By Robert Harris, Forth Capital
British expat retirees in the Eurozone and beyond will currently be enjoying an effective increase in their pension income right now due to the strengthening pound, but those in this situation should be warned to be vigilant on future fluctuations.
Sterling remains strong and anyone making an overseas currency transfer stands to benefit, not just pensioners.
Recent movements have seen the pound sterling (GBP) rise to its highest level since October 2012. For expats living in France and Switzerland, they have seen the £/Euro exchange rate move from 1.14 to 1.26 and the £/CHF rate move from 1.42 to over 1.53 over the last 12 months.
Experts believe that the pound could well strengthen further, partly due to the ECB’s desire to maintain a weak euro in an effort to support the region's recovery.
At the same time, the Bank of England is expected to raise the base rate from 0.5 per cent by early 2015. If this were to happen then sterling’s strength will again be expected to benefit.
British pensioners resident overseas should not become complacent however, as currency fluctuations are notoriously difficult to predict and potentially highly damaging. Over the long term, sterling has depreciated greatly against all the major currencies.
Investors should be looking to maintain a diversified portfolio including asset classes such as cash, property, bonds and equities, all of which can help protect against currency dips. Perceived investment wisdom doesn’t really apply to currency fluctuations, and currency collapses often occur for reasons that no-one could accurately forecast, often political.
British pensioners living abroad can consider shielding their investments by transferring their pensions to a QROPS in an overseas financial jurisdiction. QROPS offer a flexible choice of currencies and investments in addition to tax advantages and are becoming increasingly popular with expats. So, for example, an expat living in France or Switzerland can transfer their pension and purchase investments in Euro or CHF and benefit from the current favourable exchange rate.
If exploring QROPS however, investors must be certain they are getting the correct financial advice. The internet is covered with websites featuring QROPS and it is clearly difficult for the individual to decide whether expat advisors genuinely have their clients’ best interests at heart. Unfortunately there are some less-than-ethical ‘advisers out there and decisions around taking advice on QROPS should be made carefully, as with any element of your financial planning.
Author's bio
Robert Harris has over 25 years experience working for some of the major financial institutions in the City of London, including 12 years at Citibank where he was a Senior Banker. During his time at Citibank, Robert was responsible for global relationships with important financial institutions and instigated a number of landmark deals.
Robert was a founding partner of Forth Capital and has helped the company become the leading expat financial advisory company in Switzerland.
A regular presenter of the World Business Report on the WRS radio station, Robert has been quoted in the Financial Times and numerous magazine articles.
