Tuesday, 22 August 2017
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4801After losing the majority in Parliament, in an outcome she could hardly have imagined seven weeks earlier, when she surprised all by announcing an early election. May told the British Nation that she needed their backing to strengthen her position ahead of Brexit negotiations. Far from backing her, the British vote ended up with a far weaker premier, facing calls from furious Tories to sack her closest advisers and even to quit herself.

A year on from the Brexit referendum, Britain’s future place in Europe is once again an open question.

The question is…..How does it impact UK expats?

There is only one certainty... uncertainty will be the rule governing UK politics (and economics) in the near future.

At the centre of all the changes, is the Pound Sterling. How low will the pound go? The general election announcement pushed the pound up by around 1% last week against the US dollar and the Euro. However, it is relatively weak. Sterling is trading at $1.28 and at €1.18, down roughly 12% against the dollar and 10% against the Euro compared with its position pre-Brexit. There are a range of causes why Sterling keeps moving. The first one is that markets may expect the UK economy to grow more slowly after Brexit i.e. making UK a less attractive place than before to keep money. The second one is that analysts think that exporting from the UK will be more expensive and less profitable, hence the currency fluctuations.

If your savings and pensions are kept in the UK and you are living in a foreign country, or about to do so, the amount of money that you will be taking will be affected by the Sterling price fluctuations. If you are thinking about moving your monies overseas, it may now be a good time to do so, since the political uncertainty usually brings a depreciation of the Sterling against foreign currencies. What has been described before is the most direct effect that the result of the vote might have on British expats.

There is one more affect on UK Savings and Pensions, an indirect affect. This will only apply to Defined Benefit or Final Salary pension holders. Warning: This will get a bit technical. If the Sterling continues losing ground against other currencies, especially the Euro, imports to the UK will get more and more expensive. This means that prices will go up. In other words, inflation might dramatically increase. If this happens, the Bank of England will need to increase the Government Issued Loan Trust (GILT) Rate. As a result, this means that the Cash Equivalent Transfer Values (CETV) received from the final salary pensions will significantly decrease. This is because the amount of money required to equal the potential guaranteed benefits would be lower due to the higher returns that would be gained as a result of higher interest rates.

Now, it´s not all lost. A depreciation of the Sterling will also create investment opportunities. For example, imagine that just before Brexit you sold all your pension assets in Sterling and changed it to Euro denominated assets. Today you would be 30% more rich.

Now is the best time to get Financial Advice to avoid compromising your future.

In Theresa May´s words: "At this time, more than anything else, this country needs a period of stability".

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