Bank Charges Eroding Your Pension

Millions of Britons claiming a state pension and living abroad are wasting over £300m on bank charges and fluctuating exchange rates, foreign exchange broker HiFX claimed.

The number of pensioners living abroad and claiming a state pension from the UK government has grown from 770,000 in September 1997 to an estimated 1.04m in January 2007.

Mark Bodega, marketing direct at HiFX, says that the average pensioner living abroad was charged anything between £10 and £30 a month to have their state pension paid into their bank account. He adds that, on top of this, many foreign banks also imposed receiving charges of 0.5pc of the total value of the monthly pension.

“This means, in a typical year, pensioners living abroad are paying more than £300 in bank charges and fees just to be able to spend their government pension abroad,” he says.

Expatriates with a private or company pension in the UK will also pay the same level of charges for each payment received, while all pension payments are subject to fluctuating exchange rates.

One alternative is to consider looking into an exchange rate via a regular payment service.

The plan, which does not charge for transferring payments abroad, fixes exchange rates for between six and 24 months in advance. 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, the risk is that you lock in at lower exchange rates than those which become available in the open market during the period covered. Against that, fixed rates can give peace of mind.

The foreign country with the most UK pensioners was Australia where 241,050 retirees live. The next most popular was Canada with 153,820 pensioners claiming the state pension, followed by New Zealand with 46,680

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.