On transferring money from UK pensions/regular payments abroad

There are many reasons why people return from their overseas adventure sadder but wiser. These include:

• The death of a loved one or partner
• The wrong choice of destination
• Realising too late that they prefer their homeland after all
• Their mortgage payments have become too much
• Not being able to live on their pension.

The final point raises the question of why they can no longer live on their pension. Presumably when they went out they had planned carefully so as to ensure that they could live comfortably for ever and a day, so what changed?

Well, the dramatic events of the last few years have changed things considerably. Northern Rock was a real shock to the currency market which saw sterling fall from the €1.50ish/£1 level to the €1.25ish/£1 level. But surely this was a one off? The UK and the world banking system couldn’t possibly be about to implode - surely they weren’t that stupid…?

Well, were they that stupid? Some certainly were, but greed seems to have been the main catalyst for the worldwide economic collapse. That, plus a lack of government control that would have ensured that the excesses were avoided in both the UK and the US. So we saw Lehman Brothers go bust and RBS and the Halifax/ Lloyds Banks needing to be bailed out by the UK government.

The net result was sterling nearly hitting parity against the euro. This in turn meant that, in the space of 18 months, those receiving their pensions in euros saw its value drop by about one third.
You may ask how a currency company like Smart can help individuals when they make regular transfers and pension payments abroad. They are not miracle workers but there are two things that can and will help:

The first thing is to reduce the cost of each transfer, but how does Smart Currency do this?

By giving you a much better a much better rate than the bank and minimising, if not eliminating altogether, add on costs. Soon after Smart Currency Exchange opened for business in 2004, a client who was emigrating abroad confirmed how much better Smart’s rates were than the bank’s. After completing his initial euro transfer to purchase his new home, he was ecstatic about the excellent service received and confirmed savings of over £20,000 compared to his high street bank. Effectively he had saved enough money to pay his legal costs, removal costs and buy some new furniture for his new home – not bad going.

Since then Smart has transferred his pension each month thus saving him at least £75 each month compared to the rate he would get from his bank. So each year Smart saves him over £900 - he has an extra €1,000 in his pocket rather than the bank’s.

But he has also eliminated the add-on transfer cost that the bank charges for sending funds abroad. This could be as much £25 per transfer. So in fact he has saved in the order of £100 a month or £1,200 per year! In the current climate that extra €1,400 per year is not to be sneezed at!

So let’s work out what he could theoretically save over the lifetime of his relationship with Smart. Assume that he lives for at least another 25 years: using Smart Currency will have saved him £20,000 initially and £30,000 on his pension payments over the 25 years, making a total saving of £50,000. That means an extra €60,000 to spend on his new life abroad - a great result.

The example given above is a good starting point in today’s difficult climate but even more can be done by better forward planning.

Exchange rates have become extremely volatile over the last few years. Within the last twelve months we have seen a minimum exchange rate of €1.06/£1 and a maximum rate €1.19/£1. So if, in the course of the year, if you were transferring say £1,000 a month and you bought all your euros at the peak rate you would receive €14,280. But if you bought at the bottom you would have received €12,720. That’s a difference of €1,560.

Admittedly you would be very lucky to buy at the highest or sell at the lowest rate as no one can be sure when these extremes are reached, even those who have been in the industry for years. Exchange rates move quickly so peak or bottom rates are only available for a fleeting moment.

What Smart suggests is that clients first decide on an exchange rate that is realistic in the current environment and that works for them. Then the client should plan on ‘buying the currency forward’, within say the next 6 or 12 months. This may sound complicated but it’s really quite simple.

‘Buying forward’ means that you agree an exchange rate for a specific amount of euro’s for an agreed period in the future. Smart then phones into the market as the rate changes, trying to meet your exchange rate objective. This option of buying forward is usually not offered by the banks as it would be too time consuming. Generally banks set their rate early in the day and set it so that what ever happens during the day they do not lose money!

Recently we have secured forward contracts for clients making regular transfers to Euroland at rates close to €1.17/£1. If the forward contract was for a full year then the client would receive €1,700 a month for the next 12 months. This is an improvement of €1,320 over the minimum amount as noted above.

Of course exchange rates could improve further but that is a risky assumption in the current climate. And are you willing to forego certainty for potential gain? Many are…and it means that, if rates do improve, you can take advantage of those rates at a future date.

So it could be argued that using the services of a company like Smart Currency Exchange Limited could benefit you up to €100,000 over a 25 year period. And most of us would think that is a benefit worth having.

For more information on Smart Currency Exchange, please call our freephone: 0808 163 0102 (+44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyExchange.com

Ken and Sarah's 'Smart' Experience

Over the years Ken and Sarah Smith have travelled extensively abroad. However, it was while holidaying at a neighbour’s home overseas that it occurred to them to actually build their own holiday home in the sun.

“I had retired, and we decided that if we didn’t do something about it now, we never would” recalls Ken. “Sarah is still working, but we wanted a holiday home where we could really relax and enjoy life, with the intention of staying for longer periods as we get older. I had the time to put into the project, so we bought a plot and hired a local builder.”

The first payment on the new property was a deposit of €37,000 which Ken did through their local high street bank, and found it to be a massively expensive process. “I sent the money through the bank and found it hard to believe the amount they charged for the process” says Ken. “It was only on hearing about a currency company, information that Sarah picked up on searching the Internet, that I first learnt about currency companies and what they do. Needless to say, once introduced to this money saving way to ensure the best rates, I have used them ever since.”

Ken recalls: “There were more stage payments to come for the off-plan property: €13,000 for the first stage then 3 tranches of €60,000 and then finally a completion payment of €2,000. After my initial money transfer, the follow up at the currency company was excellent. I spoke to various individuals, all of whom were friendly and to the point. All my initial concerns were answered and I found the actual process extremely easy.

They talked me through the whole process, even advising on the wisdom of ‘forward buying’ – locking the currency in at that day’s rate for a time in the future. That way I could ensure that, if the rates went against us – as indeed they did do – I was safe and would only pay what I had agreed to on the day”

Ongoing dealings with a currency company rather than a bank proved easier than expected for Ken and Sarah, with the added bonus of money saved: “We will have saved hundreds of pounds by the time the building is completed. This plus I plan to transfer some funds into my overseas savings account on an ongoing basis. Also I am kept updated on currency trends” adds Ken.

Currency fluctuations, previously not really taken into account, now became an important topic of concern as Ken realised how much money could be saved by exchanging currency at the right time. It helped to have a dedicated dealer monitoring the rates for him on an ongoing basis. This plus no commission charges and no transfer fees made a huge difference to Ken and Sarah’s bottom line.

“Once I realised that not every organisation charged the same rate I started watching the rates.” he says. “I am, by my own admission, a ‘tight git’. But now, with the passage of time, trust has been established and I don’t bother to compare rates. I won't change now. Follow up is excellent and the educational reports I receive are of enormous value.”
Ken has recommended several friends to his currency company. They have all taken a leaf out of his book and are now sending money abroad through a currency company, at better rates and with far cheaper costs. Summer is on its way, and Sarah and Ken look forward to the time when they can relax in their own lovely home in the sun.

For more information on Smart Currency Exchange, please call our freephone: 0808 163 0102 (+44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyExchange.com

How much extra are you paying for your holidays billed in foreign currency?

The most common way to book a holiday is through a UK-based travel agent or website; however there are instances when the booking is done overseas. With an overseas booking the invoice is often sent in a currency other than British sterling.

For example, Simon Brown decided to change tradition and book a villa for Christmas in St. Lucia. His plan was to fly his family out along with relatives stateside to spend the festive holiday in the sun.

The villa was found on a American-based website and although there was a currency converter to help with the conversion from US dollars to British pounds the invoice was sent out in US$. The total due was $5,000 which was split into two payments. Mr Brown’s initial action was to contact a bank to find out how to make an international payment however a friend recommended that he used a currency exchange company.

Currency exchange companies specialise in moving money in and out of the UK through bank to bank transfers – as opposed to supply cash for travel money. By specialising in this very specific process, specialists are able to get rates far better than offered by the high street bank. Furthermore they can offer options to lock in exchange rates for future payments that are not readily available from the banks.

In Mr Brown’s case, he signed up with a currency specialist to determine whether or not the exchange rate offered would be better than the bank. Mr Brown explains, “After comparing rates, I was gobsmacked to discover that if I used the bank, I’d have to cough up and extra £300. And what made me even happier is that the specialist didn’t charge for the transfer giving me £25 (for each transfer) more in savings.”

Mr Brown was given the option to buy half the currency now and the remainder closer to the due date; however he felt more secure to fix the current exchange rate for both payments.

“If the exchange rate gets worse in the next few months before the 2nd payment I don’t want to find extra money to make up the difference. With the bank I wasn’t offered this option,” explained Mr Brown.

In this case, Mr Brown sent the sterling due immediately and for the 2nd payment he simply needs to send the fixed amount when it’s due. By fixing the exchange rate Mr Brown knows exactly how much the holiday villa will cost and won’t have any nasty increases to ruin Christmas!

For more information on Smart Currency Exchange, please call our freephone: 0808 163 0102 (+44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyExchange.com

Getting Your Money to Your Destination

by Smart Currency’s Charles Purdy.

There are a lot of advantages to using a currency company such as Smart Currency Exchange; better rates, one to one service, proactive management of currency requirements... the list goes on.

But one of the major advantages sometimes overlooked is that, as well as being experts in foreign currency, Smart Currency Exchange are also experts in transferring money. This may not seem such a big deal but getting a transfer wrong can be a hugely time consuming and frustrating experience to rectify.

The details required for transfers seem to vary from continent to continent and we have a clear understanding of what is required. If there is something unclear or lacking we would ask our client to clarify: better to get it right the first time.

Transfers of the euro have become much easier with the advent of what is called the IBAN number. This number is unique for a specific bank account and it can be checked for validity before sending the funds. The only time I have experienced a problem was when a client’s lawyer gave him a wrong but valid IBAN number. Thankfully this was realised very soon after the transfer and we were able to correct error with no loss of time.

Time is also an important element when making a transfer. The whole banking system is based on a time period of two days for transfers. The reason for this seems to be one of logistics and coordination between the banks [or am I being naïve and it is really a way for them to make more money?!]. This two day period still applies to most transfers but for the US$ and euro we can now transfer with a same day value. Needless to say there is a cost, but we absorb it – no hidden charges at Smart!

I hope the above is of help. It is the unglamorous side of the business but a key component in ensuring that clients are properly serviced.

For more information on Smart Currency Exchange, please call our freephone: 0808 163 0102 (+44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyExchange.com

Can you afford to lose £4,000?
The economic crisis is certainly causing issues for people all over the world, yet in the world of international money transfers there are actions that can be taken to safeguard your money – especially if different currencies are required. International payments include payments between countries for property, the movement of pension payments, transferring savings or paying for any goods or services in a currency other than the one you have. Working with an international payments specialist rather than using a bank will allow you to save money over using the bank AND provide you with options that can minimise financial losses.

Moving Large Lump Sums of Money Internationally
Do you need to pay a staged payment for a property? How about moving funds from the sale of a property abroad back to the UK? Regardless as to the reason for moving money – or where you need to move it to - it’s important to realise that for every £/€100,000 you move, you could pay around £/€4,000 unnecessarily if you use a bank. Banks around the world add a margin of around 4% more than the margin used by international payment specialist. Using a bank rather than a specialist is similar to buying a property and then asking if you can pay and extra £/€ 4,000 for no reason.

Aside from saving money on the cost of buying currency, you can also ensure that the value of the money you’re moving doesn’t change. In other words, if you need to move a large sum of money within the next year and you’re happy with the current exchange rate, you can reserve that rate today yet pay for it at a later date.

For example, during the month of January 2008 Mr & Mrs Kingston contacted Smart Currency Exchange to discuss a payment of €89,400 due in November 2008. The Kingston’s were happy with the current rate of €1.317/£1 so they booked a contract for the full amount and simply paid a 5% deposit to secure the transaction. When November came, the Kingston’s sent the money due (less the 5% already paid). If however, they had waited until November 2008 to purchase the Euros, they would have had to accept a rate of €1.155/£1 and pay an extra £9,521.

Whilst the euro has lost ground since it was at parity (€1/£1) in December 2008, in the grand scheme of things it’s still a fantastic time to purchase or secure a rate for Euros to sterling. So if you originally bought your Euros at close to €1.50/£1 and you want to now bring the funds back, now is the time to think seriously about doing it - especially given many analysts feel that sterling is likely to continue to strengthen towards €1.30/£1

Moving Small Sums on a Regular Basis
When moving small sums of money on a regular basis you can benefit greatly by fixing the currency exchange rate if and when the rate is at a good level. For example, in January 2008 many Brits living in the Europe secured a rate of €1.31/£1 for monthly payments for a year or two on all their pension payments. That means that as Sterling weakened throughout the year, clients were unaffected by the rate change and received a rate of 1.31 each month.

In addition to saving money on getting better-than-bank exchange rates and fixing rates for future use, international payment specialists can also reduce the fees associated to transfers, shrink the transfer times from 5 days to 48 hours and provide a level of service that far surpasses the cold impersonal bank. As for safety, specialist organisations like ourselves process payments through a bank and negotiate a better rate of exchange with the bank and then pass the savings onto the end client.


For more information on Smart Currency Exchange, please call our freephone: 0808 163 0102 (+44 (0)207 898 0541 from outside the UK) or visit our website at: SmartCurrencyExchange.com