If you’re moving abroad on a secondment with an employer, to retire, or to seek a better work-life balance with your young family, the switch from UK resident to becoming an expat can feel daunting.
And even when you’re living overseas as an expat you will need to think about the ongoing need to make regular currency transactions. For most, the funds you transfer to buy your property are the first of many payments.As well as regular transactions to receive pension or dividend payments, you might also need to transfer funds home to meet ongoing financial commitments, such as seeing an older child through university. And even when life as an expat is in full swing, there is a chance you will need to make ‘one-off’ transactions, such as the purchase of an additional holiday home, or to transfer cash as gifts to relatives.
So, whatever your situation, some basic knowledge will help you make informed, positive decisions and take some of the stress away from the situation. And while discussions about transferring funds might get lost in some of the exciting decisions about your new life, it’s not something you can afford to ignore.
Getting the best deal
Large sums are transferred when a person or family relocates, often from the sale of property, so exchange rates are not to be ignored. And fluctuating rates can make a big difference to your income as an expat, particularly when pensions and such are transferred monthly.
Of all the basic things to remember, the most important is that you are unlikely to get the best deal from using your bank. High Street banks do offer services such as ‘international bank pay’, which make it seem incredibly straightforward but they are not ‘currency experts’, they deal with many areas of personal finance and the price expats pay for a seemingly hassle-free service can be steep.
As well as being tied to poor exchange rates, bank fees can be high for international transfers. Banks might advertise their service as being ‘fee free’ – but behind this slogan, look closely, and you will see that the charges have not magically vanished. They’re just hidden below the line where they are harder to spot.
So what are the options expats have when transferring funds overseas?
Currency brokers are not as visible as High Street banks. They don’t advertise in the same way, but if you take a look at the recommendations on their websites, you’ll see that the service they provide is trustworthy – and highly valued by customers.
Online review sites such as Trust Pilot and Feefo are a good benchmark of the success of a product or service, and currency brokers are valued enough for many customers to leave positive reviews.
Hopefully, you will see sense, and you’re not going to use your bank, and for all the reasons outlined above you’re going to use a currency broker. Read on for our Top 5 Tips to Transfer Currency and learn how to get the most from the service.
Tip 1 – Compare rates
Exchange rates change throughout the day and sometimes – such as the recent EU Referendum in the UK – these changes can be hard for the average consumer to predict, or understand.
Currency brokers are experts in their field. They understand the way the currency markets move and will be able to offer guidance to help you make your decisions.
It is best to compare rates from a number of providers. But, to get a meaningful result, you need to check them all at the same time. Doing a couple in the morning, and another in the afternoon and maybe one more the next day just isn’t going to work.
It’s likely that the markets will have changed during that short time and, as a consequence, the available rate will change – so it is not a true comparison if made at different times.
Some brokers offer apps so that you can check daily rates, and you can always find this information on their website, but make sure you give yourself plenty of time. If you leave it to the last minute, you have less chance to take advantage of the best rates. See Tip 4 for more about timing.
Tip 2 – Work out your fees
When you’re transferring funds, there are two fees you need to consider – the transaction fee and the exchange rate. And to know exactly how much it will cost, or how much will arrive in the account at the other end, you need to calculate both.
A currency broker normally won’t charge a fee for the transaction. So for a large transfer, such as a house purchase or transferring your savings, you will make a substantial saving. They frequently provide an exchange rate better than the banks, so the savings can be thousands of pounds, if you use a broker rather than your bank.
It’s also a good idea to think about all the things you will need to make transactions for to make sure the amount transferred will cover everything:
– Property purchase
– Savings transfer to local account
– Salary payments, if your income will be temporarily paid from the UK
– Local administration, such as visas, solicitors or healthcare registration that might need to be paid before you arrive
Tip 3 – Keep your money safe
Check that the company you use keeps your money separate from its own accounts. Called ring-fencing, it might not seem a big deal, but it means your money is not being ‘used’ for the company’s gain.
In real terms, your account manager is keeping your money in a safe place before you make your transfer. So they don’t have access to it – even in the unlikely event that they find themselves in financial difficulty. And, if you’re already living your expat life, leaving a company in the UK to manage your regular transactions, you might feel vulnerable to this.
Check that the specialist you choose is authorised by the Financial Conduct Authority (FCA). FC Exchange, for example, is also FCA-authorised as an E-Money Institution, for added peace of mind.
Tip 4 – Talk to your broker
When you use a currency broker to make a transfer, you’re using an expert. Your account manager, or broker, will have in-depth market knowledge and as they get to know you and your requirements, they will use this improved knowledge to offer guidance with your personal situation in mind.
Moving and living abroad can throw up a number of financial issues that need to be worked out, so currency brokers are often assigned clients according to local knowledge. Some, like FC Exchange, may even employ expats themselves and this first-hand knowledge of the process from start to finish is invaluable – to broker and client.
Timing, and when you make the transaction, is a crucial part of the currency transfer process. If you leave the transaction until the last minute, you’re limiting your opportunities to get the most from the funds you’re transferring.
If you get your account set up as soon as you know you need one you’re giving yourself – and your broker – a wider window in which to make the transfer. And if you decide early in the whole process who your currency broker will be, you’re giving yourself the chance to build a relationship with them. As well as setting up the account you’re letting your broker know your plans. So, if at some point down the line you need to act quickly, say because a visa was issued unexpectedly quickly or an earlier start date is required by an employer, everything is already in place.
This increases the opportunities to take advantage of the best rates and gives you more buying power if rates move in your favour.
Tip 5 – Make regular payments
Most people who have retired abroad often find they need to make regular money transfers from the UK as they will be receiving pension income and possibly rental income every month.
Foreign exchange brokers offer regular payment services which cut out a lot of the hassle and most will arrange regular transfers of £250 or more. Instead of arranging a new transfer every time – and incurring a separate set of charges each time – you can set up a regular payment with a broker. Funds are taken from your account, changed into foreign currency and paid into the overseas account.
There are three options for people making regular payments, and who need to be certain about their income and outgoings:
– Fix the sterling amount that you transfer each time, so you always know the cost of the transaction but the amount received in your foreign account fluctuates
– Fix the amount of foreign currency you receive each time, so you always know what is coming but the cost of each transaction varies
– Fix the exchange rate for up to two years, giving certainty about both your income and the cost of the transaction every time. This guarantees certainty, but if exchange rates move in your favour during the fixed-rate period, you will not be able to take advantage of them. However, you will be protected if exchange rates move against you
Tip 6 – Get the best exchange rate
Plainly speaking, this means the firm you use will get you the best possible rate for your situation. A ‘spot rate’ is the best available price at the time of making the currency transfer and is often the preferred choice if you want to transfer money quickly.
Even the smallest fluctuation can have the biggest impact so, for added peace of mind, you may want to secure the rate.
Alternatively, if you’re not making a transaction straight away, a ‘forward contract’ locks the exchange rate. Also, if you pre-authorise your transfer, the funds will be waiting in your account for you – ready to send at the time you need them.
If you agree the exchange rate when the funds are authorised, you know exactly what you will pay because you’re protected from further fluctuations.
At FC Exchange we have expert knowledge of all the major currencies and what funds might be used for in the destination accounts. In France, for example, property purchase fees are paid individually not via a solicitor as happens in the UK. And, in Australia you can set up a bank account up to three months before you arrive so you have immediate access to money when you arrive.
Although nobody can predict exactly where the exchange rate is going, it is worth chatting to the experts about when may be a good time to transact and what is a realistic figure you can target.
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GLOSSARY
Wherever you are on your journey to your new life abroad, when you start to think about transferring currency you might come across some unfamiliar terms. Use our handy guide to help you navigate your way:
Bank-beating exchange rates
Forex brokers buy currency at wholesale prices, they do not charge fees over certain amounts so the price the customer pays is less than if they used a high-street bank.
Currency broker, Forex Consultant
Unlike banks, currency brokers / Forex consultants specialise in buying and selling currency and nothing else.
FCA Authorised
If the Financial Conduct Authority authorises a company, it must conduct its business in accordance with regulations including the safeguarding of its clients’ money.
E-Money Institution
This is an additional authorisation from the Financial Conduct Authority. Electronic money institutions must provide certain information to help the FCA comply with supervisory responsibilities under the Electronic Money Regulations (EMRs).
Fluctuation
Currency fluctuations are a natural outcome of the floating exchange rate system that most companies operate within. The exchange rate of one currency versus another is influenced by factors such as inflation and interest rate differences.
Forward contract
An agreement to buy and sell currency at a specified amount on a specified future date.
Funds
The amount you need to transfer, not your entire available capital.
Markets
Financial markets is a basket term that includes stock markets, bond markets, currency markets, commodities markets, etc. In terms of Forex, currency markets buy and sell major world currencies.
Spot transaction
The price you pay to trade at that time ie the best available price at the time of making the currency transfer. Spot transactions are the term most commonly used for ‘instant’ transactions.
