The Federation of European Independent Financial Advisers

While the world economy struggles along and holds down interest rates, many expats have reason to cheer.  This is certainly the case if they have fixed income pensions.

Cash in the bank and index-linked pension payments are hardly growing.  But the good news for those earning from fixed income pensions is that neither are consumer prices.

For British expats with state pensions linked to the triple lock, this means that retirement payments are actually beating inflation.

The triple lock system keeps pension increases at a minimum of 2.5 per cent a year until 2020.  At the moment inflation in the UK is way below that level, despite fears over the Brexit vote.

In Britain, the cost of living increased by just 0.6 per cent in the first 6 months of the year.  This was in spite of the Bank of England triggering another round of bond buying to kick-start the economy.  The rate is the highest since November 2014.

Low inflation is also affecting Europe, where British expats are enjoying an average Eurozone rate of 0.2 per cent – but this varies between deflation of -1.1 per cent in Bulgaria to 2 per cent in Belgium.

The latest figures from EuroStat show that 12 countries are in deflation.  Lithuania has zero per cent inflation and 15 countries are seeing the cost of living rise from between 0.1 per cent to Belgium’s 2 per cent.

At the other end of the scale, in Australia inflation is running at 1.6 per cent and in Canada, 1.3 per cent.

FIXED INCOME PENSIONS OFFERING BETTER COST OF LIVING

For expats with fixed income pensions, this means prices are fairly static.  This is mainly due to the falling price of oil.  The price of oil has dropped from more than 100 USD a barrel two years ago to less than 50 USD a barrel today.

This has seen the cost of travel and energy drop in many countries.

Cheaper food has also contributed to the fall in prices as farmers have harvested bumper crops in the past year.

At the same time, central bank measures aimed at trying to improve growth has seen interest rates in the UK and Europe sink.  Record lows have been hit and the rates do not look like moving for some time yet.

The US Federal Reserve has indicated a rate increase is on the way in the autumn.  No other world economy looks fit enough to sustain higher interest though.​​​​​​​​​​​​​​​​​​​

​​​​​​​This article was kindly provided by Alan Turner of Forth Capital and originally posted at: ​​​​http://www.forthcapi​tal.com/expats-fixed-income-pensions-rates​​​​​​​​​​​​​​/​​​​​​​​

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