On 3rd May 2016, the Reserve Bank of Australia (RBA) cut its interest rate from 2.00% to 1.75%. This drop in interest rate was the first in Australia since May 2015.
With this is mind, how does this interest rate cut effect UK pension transfers to Australia?
Exchange Rate
One factor, that the interest rate change has an impact on, is the exchange rate. This is important for any individual considering a UK pension transfer to Australia. We have immediately seen, with the drop in Australian interest rates, that the Australian dollar has weakened against the Pound Sterling. The exchange rate, at one point, hit over A$1.93 to £1.
Of course, economic and political circumstances, in both Australia and UK would mean the exchange rate can rise and fall at any moment – we have already seen how the announcement of the UK’s EU Referendum (for 23rd June 2016) has weakened the UK GBP against the Australian Dollar. Exposure to fluctuating exchange rates will influence the value of someone’s UK pension fund – especially if their lifestyle is already in Australian dollars but their pension fund is in UK GBP. It is this type of exposure our advice can help guard against.
If you would like more information on the best way to capitalise on positive changes in the exchange rate or guard against a drop in the exchange rate, whilst considering a UK pension transfer to Australia, please contact us immediately and an adviser would be able to discuss this with you.
