Expat pensioner’s income slump of up to 47% shows need for QROPS

UK pensioners living overseas are now in most cases significantly worse off financially than they were ten years ago, according to recent research. Equiniti, one of the UK’s largest pension administrators and business process outsourcing providers, said a decade of a weakening pound has left many pensioners living abroad with up to 50% less buying power from their retirement income now than when they first retired.
Ten years ago the value of sterling was significantly higher than it is today, and those emigrating abroad for their retirement enjoyed considerable value from their pension. A plummeting pound has left many expat pensioners unable to make ends meet and struggling to find other ways to protect the value of their pensions.
Expats in the Eurozone have been hardest hit, suffering a loss in their income of 22%. But expats in Australia have seen a drop of 47% in income, whilst expats in Thailand and Philippines were hit with losses exceeding 30%
Country / currency
% of Equiniti Paymaster Payments abroad
Purchasing Power of a £5000 pension
% change 2003 to 2013

March 2013
March 2008
March 2003

Eurozone
12.45%
5692
6504
7292
-22%
Australian Dollar
9.83%
7253
10900
13625
-47%
US Dollar
9.13%
7400
10050
8017
-8%
Canadian Dollar
8.28%
7645
10021
11889
-36%
New Zealand Dollar
7.61%
8968
12462
14577
-38%
South African Rand
5.85%
67163
77987
63558
6% (increase)
Thailand Baht
4.11%
220229
319116
344360
-36%
Swiss Franc
2.72%
6970
10219
10617
-34%
Jamaican Dollar
2.69%
710410
695019
428358
66% (increase)
Philippines Peso
2.59%
299936
413542
440602
-32%
According to the Telegraph, Bank of England policy has put pressure on the value of sterling over the past few years. The policies of low interest rates and quantitative easing have systematically devalued the pound abroad.

How many times have you heard expatriates here discuss ‘the good old days’, when they were still able to get 76 THB to the GBP?? To put this into context, someone retiring to Thailand in 2003 with a £5,000 pension, would have enjoyed an income of THB 344,360. By 2013, the same pension would only provide income of THB 220,229……….A REDUCTION OF 36%!!
If you combine this with the fact that the state old age pension is currently frozen for expatriates retiring in Thailand, then the situation is far worse. Thailand is still one of the countries in the 4% minority who are denied statutory pension increases, despite having fulfilled the requirement by virtue of their mandatory contributions during their working years. 
In 26 years of advising expatriates in 8 different countries, I have never once heard anyone complaining that they simply have ‘too much’ retirement income. On the other hand, we will all know many people who are fighting a losing battle to ‘balance the books’ as it were, in an effort to maintain their expatriate lifestyle in the sun.
SO WHAT CAN EXPATRIATES DO ABOUT THIS SITUATION THEN?  Well first of all they can protect themselves against this type of problem by using a QROPS overseas pension arrangement.
QROPS can be set up outside your country of residence and in whichever currency individual’s wish. This means that existing pension assets can be transferred into a new currency, allowing individuals to withdraw income in their local currency and avoid sometimes costly exchange rates. 
QROPS can also include greater potential investment returns and far higher income than traditional pensions, which can be fully currency diversified. This means that losses in one particular currency can be easily negated by gains in another.
With inflation across the region of around 4% and declining global bank interest rates, it is IMPERATIVE that your accumulated assets keep pace with the cost of living.  If they do not, then your standard of living will reduce each year and you may then – like many expatriates currently – be faced with a return to your home country once again.

To see how this problem can be mitigated and to determine if your own UK pension arrangements could be maximised as outlined above, it’s vital that you seek advice from a qualified financial advisor. Our advisers are always on hand to assist you, so please feel free to contact us.
The above article is reproduced by Asia Pacific Pensions who can be contacted either by email at [email protected] or alternatively by telephone on either 038 074644 or 0800 178 269.
The information provided in this article is not intended to offer advice. It is based on Asia Pacific’s interpretation of the relevant law and is correct at the date of printing this article. While we believe this interpretation to be correct, we cannot guarantee it.