What to do about a stronger pound?

on Tuesday, 29 July 2014. Posted in ,
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As the pound continues its trend of strength, retired expats in Asia and beyond have been enjoying a nice uplift in their pension payments; but how long will this trend continue?

 

sterlingRecent rumours of the Bank of England planning to finally raise the base interest rate by 2014 (after sticking to their guns with the 0.5% for 6 years) coupled with European Central Bank growth policy spell a continuing good forecast for the pound. This massive rise has been largely down to UK growth and the ECB’s strategy to drive growth by export –led demand through maintaining a weak currency.

 

Nonetheless, if anyone should remain wary of currency fluctuations, it’s expats. Going back a few years, the financial crisis and the resultant global economic downturn saw UK expats sometimes lose up to a third of their pension payments as a direct result of sterling weakening.

 

financial-planningThis is why investors should always maintain a wide range of investments in their portfolio, including property, equity, cash and bonds. These types of investments stay untouched by (short term) currency fluctuations are always going to be more predictable and stable (if say the housing market is set to go down, you’ll at least be able to see it coming). That’s not to say that currency fluctuations are always irrational, but they’re just a bit more of a head scratch when it comes to analysing.

 

A sure-fire way to protect your pension from such a disaster is to look at the possibility of switching your plan over to a QROPS. A QROPS, or Qualifying Recognized Overseas Pension Scheme, is a clever way to shield your retirement investment, as well as probably benefiting from several tax advantages and a wide choice of currencies. Because of the degree of flexibility they offer, QROPSs are becoming quickly known as the smart expat’s solution to pension woes.

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