Chris Thornton

How can I limit exposure to exchange rate fluctuations on my UK pension now I am living in the US?

In our new FAQ feature, Chris Thornton, Country Manager in the US, answers a frequently asked question about the relevance of currency and exchange rates in retirement planning.

Chris says:

Currency movements are a staple discussion point of the financial services industry, however, they have recently become a much hotter topic as Brexit and all its uncertainties have resulted in acute sterling volatility. For many cross-border investors this has caused a significant impact on their cashflow.

Unfortunately, for the UK expatriate living and working in the United States, there is no escaping the reality of currency movements.

Although we CAN say that seismic events and periods of uncertainty, such as Brexit, are almost certainly going to result in the short-term rise or fall of a particular currency, over the medium or long-term there are a few reliable ways that investors can predict factors such as interest rate rises, trade relationships, the strength of a particular economy, and the myriad other causes of currency movements.

And, of course, it is impossible to predict exactly when you will need your money or to time your currency exchanges to coincide with moments when the trading rates will be beneficial to your objectives.

The situation for Brits in the States

For those British expatriates who have lived long enough in the Untied States to remember the days when 2 to 1 on USD/GBP seemed like par for course, the post-referendum lows of 1.20 can be difficult to stomach.

It is wild currency exchange disparities like this which can make the process of planning your retirement income extremely difficult. For example, over the past 15 years a GBP 10,000 per annum pension could have been worth as much as $20,000 per annum or as little as $12,000 depending on USD/GBP currency movements.*

How can you limit exposure?

If you live in the United States but have a UK defined benefit or a defined contribution pension you will likely have no option but to accept fluctuations and all the uncertainty, unpredictability and practical problems they will bring to the process of retirement planning.

However, there are strategies that can be employed to mitigate these risks. For example, if a defined benefit or defined contribution scheme is transferred into a Self Invested Personal Pension (SIPP), not only are there increased options for converting funds from GBP to USD (therefore removing future exchange rate risk), but there are also ways to invest the SIPP into USD denominated investments, thereby better aligning pensions with your country of residency.

How Blacktower (US) LLC can help

Blacktower in the US is able to offer an initial, no obligation review of your existing UK pensions and can provide a comparison with a SIPP investment to help you ascertain whether a pension transfer would be a suitable course of action for your personal circumstances and objectives.

We have found that when clients ask their pension providers for information on how exchange rates may affect their pension income, they often receive limited answers to their questions. We know what questions you should be asking of your existing schemes and can help you understand the replies.

We are an experienced IFA within the cross-border pension planning arena and understand the nuances of the process.

Contact Blacktower in the US today for advice you can rely on.


* https://www.macrotrends.net/2549/pound-dollar-exchange-rate-historical-chart accessed 05-09-19


Disclaimer: The provision of information in this communication is not based on your individual circumstances and does not constitute investment advice. Blacktower makes no recommendation as to the suitability of any of the products or transactions mentioned.

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