3 Actions You Can Take to Prevent Currency Risk Costing You up to 53% of Your UK Pension’s Potential Value

With the Pound having fallen in value by 34% in relation to the New Zealand Dollar since January 2001, 25% in relation to the Australian Dollar, and 53% in relation to the Swiss Franc over the same period, currency risk has the potential to significantly impact the value of your UK pension funds held in Pounds Sterling (GBP), diminishing their buying power and the lifestyle they afford you, when you retire abroad.

As a British expat moving to a Eurozone country in January 2001, you would have enjoyed an exchange rate of 1 GBP: 1.58 EUR. That compares with 1 GBP: 1.21 EUR on 1 March 2025, a reduction of 24% over that period.

In effect therefore it would now cost you 24% more to buy the same goods or services in EUR using GBP, and the contributions made to your UK pension in 2001 would effectively be affording you only three-quarters of the lifestyle you had planned for when you made the investment, before you even account for inflation.

And the impact is equally acute for UK schemes that pay a guaranteed pension income in GBP. You would no doubt be asking serious questions of your financial advisor if your investments had lost 24% of their value over the same 24-year period.

Suddenly, a guaranteed retirement income is not quite as ‘guaranteed’ as it seemed.

3 Actions You Can Take to Mitigate Currency Risk

1. Align your retirement savings with your future currency needs

A key strategy to reduce currency risk is to hold and invest your retirement funds in the currency of the country where you plan to retire. This helps protect your purchasing power and minimizes the impact of exchange rate fluctuations on your long-term financial security. Holding your retirement funds in GBP while planning to retire in the Eurozone, for example, exposes you to long-term fluctuations that could erode your purchasing power. By structuring your pension and investment portfolio in the currency of your future expenses, you can better protect your financial security and avoid the pitfalls of unpredictable exchange rates.

2. Limit cash holdings to an emergency fund - Cash is a tool, not an investment

Cash should be seen as a short-term tool, not a long-term investment. Inflation, interest rate changes, and central bank policies can erode the real value of cash holdings over time. Holding more than six months' worth of living expenses in cash can result in lost investment opportunities and increased exposure to devaluation. Instead, it is advisable to deploy excess funds into diversified investments that can preserve and grow wealth over time.

3. Invest in assets to preserve and grow your wealth amid currency fluctuations

When government and central bank monetary policies lead to increased money supply or prolonged low interest rates, currencies often lose value. In contrast, tangible assets such as equities, bonds, real estate, and commodities typically appreciate over time, helping to protect and grow your wealth. Investing in a mix of stocks, bonds, property, and commodities can act as a hedge against inflation and currency depreciation. Tangible assets provide long-term value appreciation and reduce reliance on the strength of any single currency.

Forth Capital has created an award-winning range of multi-currency risk-rated Next Generation Global Fund Strategies in partnership with Morningstar. These fund strategies are available in multiple international currencies, helping to protect your wealth from the negative impact of currency fluctuations. By investing in a globally diversified portfolio, structured in the currency of your retirement country, we can help ensure that your pension retains its value in real terms, safeguarding your purchasing power over the long term.

Take Action to Secure Your Retirement

Currency risk can significantly impact the value of your UK pension when retiring abroad.

To protect your wealth and secure your financial future, it's essential to implement a strategic financial plan tailored to your circumstances. At Forth Capital, our dual-qualified international financial planners specialise in helping expats navigate these challenges.

Contact Us Today to schedule an initial consultation with one of our financial planners to discuss how we can assist you in protecting your wealth from exposure to currency risk and IHT.

Download Our Guide to UK Pension Transfers to understanding your pension transfer options and how we can help you to maximise your retirement income and benefits.

This communication is for information purposes only and does not constitute financial, legal, or tax advice. Please schedule a meeting to discuss your circumstances and to receive personal financial planning advice.