Last updated 1 August 2016

How not to get currency crunched

HiFX reports that, prior to departure, the average emigrating family will realise assets worth a quarter of a million pounds. This sizeable sum typically comprises proceeds from the sale of a house, a car or cars and savings.  HiFX says far too many migrating families are ignoring the potential cost of leaving the actual business of currency exchange in "the wrong hands". When savings are transferred to a foreign country via a high street bank, for example, HiFX calculates the average family risks losing up to a staggering £10,000 as banks will typically charge 4% more than currency specialists on exchange rates.

As if that isn't bad enough, Brits moving abroad who use a high street bank to switch currencies are also susceptible to unnecessary charges. These can include commission fees (add approximately 2% of the amount transferred) and transfer charges (which can be as much as £25 per transfer). Finally, warns HiFX, depending on where the money is being sent, expats must expect to be clobbered for a further 0.5% by the receiving bank.

HiFX, and other foreign currency dealers, will normally transfer money abroad free of charge. Currency jugglers should compare and contrast the deals and services from forex brokers.

Currencies Direct reminds us that sterling has surged to a seven month high against both the dollar and euro (£1 was worth €1.1745 on 11 June, and would buy $1.638 on the same day), but as expats know only too well, exchange rates can (and do) swing both ways. Hundreds of thousands of British expats retired to the Eurozone, and have spent the last year eking out a much reduced retirement income thanks to sterling's breathtaking plunge against the euro. All of which means expats must learn to manage the survival of 'big dipper' rides of fluctuating currency exchange rates on a weekly, if not daily, basis.

MoneyCorp offers expats its Regular Payment Plan which ensures funds are fully automated (via direct debit), thus removing the hassle and cost of regular overseas transfers. "Opening a trading facility is free, and from just £4 per transfer, or £8 for a premium ‘fast track’ transfer for same or next day delivery, retirees can save money compared to making one-off payments with the high street banks. There are also different options available which can help protect you from adverse currency fluctuations by fixing either the sterling amount, the foreign currency amount, or both," confirms MoneyCorp.

Expats can also put ‘forward contracts’ into place. "Unlike your bank, currency specialists will allow you to lock into favourable exchange rates for up to 12 months, protecting your money from adverse currency movements – great for ensuring peace of mind if you are receiving a salary in a currency other than your own or you’re an expat making payments off a mortgage in the UK while overseas," says HiFX Director Mark Bodega. 

Such contracts mean expats can lock into favourable exchange rates for up to two years If you opt for a forward contract you have to be confident that today's rate will remain the most favourable one for some time ahead. So, seek professional advice before committing. 

Hannah Beecham

Photo: epSos .de

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