In the current turbulent economic climate it is imperative that overseas retirees and expatriates sending funds regularly from the UK get the most out of their money transfers. With the value of the pound having plummeted, every expat now knows that there is a benefit to be potentially gained from shopping around and comparing currency exchange rates.
The purpose of this article is to explain - in simple terms - how foreign exchange specialists can offer the most competitive rates, the most flexible products and ultimately the most cost-effective solutions for receiving your state pension or other payments when you’re living abroad. At Shelter Offshore we want to help expats and overseas retirees get more out of their regular currency transfers so that they can continue to enjoy their new life abroad.
We have teamed up with www.sendmoneyhome.org once again to assist us in cutting through the industry jargon to provide an easy to read, accessible guide for those who earn a regular income in the UK and who need to transfer their hard earned money abroad.
Why use an International Payment Specialist over a Bank?
By using the standard banking system, money saving options are often overlooked and unnecessary charges can be issued and poor currency conversion rates applied. This all adds up to you losing out when you transfer money overseas.
According to Phil McHugh of Currencies Direct: ‘‘The role that payment specialists can play for those earning an income in the UK but living abroad is becoming increasingly important in terms of stretching one’s income to its maximum capacity. You often hear headlines such as ‘the recession is not over’…. ‘Sterling weakens’…. ‘Expats abroad are returning home’…. These are all fast becoming regular headlines in the media as unpredictability in global markets continues. People commonly have the misconception that their bank is the safest and easiest way to transfer their monies without realising that the banks are applying exorbitant rates as well as placing additional charges on these transactions.’’
Typically, international payment specialists offer exchange rates that are guaranteed to beat the rates provided by the bank.
But why?
Well, banks often set their buying and selling rates for currency first thing in the morning – when you visit a branch, you’ll see them hanging on the wall. Specialists however, don’t set the rates in advance but call into the market floor to obtain the best rate possible at the time of the transaction.
Charles Purdy, of Smart Currency Exchange, states: “when using a bank, on average a pension holder can lose around £30-£50 unnecessarily on each transfer – this can amount to actually giving away £600 a year – and in some cases, much more! For many expats or pensioners, wherever they are in the world, watching the value of their sterling pension depreciate over the last year must have been soul-destroying.’’
Sterling strength and stability is to most a distant memory clouded by dampening economic reports. Shelley Cox at Currencies Direct alludes to the fact that: ‘‘to British expats living abroad, this is perhaps even more of a concern, as volatility of sterling in the foreign exchange market means one thing… the value of the pound affects the value of one’s income and as this continues to plummet, so too does the affordability of living abroad.’’
Having extensively compared the market, Daniel Abrahams from independent price comparison site, www.sendmoneyhome.org confidently asserts that: ‘‘using an FX specialist over the banks can lead to savings of between 2 and 5% on the value of regular transfers overseas. Cumulatively, this can amount to a substantial amount of money.’’
A further selling point is the fact that brokers will offer the customer a dedicated account manager to ensure a personalised and hand-held service throughout the process. Although he or she will tailor the type of transfer to each individual’s specific requirements, one must be careful of a pushy salesman like approach that some FX brokers will adopt. It pays to shop around for a reputable Foreign Exchange provider therefore, and one who will offer you the best service and the best rates.
Thus, as money transfers are the core business of international payment specialists and only a capability rather than a core product provided by banks, using a foreign currency specialist can save a substantial amount of money each year on both fees and in terms of much better exchange rates.
Why is it beneficial for an overseas retiree or expat to fix their rate of exchange?
Foreign Exchange brokers will allow you to ‘fix’ an exchange rate for up to 24 months. The best way to explain the value of this service offered by international payment specialists is by taking a real life example.
Charles Purdy of Smart Currency Exchange explains the dilemma facing his client Mr Benson. “Take Mr Benson who retired to Cyprus at the end of 2007. He needed to receive his Sterling pension in Euros. In January 2008 he explained that his monthly pension amounted to £1,134 and wanted to know which options were available. After a brief conversation, he decided to set up a regular payment with a fixed exchange rate of 1.33 for the next 24 months until the end of 2009. In January he received €1,508.22 in his Cyprus bank account and will continue to do so every month until December 2009.”
If Mr Benson had decided against fixing a currency exchange rate, his monthly amount would have decreased along with the weakening sterling rate - and by December 2008 his monthly transfer would have fallen to €1,190.70 - a 21% drop in value.
Conclusions
Many expats living abroad unknowingly lose money when receiving their monthly pension payments using banks. Due to the peripheral nature of which international money transfers are provided by banks, they do not offer or even mention options such as fixing currency exchange rates for a fixed period of time.
In our dire economic climate, with the loss in value of sterling over the last 18 months, it is highly recommended to consult an international payment specialist when sending or receiving regular payments overseas.
www.sendmoneyhome.org independently compares the best value services offered by Money Transfer Operators and FX brokers - every provider listed on either site has been vetted by the company and is fully regulated. Shelter Offshore is not affiliated with any company mentioned in this guide.
