The Consumer Credit Counselling Service (CCCS) has reported a 33% rise in the number of enquiries it received from expats with financial problems. The falling pound has hit people who have retired abroad hard, making the value of their savings and pensions plummet over the space of a few weeks.
According to the CCCS, the movement in currencies has affected older people disproportionately badly – perhaps because they are not able (or understandably not willingly) to jump straight back into the labour market to put more into their pension pot. This is certainly born out by the CCCS’ recent figures: 18% of the calls that they received last year were from expats who were over 60.
It is not just the fluctuation of currencies that could cause hardship when you expats hold their pension or savings in sterling. Transfer fees and bank exchange rates can also eat into an expat’s retirement savings. The costs of drawing a pension in sterling, then converting and transferring it into a local bank account can typically deplete a withdrawal amount by 2%. And when the funds reach their final destination, it is not unusual for the receiving bank to make a deduction too.
For UK private pensions, there is an option which can solve this problem, which is often overlooked by thousands of expats every year. Transferring your UK pension into a QROPS (Qualifying Recognised Overseas Pension Scheme) means that you can move your money (or other pension assets) into a government approved foreign scheme, and take advantage of the opportunity to “fix” it into the new currency.
Many QROPS providers offer the option of a number of different currencies for their pensions to be held in, and your QROPS adviser will be able to advise you about which one would be appropriate.
Aside from the potential currency advantages, there are other benefits to having a QROPS. Firstly, they are not liable to UK income tax, although schemes will be caught by the regime of the country that hosts them. Given that you do not have to be resident in the same country as your QROPS, this offers an opportunity for some tax planning.
