9th July 2014
British expats who live in Eurozone countries will have seen their State Pension income increase by 10 per cent in a year says Prudential.
UK Pensioners living in the Eurozone will now find their annual income from the basic State Pension at €7,344.44 – a rise of €661.24 since this time last year. Prudential’s analysis shows that just over a quarter (26 per cent) of the increase is a result of the rise in the basic State Pension to £113.10 a week from £110.15 a week in April 2014. However, the bulk of the gains seen by expat pensioners has come from the soaring value of the pound against the euro.
The pound was worth €1.25 at the end of June compared with €1.17 at the same time last year. The value of the pound in relation to the euro is now back at the level last seen in November 2012 and substantially higher than the low of €1.14 experienced in March 2013.
Eurozone expat pensioners now receive 26 per cent more in euros from their basic State Pension than they did five years ago – the equivalent of a pay rise of €1,530 a year.
Paul Fidell, investment expert at Prudential, said: “The relative strength of the pound means that expat pensioners have effectively benefited from a pay rise over the last year. However, if they are totally or heavily reliant on the State Pension for their retirement income it is important not to fall into the trap of overestimating its buying power.
“Anyone considering retiring abroad should also be aware of the risks posed to their income by currency fluctuations and an unfamiliar tax regime. A consultation with a financial adviser or retirement specialist should help them to prepare a plan to deal with these risks. There is also some free impartial information available from the International Pensions Centre.
He says: “The changes to pensions and how people can take their retirement income that were announced in the Budget in March will provide savers and retirees with more choices. However they don’t alter the fundamental fact that the best way to secure a comfortable retirement is to save as much as possible as early as possible in your working life.”
Retirees in the UK, and those in countries having a bilateral agreement with the UK, can expect a boost to their basic State Pension every April when the UK Government increases its value in line with the ‘triple lock guarantee’.
This means raising payments by whichever is the greater of inflation, earnings or 2.5 per cent. All of the countries in the Eurozone have a bilateral agreement with the UK and this year’s April increase resulted in a rise of €3.27 per week for expat UK pensioners living within the zone, with the strengthening pound adding another €4.52 a week**.
The latest available UK Government figures show that in November 2013 almost 445,000 UK expat pensioners receiving the State Pension lived in a Eurozone country.***
** Figures as of 30th June, 2014
*** UK State Pension recipients by Eurozone country:
|Country||UK State Pension recipients|
NB – Latvia became a Eurozone country on 1 January 2014 and therefore is not counted for year-on-year comparison.
Data for this table calculated using information available here.