Currency payments – the right tool for the job

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So many people are either retired in overseas destinations or are planning to be there as soon as the gold carriage clock has been handed over. So much so that the challenge of mastering the foreign exchange aspects of retirement are as important as arranging pensions and healthcare.

Exchange rates can look a bit daunting to those who have only ever had to deal with holiday cash in the past and, because it looks pretty complicated, some will avoid the worry by just letting the bank apply the current exchange rate and be done with it. But that would be a shame because, for the unaware, bank payment systems will tend to apply the tourist exchange rates that you see on the bureau de change board and, if you take a closer look, you will be taken aback by the yawning chasm between the ‘We buy’ and ‘We sell’ rates on those boards.  For cash transactions, that makes sense but for electronic payments, there are better options.

Lump Sums

As soon as you know you have a currency payment to make, the fluctuating exchange rates are adding or detracting from your funds. It makes sense to keep a wary eye on the rates and to try to buy at the appropriate time. In an average month, most exchange rates will move around by 2 or 3 percent and if you add the savings that a broker can offer in comparison with Bureau de Change rates, that could boost your funds by 8% or more. Booking an exchange rate for immediate delivery is known as a ‘Spot Contract’. Think in terms of ‘on the spot’ exchange.

But what happens if the rate is fantastic but you are not quite ready to exchange your funds? Maybe the money is still invested elsewhere or tied up in your house or pension. In this instance, you can still book a contract to secure the exchange you need at a rate agreed (usually with a specialist broker) but delay the actual exchange of funds until a date in the future that suits you. Some brokers can book up to 2 years ahead but that may be overkill. Nevertheless, whether you are only a few weeks from needing to move funds or a year or so away, you can, with the use of this kind of ‘Forward Contract’, have the peace of mind that comes from certainty over your finances.

Regular transfers

There are often monthly needs for retirees and those in throes of making those plans. It may be a mortgage payment, receipt from rental arrangements, a pension transfer or perhaps a salary that you receive each month. Whatever the reason, it is often better to have a set amount arriving and departing each month rather than having the market fluctuations alter your numbers each month.

Some brokers offer a facility that turns your monthly currency exchanges into a standing order arrangement. Using the same principle of forward contracts, the broker will agree a set amount of funds to be exchanged at a set exchange rate on the same day each month. For retirees, living on a fixed income is simpler than trying to guess how much will arrive each month and this arrangement is very popular with those who need this kind of budget certainty.

Whatever your needs, when it comes to foreign exchange payments, as with so many things in life, there is a tool that does the job. If you would like to discuss what might work in your particular circumstances, please feel free to contact us.

To find out how you can take advantage of positive fluctuations in the market and exchange your currency at the right time to get the best possible rate, call 020 7350 5474 or visit www.halofinancial.com

How do I get the Best Exchange Rates17Aug2015

Authorised by the Financial Conduct Authority under the Payment Services Regulations 2009, FRN: 528727.

Her Majesty’s Revenue & Customs MSB registration No. 12197454.

© 2015 Halo Financial Ltd. Registered in England No. 5155787.

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