Bank Charges that eat into your Pension
March 26th, 2007
Bank charges and taking risks on the exchange rate could be robbing more than one million pensioners abroad of around £300 million a year when they claim their state pensions.
Every month, the average expat pensioner is charged between £10 and £30 for simply collecting their pension through their bank, and a number of overseas banks add a receiving charge of 0.5 per cent on top of that, according to research from HiFX, which provides currency exchange services.
This means that in all, the average expat pensioner is paying as much as £300 a year just to collect their state pension. That in itself is a shocking figure, but given that the basic state pension is currently worth just £4,381 a year – less than a fifth of the average national wage – it amounts to a nearly seven per cent reduction on the payment you can claim, and that is before tax.
Over 100,000 Britons leave the UK each year, according to the Institute for Public Policy Research, with over 5.5 million already living abroad – a fifth of them pensioners. Many, I have no doubt, find they can make their money stretch that bit further in sunnier climes.
But, of course, not only do you have to take the cost of the transaction itself into consideration, there is also the thorny question of exchange rate fluctuation. You might expect HiFX to point this out – it is what it does after all – but even so, it is not wrong.
If you happen to be taking your pension when the currency is working in your favour, then great, you automatically generate income for yourself and you can treat yourself to something a bit special. If you happen to be a loser in the equation though, it can be painful – and your standard of living will suffer.
You can fix your currency exchange rates with some foreign exchanges, but you may also be able to alleviate some of the charges you face from the banks by looking at other ways of cashing your pension. Alternatively, given the current climate and rising tide of resentment against bank charges, you could try to challenge your bank to reduce the charges you pay.
Sterling is currently strong, said HiFX, so picking a good exchange rate now could mean that you benefit for the longer term by locking in.
Of course, there is nothing you can do to change the amount of pension you get if you live in one of the Commonwealth countries where pension freezing is an issue, but at the very least you can reduce the amount you are throwing away in charges.