Weak pound causes misery for ex-pat pensioners

Ex-pat retirees who receive their pensions in sterling are seeing their incomes squeezed by the weak pound, an international wealth management firm said.

Sterling has decreased in value by 20% in the past three years, David Howell, group chief executive of Guardian Wealth Management said.

A recent report from Lloyds TSB International estimates there are around a million British expat pensioners receiving their pension in sterling.

"They will be receiving less when they convert to local currency now than they were three years ago," said Howell.

Howell said the situation was unlikely to improve in the near-term.

"With the Eurozone increasing interest rates, in contrast to the UK and the US which are trying to maintain rates as low as possible to stimulate their economies, the ongoing scenario is that the pound is most likely to remain weak against the euro," he said.

Howell said retirees could try to hedge against exchange rates by making pension investments in local currency denominated funds.

Those with pots of more than £25,000 could also mitigate currency risk using qualifying recognised overseas pension schemes (QROPS) as they can pay out in the pensioners' local currency.

Using QROPS could also avoid bank fees for capital transfers from UK banks to overseas banks.

He also recommended investors fix the exchange rate they receive for six months to two years.