If the new governor of the Bank of England pursues his pet policy of 'forward guidance' the devaluation of the pound could be disastrous for British expats, argues financial consultant

Prior to Mark Carney's official appointment as governor of the Bank of England this week, the general expectation was that he would institute an aggressive new monetary policy to kick-start Britain's sluggish economy. Yet as he arrived at his new office in Threadneedle Street on Monday, most economics experts posited that he would instead be likely to adopt a pet policy of his that of 'forward guidance'.

History shows that Carney has a particular fondness for forward guidance, which is what results when a central bank flags up what is expected to happen to interest rates way beyond the next policy vote. Chancellor George Osborne has also specifically requested that he should pursue this as a matter of some urgency. The theory behind forward guidance is to foster growth by providing greater certainty to lenders that, due to low rates, they can access cheap cash for a long time to come.

Naturally, this practice will further devalue the pound and this could be disastrous for those who hold most of their savings and/or receive most of their income in sterling, such as retired British expats. Indeed, its deleterious effects could start to bite much sooner for these people than even the most pessimistic economic pundit might acknowledge. It is estimated that one million British retirees live overseas and draw a United Kingdom state pension, so any further devaluation of the pound could have devastating results for their financial security.

Unfortunately, it is entirely possible, indeed probable, that Carney will devalue the pound by up to 15 per cent, which would be ruinous for expat pensioners who live on a fixed sterling income. The painful truth is that, through no fault of their own, many British retirees have lost more than 20 per cent of their income since the financial crisis first hit. This situation has been further compounded by soaring living costs and higher taxation in many popular expat destinations. If Carney, as expected, pursues his favoured 'forward guidance' policy, it is entirely possible that this already vexed situation will worsen before it improves.

The devaluation fallout has had especially cruel consequences for expats in the eurozone. At the beginning of 2007 they were benefitting from a 1.48 to the pound exchange rate, but that has dropped to approximately 1.16. If the Bank of England's new governor does initiate further sterling devaluation, expat pensioners living off a state pension will need to take measures to insulate themselves financially. It is time for such retirees to consider very seriously how best they can protect their finances against the inevitable effects of a devalued pound. It might be wise to employ the services of an online currency platform, where an automated payment system can be set up in advance, essentially guaranteeing a minimum and/or maximum rate at which currency is exchanged. Now is very definitely the time to consider how best to make the most of one's money.

The whole devaluation debate in any case makes little sense if one considers that this is a ploy generally adopted to boost export trade; and the UK's glory days as a major manufacturing hub are in the past, so a weaker pound can only harm the country's core economy, which thrives on a stronger pound. It is at times like this that the old saw, forewarned is forearmed, comes into its own. If Mark Carney is dedicated to forward guidance then Britons living overseas and claiming a UK state pension must take matters into their own hands and seek advice as to how best they can protect their interests.