co.uk/frozenpensions for more articles on the plight of British pensioners abroad.
A related article:
http://www.thisismoney.co.uk/mortgages- ... age_id=505
