A test case being heard by the European Court of Human Rights has ruled that the UK Government's refusal to update pension payments in line with inflation to British expats living in 150 countries, including Canada and Australia, can continue.
Half of Britain's 1.1 million British pensioners living currently living overseas who have already seen the value of their pensions plummet as Sterling has weakened are affected, according to HiFX, the UK-based provider of foreign exchange and cash deposit services.
The ruling marks the end of years of legal wranglings and is unlikely to be overruled. The current rules mean that a pensioner who paid National Insurance contributions throughout their working life but moved to overseas and took a pension from 1995 still only gets £59.20 per week, compared to the current basic state pension allowance of £95.25 per week, says HiFX.
In just the last two years, retired British couples all over the world have seen their monthly pension incomes hit by Sterling's depreciation. Worst hit are pensioners in South Africa, New Zealand and Australia who've seen the domestic value of their State Pension in their new countries of residence slashed by market volatility.
In March 2010, the current monthly state pension of £823.55 equated to $2,223.59 Australian dollars; current exchange rates means it now buys AU$1,358.86, a drop in income of AU$864.73 per month, says HiFX.
It’s a similar story for New Zealand dollars (a monthly drop of NZ$716.49), South Africa (NZ$716.49 a month), the US (a difference of $444.72 per month) and the eurozone (a difference of €164.71 a month).
With further falls in the value of sterling predicted if the general election leads to a hung parliament, HiFX says that any British pensioners living overseas who cannot afford to see the value of sterling decrease any further should consider the following services offered by many currency specialists in the UK.
HIFX runs a regular payment service to enable British people who have emigrated or retired abroad to manage their currency payments via direct debit and protect themselves against currency fluctuation by fixing exchange rates for between six and twelve months.
HIFX do not charge their customers to send money overseas through their regular payments plan and also eliminate all receiving charges.
HiFX has calculated that, each month the average retiree living abroad claims their pension through their bank they are charged anything between £10 and £30. On top of this many overseas banks charge average receiving charges of 0.4 per cent of the total value of the monthly pension.
This means in a typical year pensioners living abroad are paying over £300 in bank charges and fees just to be able to spend their pension abroad.
"The cost of living for expats receiving a fixed income in sterling has already shot up in the last few years as sterling has depreciated,” said Mark Bodega, Director at currency broker HiFX.
“So this ruling that their income will not rise in line with inflation as it does for pensioners in the UK is a double blow for hundreds of thousands of pensioners who are already struggling.
"Any pensioners living abroad who want to get the most out of their pension payments and cannot afford to see the value of their pension income decrease any further through currency fluctuation should consider using one of the Regular Payments Abroad services offered by many currency specialists in the UK."
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