British Expats Hit by Pound Collapse

Written by: George Prior

The crashing pound has hit British expats around the world, of which there are an estimated 5 million, disproportionately hard, affirms one of the world’s leading financial advisory, asset management and fintech organizations.

The observation from James Green, Investment Director at deVere Group, comes as the pound sterling collapsed to its lowest-ever level against the U.S. dollar in recent weeks, and has fallen, too, against the euro and other major currencies. 

Since the beginning of the year, sterling is down 18% against the dollar and around 4% against the euro.

He says: “The pound – which was already one of the year’s worst performing currencies – has been pounded hard after the UK government unveiled the most radical package of tax cuts since 1972, and huge spending increases, which raised concerns about Britain’s unaffordable debt levels and the likelihood of even higher inflation.”

The developments have triggered a surge in enquiries from worried UK expats who are directly affected by movements in the British currency.

“The volatility of the pound hits hard those expats who still receive retirement income in sterling.

“It makes already soaring living costs in their adopted countries significantly higher.

“In addition, the government’s radical plans also make it more likely that the Bank of England will intervene by further hiking interest rates next month, which will hamper them if they try and mitigate the pain by transferring their pensions outside of the UK as the hikes push down final salary transfer values further.”

When your retirement funds are transferred into an overseas jurisdiction, you can choose the currency that you’re paid out in, they are not typically subject to inheritance or income tax in the UK and, after paying initial tax on transfer, you can often benefit from a much lower tax rate.

There’s also flexibility around lump sum or income payments; on death, your whole pension fund can be passed to your heirs; you can consolidate multiple schemes into one that will be easy and sometimes cheaper to manage.

James Green concludes: “The UK government’s plans have proven to be a masterclass in the Law of Unintended Consequences – one of which is that an increasing number of expats are looking to take their pensions out of the UK to safeguard their hard-earned nest eggs."

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