Economic forecast is bad news for UK pension holders

Expats with a UK pension need to review how currency fluctuations will affect the money they receive after a leading economic think tank forecast the pound is expected to drop below parity with the Euro.

Annuities are also a likely casualty of interest rates, as they are expected to stay pretty much the same until 2011 and are unlikely to climb above 2% until after 2014, said the Centre for Economics and Business Research.

The CEBR based their forecasts on the assumption that UK economic growth will stay in low gear for the next few years. This will curb inflation and wages that will allow the Bank of England keep interest rates down.

Pension holders living in Euro currency areas receiving payments from an annuity in sterling will find their buying power significantly reduced if the pound falls against the Euro.

CEBR expects the pound to fall to $1.40 and possibly below €1.00, depending on how money markets react to the long-term sustainability of the euro.

One way anyone living abroad with UK pension rights can protect their retirement income against currency fluctuation is by transferring their UK pension funds in to a QROPS - an overseas pension wrapper that allows plan holders to invest and withdraw from their overseas pension in any currency.

Also, a QROPS negates the pension holder’s obligation to buy an annuity, which is a legal obligation for a UK pension.

Low interest rates and possible currency issues mean annuities are not attractive investments for retirees.

‘Our forecasts show low levels of labour cost inflation which should keep the consumer price index low enough to prevent the Bank’s Monetary Policy Committee from having to raise rates until the economy is recovering, ‘ said Charles Davis, senior economist at the CEBR.

The forecasts consider the incoming government that wins next year’s general election will need to take make decisions about £100 billion in tax rises and spending cuts to correct the fiscal deficit,  said the CEBR.

Whatever your financial goals or aims, seeking professional highly regulated advice as early as possible from Qrops Adviser, is the first step in securing the best possible life in retirement. Contact us via the contact Qrops Adviser page, call us direct on 0032 (0)2 400 0087 or email us at info@qropsadviser.com.