Retirement spells a big change in anyone’s lifestyle, and a move overseas will add yet another dimension to this upheaval.  You should seek professional advice if you have any concerns about your tax position. Consider whether you will be receiving earned income after you retire, for instance, or whether you need to realise any capital gains before you make the move. The more complicated your tax affairs, the more important it is to get them right and to be able to declare them accurately on your self-assessment tax returns in the UK.  You will need to think carefully about your pension income. What happens to your UK state pension entitlements will depend on which country you are moving to - these payments are often frozen for people who retire to some former colonial countries at the time of their move, even though many people will live for 20 years or more after they retire. Will you be receiving an income from occupational or personal pensions as well, and how will these be taxed if you live abroad?  With all these and other practical concerns to be thinking about, it is little wonder that many will put off considering how they will transfer money overseas, and whether they will need to make one-off or regular payments in foreign currencies before or after they move. People in retirement know the importance of setting a sensible budget, something which can be particularly worrying when you are living on pension savings while interest rates are so low and the threat of inflation is looming on the horizon.  Therefore, it is all the more important to ensure that you are not wasting time and money on money transfers.  Most people who have retired abroad find they need to make regular money transfers from the UK to their new country as they will be receiving pension income and possibly rental income on a monthly basis.  Foreign exchange brokers offer regular payment services which cut out a lot of the hassle of sending money abroad. Most will arrange regular transfers of £250 or more. Instead of arranging a new transfer with a bank or internet service every month – and incurring a separate set of charges each time - you can instead set up a regular direct debit with a broker, and they will take it from your account, change it into foreign currency, and pay it into the relevant account overseas.  Some brokers make a small charge of around £4, while others price all charges for sending, converting and receiving foreign currency into their exchange rate - which is usually much more favourable than rates used by high street banks. As a rule of thumb, brokers who levy small charges usually offer the most competitive exchange rates, so there should be little overall difference in cost.  There are three options for people using a regular payment service, and who require a high level of certainty about their income and outgoings:  You may need to make small, one-off money transfers before, during or after your move - perhaps to pay for services relating to the move, buy furniture or to send gifts of money home to family. For amounts of less than £1,000, you will either have to consolidate your payments to use a foreign exchange broker , or use a bank or internet foreign payment service.  The comparison site www.sendmoneyhome.org was set up by the Department for International Development and lists some of the internet money transfer services that it has vetted. This site will search for the best exchange rate and lowest fees for your transaction.  Some foreign exchange brokers, which usually only deal with amounts of £1,000 or more but offer more favourable exchange rates and do not levy transaction charges, have started offering internet transfer services for smaller amounts as well.  Whether you are moving a sum of money or making a large purchase in advance of your move, you will probably need to make at least one large overseas money transfer before you go. If you can try to consolidate your funds in order to make just one transfer, you will be able to keep costs down.  If you are sending more than £1,000 in one go, you will almost certainly save money and hassle by going through a foreign exchange broker. Most brokers either make no charge at all – and certainly take no commission – or levy just one small charge of £10 to £15 in return for an even better rate of exchange.  International money transfers via brokers will also be regulated by the Financial Services Authority from November 2009, which provides protection for your money. The Financial Services Compensation Scheme guarantees cash of up to £50,000 only, but reputable foreign exchange brokers will protect clients’ money by using trustee accounts to ring-fence their funds and keep them separate from its own assets.  This means that if the broker were to go into insolvency, your money would not be available to the liquidators. It is a good idea to ask a broker questions about how they keep your money safe from insolvency or fraud and, if you are not entirely satisfied, don’t send more than £50,000 in one go.  While high street banks usually apply an exchange rate which is around three or four percentage points worse than the interbank rate - the rate at which banks sell currency to each other - a foreign exchange broker will usually keep this margin below one percentage point. This could mean a difference of £3,000 or £4,000 on a £100,000 transaction, for instance.  Furthermore, brokers either make no transaction fees or commission charges at all, or make just one small charge of around £10 to £15 in return for a more competitive exchange rate. With exchange rates swinging by as much as 10 per cent in a matter of weeks, you will not know how much your currency is going to cost until you have made the transaction.  Although foreign exchange brokers are not able to give individual financial advice, they do have access to high quality research about currency movements, interest rates, and other economic data likely to affect exchange rates. All brokers make this information freely available to clients to help them choose the best moment to make the transaction. It is usually possible to sign up for a daily, weekly or monthly alert to keep yourself informed.  While high street banks usually set an exchange rate for each currency at the start of the day - and stick to it until the end of the day - foreign exchange brokers move their exchange rates in line with currency movements throughout the day. This gives a much more accurate reflection of the currency markets and will help you to time your trade more efficiently. Of course, you should remember that while exchange rates can move in your favour, they can equally go against you if you wait too long.  There are a number of ways to make the transaction when it comes to buying foreign currency. Brokers offer a range of currency exchange contracts, which can also help you to time your transaction better. A spot price (the current price) is agreed when you arrange the trade; a forward contract enables you to use the spot price at some time in the future; and an option gives you the option but not the obligation to buy currency at the spot price any time up until a future date for a fee.  Brokers can also make use of watch orders, take-profit orders and stop-loss orders to help you make the most of opportunities in the currency markets and minimise losses. Take-profit orders and stop-loss orders can be executed at any time of day or night, ensuring you don’t miss out on the best exchange rates, even if they occur in the very small hours.  Once you have bought your currency, you can send it overseas immediately or wait until later. The broker will be able to wire it quickly to the recipient, and will usually pick up any charges levied by the receiving bank.  Most brokers are members of the Society for Worldwide Interbank Financial Telecommunications (SWIFT), which is the global platform for instant wiring of domestic and international money transfers. This system is generally faster and more efficient and means that the broker does not have to rely on a third party to carry out payment instructions.  Once a transfer has been made, it should arrive on the same day if it is going to Europe or North America, but may take a little longer if it is going further east.  There is a vast array of things to consider before you move overseas - beyond the questions of where you will live, what job you will be doing and which schools to consider.  Are you going a buy a new home or rent a property? Will you be keeping a house or apartment in the UK and, if so, do you have plans to rent it out? How will you receive rental income from the UK?  You must also think about whether you continue contributions to your UK pensions, savings and investments and, if so, what the tax implications will be. Think carefully about how you will send your money back to pay bills and other maintenance and, of course, how will you move your funds with you when you go overseas.  Our checklist can help you prioritise these issues while you are planning your move...  12 months before you move  6 months before you move  1 month before you move  Whether you are moving a sum of money or making a large purchase in advance of your move, you will probably need to make at least one large transfer before you go.  For amounts of more than £1,000, you will almost certainly save money and hassle by going through a foreign exchange broker.  While high street banks usually apply an exchange rate which is around three to four percentage points worse than the interbank rate - the rate at which banks sell currency to each other – as well as taking commission, a foreign exchange broker will usually keep this margin below one percentage point with no commission.  Brokers offer a range of currency exchange contract options, which can also help you to time your transaction better. A spot price is agreed when you arrange the trade, a forward contract enables you to agree a price now to use in the future, and an option gives you the option but not the obligation to buy currency at the spot price any time up until a future date.  Brokers can also make use of watch orders, take-profit orders and stop-loss orders to help you make the most of opportunities in the currency markets and minimise losses. Take -profit orders and stop-loss orders can be executed at any time of day or night, ensuring you don’t miss out on the best exchange rates, even if they occur in the very small hours.  While high street banks usually set an exchange rate for each currency at the start of the day, and stick to this until the end of the day, foreign exchange brokers move their exchange rates in line with currency movements throughout the day. This gives a much more accurate reflection of the currency markets and will help you to time your trade more efficiently. Of course, you should remember that while exchange rates can move in your favour, they can equally go against you if you wait too long.  Unlike high street banks, which apply charges of between £10 and £40 for currency transfers, brokers either make no charge at all – and certainly take no commission – or levy just one small charge of £10 to £15 in return for an even better rate of exchange, no matter what the size of the transfer.  Membership of the Society for Worldwide Interbank Financial Telecommunications (SWIFT), the global platform for wired domestic and international money transfers, enables brokers to transfer your money quickly and at a low cost. This is because they do not have to rely on a third party to carry out their payment instructions. So, once a transfer has been made, it should arrive on the same day if it is going to Europe or North America, and within a couple of days for elsewhere in the world.  Once you are living abroad, you may need to send money from the UK on a regular basis - perhaps to transfer pensions or rental income. You can arrange to make regular payments of £250 or more through a foreign exchange broker using a regular payment service. Not only will you benefit from the lower margins applied by brokers to exchange rates, you will also avoid bank charges of up to £40 which would be applied every time you transferred money, along with commission.  Some brokers include all these charges within the exchange rate margin they apply, while others apply slightly keener margins and levy a small charge of between £4 and £8 per transfer. A regular payment service only needs to be set up once; whereas bank transfers must be arranged individually each time you need to make one.  Unlike other currency trade contracts, and transmission instructions, regular payments via a foreign exchange broker can be arranged using direct debit, so the hassle to you is minimal.  For those who are not averse to risk, foreign exchange brokers can also offer the facility to trade in worldwide stock markets and foreign exchange markets. Trades in foreign exchange markets are allowable within Self-invested Personal Pensions (SIPPs), and your foreign exchange broker will be able to provide you with access to one which accepts these.  However, if you are living outside the UK, it is important to check the tax implications of investing in a SIPP, which are designed for UK residents paying tax in the UK.  This is a high-risk form of investment, which allows you to speculate about how a pair of currencies will move against each other. To do this, you will need to open a trading account with a foreign exchange broker qualified to give independent financial advice. You choose a pair of currencies and then buy or sell a spot contract in those currencies, for example the eurodollar - much the same as you would buy and sell company shares on the stock market.  Next, you decide which way you think the two currencies will move. If the eurodollar goes up in value, this means that the euro is strengthening against the dollar. If it moves down, then the dollar is strengthening. If you expect the former to happen and you are using euros to trade, then you would buy - or “go long” on - eurodollar spot contracts, and take profits once the price has risen. If you expect the latter, you would go short. This means effectively selling at the current price and buying once it has fallen lower.  For example, you are using euros and you wish to place a Eu100,000 trade on the eurodollar, which is trading at 1.46 (ie $1.46 to the euro). You buy at the current price, it rallies up to 1.47 and you then sell the spot contracts you bought, thereby gaining what is known as 100 pips (one-hundredths of a centile). Your profit is delivered in dollars - the currency you have traded against.  Usually, the only charge involved is the spread applied by the broker. A two-“pip” spread is not uncommon in eurodollar trades, meaning that an Eu100,000 trade would cost Eu20. The broker will apply another margin of around 0.5pc points from the interbank exchange rate when converting your profit back into your base currency, or some will levy a small charge in return for a keener margin.  Because the spot contract market is highly leveraged, this means you only need to put down a fraction of the value of the deal. So, if the leverage is at 100-1, you put down Eu1,000 to make an Eu100,000 trade. The higher the leverage, the higher the potential gains to you - and the higher the potential losses.  Foreign exchange advisers usually place automatic stop-loss orders on clients’ trades so they cannot lose more than they have invested. You can place a stop-loss order at any level you wish and it is common to place one at the value of your trade and another at the value of your account to ensure you do not fall into negative investment territory. As foreign exchange markets move 24 hours per day, the stop order is working all the time. Most foreign exchange brokers guarantee these orders and will cover any losses if an error occurs.  Exchange rate margins used by foreign exchange advisers are even lower than those used by brokers - usually around 0.5 of a percentage point. Some will levy a small charge in return for an even keener margin. For an extra charge which depends on the size of the trades you wish to make, you will also have the services of an account manager who can help you with your investments.  Most advisers will also make their own research and analysis freely available to clients, and will publish ‘signals’ on currency crosses each day, suggesting which way clients should move with those pairs.  There are several ways in which you can invest in stocks and shares, and which are commonly provided by foreign exchange brokers, and accepted by providers of self-invested personal pensions (SIPPs). Trading in leveraged securities, which is highly risky, is likely to be limited, either by your SIPP provider or foreign exchange broker, to a proportion of your overall holdings.  If you are using a SIPP to invest, you must ask a professional tax adviser about the implications of doing this while you are living outside the UK. These will depend on where you are living, how much you are earning, and how long you spend outside the UK.  Whether you are intending to move or retire abroad, spend part of the year in another country, or just want a holiday home you can let when you are not using it, making a large purchase overseas can be fraught with risk and difficulties. You will need to seek out appropriate local legal and tax advice, insurance and utility providers, as well as ensure you are complying with local laws and revenue requirements.  If you need to arrange a mortgage on the property, you will want to find the best deal - and, if you are planning to let it out, you must find out if there will be local tax to pay as well as declaring it on your UK self-assessment tax form. Some countries have double taxation agreements in place with the UK - so you do not have to pay the same tax in both countries - but others do not.  Although it may come low on your list of priorities, it will make sense to consider early on how you plan to buy the foreign currency needed to make your purchase and when and how you will send it overseas. If you get the timing and method right, you could save thousands of pounds as well as time, hassle and stress.  Until you exchange your sterling for the foreign currency you are making your purchase in, you will not know for sure how much it will cost precisely. If you need complete certainty about this, it is better to make the exchange sooner rather than later, to avoid disappointment later on. A foreign exchange broker can provide you with a number of alternatives, depending on your circumstances.  A spot contract is based on the current price and happens the moment you arrange it. So, even if you don’t need your funds immediately, you can lock in to a good exchange rate and then hold the foreign currency until it needs to be transferred.  Once you have agreed your spot price with your broker over the phone - you cannot do it by email - it becomes legally binding and the exchange rate is fixed. You must then deliver your sterling payment to the broker usually within five working days. Under banking legislation, the broker cannot deduct the money from your account via direct debit, so you will have to send the payment yourself. If it is urgent and you can get your funds to the broker on the same day, it is possible they will be able to make the transfer on the same day, too.  If you want to agree an exchange rate now for a currency purchase in the future - perhaps to help with budgeting or because exchange rates are particularly volatile - you can agree a forward price with a foreign exchange broker.  A forward rate is not a forecast of what an exchange rate will be in the future. The broker takes the current spot price and applies a forward margin which is calculated based on the interest rate differentials between the two currencies over the period until the contract matures.  For example, take the case of someone who wishes to sell AUS$500,000 in 12 months time, but does not want to run the risk of the pound strengthening against the AUS$ in the meantime. If the UK base rate is at 0.5 per cent and the Australian interest rate is at 3.25 per cent, there is an immediate differential of 2.75 per cent.  In order to lock in a rate now to sell Australian dollars for British pounds for delivery in one year’s time, the broker must apply a margin to the spot GBP/AUS$ rate. If the current GBP/AUS$ spot rate is 1.7800, the forward rate for delivery might be 1.8550.  Comparing these rates, AUS$500,000 at the first rate would generate £280,899, whereas AUS$500,000 to be delivered in one year’s time would produce £269,542 - a difference of £11,357.  However, the extra 2.75 per cent earned on the cash holding in the meantime would produce AUS$13,750 - possibly more if sterling is expected to weaken and the Australian dollar is expected to strengthen, or if the interest rate differential widens. You also have certainty now about the cost of your future currency purchase.  Under a forward contract, brokers usually ask for a 10 per cent deposit at the time of arrangement.  This is a way to hedge your bets. Similar to forward contracts, options give you the right - but, crucially, not the obligation - to take up the spot price at some stage in the future. You pay a cost at the outset which depends on a number of factors, but is a small fraction of the trade amount.  For example, you have agreed an option to sell sterling and buy US dollars at a ‘strike’ rate of $1.60 for a specified premium which is paid at the time of the agreement. Should the GBP/US$ exchange rate fall to $1.45 for example, then a client would most certainly take up the option to sell at $1.60.  If, however, the price is actually higher than $1.60 at the time of expiry then the client would let the option lapse and trade in the open market at the higher level, but will have foregone the premium already paid.  If you are hoping for an exchange rate to reach a particular level - either higher or lower than the spot price - you can ask a foreign exchange broker to place a watch order on it. When the market reaches the level you want to trade at, the broker will contact you to let you know. There is no obligation to trade at this stage, and there is no cost for placing a watch order.  Firm orders are used to minimise risk or to maximise opportunities, depending on whether you are using a Take Profit order, or a Stop Loss order. Under a firm order, a client makes an agreement with a broker to convert one currency to another above or below a certain level.  If the exchange rate moves to the level agreed, then the transaction is automatically executed. Foreign exchange brokers are able to monitor market movements 24 hours per day, so this is particularly useful if you are dealing with currencies in different time zones. Both New Zealand and Australian dollars, for example, can be particularly volatile and will move during the night for people based in the UK.  The main consideration will be when to make the transfer of funds. Although brokers cannot give individual advice, they do have access to considerable amounts of economic data which they make freely available to clients, and can also give guidance about when is likely to be a good time to buy foreign currency.  With exchange rates swinging by as much as 10 per cent in a matter of weeks recently, it could pay to think carefully about your timing. Although foreign exchange brokers are not qualified to give individual financial advice, they do have access to high quality research and analysis about the currency markets, as well as economic data likely to affect exchange rates.  Brokers usually make this information freely available to clients in easily digestible updates on a daily, weekly and monthly basis - you will probably be able to sign up for email alerts. You will also be able to use research tools on the broker’s website.  Once you have bought your currency, you can send it overseas immediately or wait. The broker will be able to wire it quickly to the recipient, and will usually pick up any charges levied by the receiving bank.  Once you have made your purchase, you may need to send regular payments abroad to pay a mortgage and bills or meet other maintenance costs.  Foreign exchange brokers offer regular payment services which cut out a lot of the hassle of sending money abroad. Most will send regular transfers for you of anything over £250. Instead of arranging a new transfer with a bank or internet service every month, you can instead set up a regular direct debit with a broker, and they will take it from your account, change it into foreign currency, and pay it into the relevant account overseas.  Some brokers make a small charge of around £4, while others price all charges for sending, converting and receiving foreign currency into their exchange rate which is usually much more favourable than rates used by high street banks. As a rule of thumb, brokers who levy small charges usually offer the most competitive exchange rates, so there should be little overall difference in cost.  There are three options for people using a regular payment service, who require a high level of certainty about their income and outgoings:  You may wish to send small amounts to your foreign account on an ad-hoc basis, perhaps to top-up with spending money before you go. It is possible to do this through your UK bank, but you should check the costs.  There is usually a fee of between £10 and £40, a commission of around two per cent, as well as a foreign exchange rate to pay each time you use a bank transfer service, plus a further fee from the receiving bank of around 0.5 per cent. Some banks offer free transfers to your foreign account in a number of countries, but both the sending and receiving accounts will need to be in the same name and with the same institution.  There are a great number of internet services offering cheap exchange rates to people wanting to send money overseas. However, these firms are not yet regulated so it is wise to stick to small amounts. From November this year, the FSA will begin regulating foreign exchange transactions, so customers who lose money in transit because of fraud or insolvency will have recourse to compensation.  The comparison site www.sendmoneyhome.org was set up by the Department for International Development and lists some of these organisations that it has vetted. This site will search for the best exchange rate and lowest fees for your transaction. Some foreign exchange brokers, which usually only deal with amounts of £1,000 or more but offer more favourable exchange rates and do not levy transaction charges, have started offering internet transfer services for smaller amounts.  Using a pre-paid currency card  This option can be particularly suitable for people who regularly travel to a holiday home to spend short periods.  A pre-paid currency card can be loaded from the UK - usually for free and straight from your bank account - in sterling, euros or US dollars. Some providers are considering adding to this range of currencies. Once you have loaded foreign currency onto the card, exchange rate is then fixed unless you load sterling, in which case it will vary each time you use it and you will probably pay the 2.75 per cent foreign usage fee.  Pre-paid cards can be used to withdraw money from ATM machines, or to make purchases. These cards use chip-and-pin technology similar to UK credit and debit cards, and operate like travellers cheques - if you lose your card, it will be cancelled and replaced.  Cards provided by foreign exchange brokers tend to offer the best exchange rates and are low cost. You should check what arrangement fees, annual or management fees, or top-up fees, if any, will apply as many cards do not make any charges at all. Some cards apply a minimum load-up rate if you wish to escape other charges. Many may be topped up instantly online or by text message.  There are many reasons that you might need to return to the UK. Some people may be returning for work reasons, but others may be coming back because of financial hardship.  Recent falls in the value of the pound have had serious consequences for many people who live abroad. State pension recipients, who live overseas, for example, will have seen their pension income cut substantially. A recent rise in the number of over-65s repatriating large sums of money suggests that many people are finding they have to sell up and return home.  There are many issues to consider when returning the UK – you may need to buy a new house, or settle children into new schools which will bring additional time constraints. You will have to inform HM Revenue & Customs that you are returning and deal with a whole host of legal and tax issues. You may have debts and other financial commitments in your current country which need to be discharged. Consideration about how and when you will transfer money back to the UK may seem like a low priority, but if you take some care over this choice, you could save money and reduce some of the stress of the move.  Making a large transfer of funds  If circumstances are straightened, then timing is crucial. Try hard to consolidate all your funds in order to make just one transfer, as this will increase your buying power and help to keep costs down. For any amounts of more than £1,000, you will almost certainly save money and hassle by going through a foreign exchange broker.  While high street banks usually apply an exchange rate which is around three to four percentage points worse than the interbank rate - the rate at which banks sell currency to each other – as well as deducting commission, a foreign exchange broker will usually keep this margin below one percentage point and take no commission. This will make a big difference if you are transferring a large amount – the sale proceeds of a house, for example – and you could save as much as £3,000 for every £100,000 your are transferring.  Brokers offer a range of currency exchange contracts, which can also help you to time your transaction better. A spot price is agreed when you arrange the trade, a forward contract enables you to use the spot price at some time in the future, and an option gives you the option but not the obligation to buy currency at the spot price any time up until a future date.  Brokers can also make use of watch orders, take-profit orders and stop-loss orders to help you make the most of opportunities in the currency markets and minimise losses.  Sending your funds back to the UK  Once you have bought your currency, you can either send it overseas immediately or you can wait. The broker will be able to wire it quickly to the recipient, and will usually pick up any charges levied by the receiving bank.  Banks charge between £10 and £40 per transfer, and there will probably be a cost from the receiving bank as well. Foreign exchange brokers either absorb these costs completely, or make a small transaction charge of just £10 to £15. The main consideration will be when to make the transfer of funds.  If you are making regular payments back to the UK and locally, you will have to find out what, if any, penalty there is for stopping a regular payment service before the fixed-rate contract is up. You will have to decide whether it is in your interests to take this hit now, or try to hold out from selling your property until the end of the term.  Most foreign exchange brokers expect clients to pay any losses they incur as a result of cancelling a fixed-rate contract when exchange rates have moved against them in the meantime. This is because brokers must purchase currency in advance in order to guarantee your rate. If you need to cancel mid-way through a fixed-rate period, and exchange rates are less favourable than the rate at which the broker originally purchased the currency, then the broker will lose money.  The loss a client would be expected to repay would depend on how far into the fixed-rate period they were, and therefore how much pre-bought currency was still being held by the broker. It is rare for customers of foreign exchange brokers to find themselves in this situation.  Whether you travel abroad frequently, are thinking of retiring overseas or moving to another country for work, or want to buy a holiday home in the sun, there are many reasons you may need to exchange foreign currency and make overseas money transfers. It will pay to do your homework and make sure you are using the most efficient and cost-effective method for your purposes.  Your requirements when sending a large sum overseas will differ from those when you need to make regular payments in another currency, and some people will need a great deal more certainty about their income and outgoings than others.  By using the most appropriate service for you and seeking out the best exchange rates and transaction charges, it is possible to take much of the expense, worry and hassle out of the process. Above all, it will enable you to focus on the really important issue – your move, retirement or property purchase – while feeling secure in your method of currency exchange and transfer.  To provide you with the best rates and service, the Telegraph Media Group selected Moneycorp as their preferred provider of the Telegraph International Money Transfer service.  Moneycorp is a long-established business with an excellent reputation, setting industry-leading standards across the foreign exchange and global payment markets. Indeed, 2009 marked the 30th year of the business trading foreign currencies, giving it an unparalleled track-record and a wealth of experience.  The Telegraph International Money Transfer service is safe, secure and easy to use. Their currency market experts can save you money on all your international money transfers, that’s why 99 per cent of their customers recommend their services*.  Telegraph International Money Transfer Service, provided by Moneycorp, offers expert guidance and the best exchange rates available. To get the best exchange rates and find out more, please call 0808 115 8476 or open an account  * Results are from Moneycorp ‘Private Client Customer Satisfaction Survey – July 2009’  *Moneycorp is a company wholly independent of Telegraph Media Group Limited and is a company registered in England and Wales having its registered office at 2 Sloane Street, London, SW1X 9LA with registered company number 738837
Advice for British expats about buying foreign currency and transfering money   abroad - or, indeed, home.