Penny for your thoughts

The op­tions avail­able when trans­fer­ring funds to France to make your money go fur­ther

Living France - - Contents -

There’s a whole world of cul­ture on the other side of the Chan­nel just wait­ing to be dis­cov­ered, and UK ex­pats have spent decades find­ing out just how much France has to of­fer. But whether you’re think­ing of mov­ing to France on a per­ma­nent or semi-per­ma­nent ba­sis, you’ll want to make your money stretch as far as pos­si­ble to en­sure you can make the best of your time there.

Short-term spend­ing money isn’t the only rea­son that you might need to make a trans­fer; you could be buying a French prop­erty, plan­ning an in­vest­ment or mov­ing your UK pen­sion across. Your cur­rency trans­fer needs may even be as sim­ple as need­ing to pay the bills, but what­ever your own in­di­vid­ual cir­cum­stances might be, know­ing the op­tions when it comes to trans­fer­ring money from the UK to France (and vice versa) is a must for any ex­pat.

EX­CHANGE RATES MATTER

This also means get­ting to grips with ex­change rates. In the most ba­sic terms, an ex­change rate is what one cur­rency is worth rel­a­tive to an­other. So the GBP/EUR ex­change rate would tell you how many eu­ros you’d get per pound, while the EUR/GBP ex­change rate would tell you how many pounds you’d get per euro.

A ‘favourable’ ex­change rate is one which re­sults in you get­ting more of the ‘for­eign’ cur­rency for your money, so a favourable GBP/EUR ex­change rate would re­sult in each pound be­ing worth more eu­ros than it had pre­vi­ously.

The dif­fer­ence of even a cou­ple of cents per pound can mean a dif­fer­ence of hun­dreds or even thou­sands on larger cur­rency trans­fers. How­ever, ex­change rates are tricky things and can rise or fall dra­mat­i­cally within hours de­pend­ing on out­side in­flu­ences, such as po­lit­i­cal and eco­nomic news.

While ex­change rate move­ment can be mi­nor, it can also be pretty ex­treme. For an ex­am­ple of how sig­nif­i­cantly ex­change rate move­ments can im­pact cur­rency trans­fers, we only have to look back to June of last year and the UK’s ref­er­en­dum on EU mem­ber­ship. In the run-up to the UK’s de­ci­sion to leave the EU, the GBP/ EUR ex­change rate rose to €1.30 due to polling data pre­dict­ing a ‘Re­main’ vic­tory. When it be­came clear on 24 June that the ‘Leave’ side had pre­vailed, the pound to euro ex­change rate abruptly dropped to €1.23 be­fore spi­ralling as low as €1.10 by Oc­to­ber. This drop of 20 cents would have meant the dif­fer­ence of €30,000 on a £150,000 cur­rency trans­fer. As the say­ing goes, look af­ter the pen­nies…

Trans­fer­ring your money at the right time can make a dif­fer­ence of thou­sands of pounds on larger sums, such as those in­volved in the pur­chase of a French prop­erty, for ex­am­ple. While some cur­rency move­ments can’t be pre­dicted, there are a num­ber of op­tions avail­able to help you pro­tect your trans­fer from sud­den mar­ket move­ments.

WHICH TRANS­FER SER­VICE IS RIGHT FOR YOU?

Cur­rency bro­kers are spe­cial­ists in the field and typ­i­cally of­fer far more com­pet­i­tive ex­change rates than banks, as well as con­duct­ing trans­fers on a fee-free ba­sis.

So what are some of the trans­fer op­tions you should con­sider?

SPOT CON­TRACT

As you might have re­alised from the name, a spot con­tract or spot trans­fer is an on­the-spot cur­rency ex­change, where your pounds are im­me­di­ately con­verted into eu­ros. The process is quick and se­cure, and can be ar­ranged at short no­tice. This op­tion may suit you best if the cur­rency mar­ket sud­denly moves in your favour, or if you need to move money quickly. How­ever, if you’ve got time on your side then you might want to con­sider us­ing a for­ward con­tract.

Ac­cord­ing to a re­cent sur­vey, 14% of UK adults trans­fer money abroad through a bank or spe­cial­ist provider at least once a month, with half of those ar­rang­ing trans­fers at least once a fort­night

FOR­WARD CON­TRACT

With a for­ward con­tract, you can ef­fec­tively ‘lock in’ an ex­change rate for up to two years be­fore the ac­tual cur­rency trans­fer takes place. This kind of de­lay can be handy for a num­ber of rea­sons – you might not have all of the re­quired funds ready, for ex­am­ple, or you might be wait­ing for your pur­chase of a French prop­erty to go through.

This ser­vice of­fers a sense of se­cu­rity and gives you the abil­ity to bud­get ef­fec­tively, be­cause if the mar­kets worsen in the fu­ture then you will still be guar­an­teed the ex­change rate you se­cured with your for­ward con­tract.

LIMIT OR­DER

An­other type of fu­ture-based ser­vice is the limit or­der. If you open an ac­count with a cur­rency bro­ker, you may be as­signed a per­sonal ac­count man­ager to over­see your re­quire­ments and of­fer you the ben­e­fit of their for­eign ex­change in­sight. With a limit or­der, you can pick the ex­change rate you would like your trans­fer to be con­ducted at and know that the trans­fer will only take place if the mar­ket reaches that level. If the ex­change rate does rise, the trans­fer will be trig­gered au­to­mat­i­cally so you won’t lose out if the ex­change rate sud­denly falls again. This takes the pres­sure off you and means you won’t have to keep a con­stant eye on the cur­rency mar­ket.

STOP-LOSS OR­DER

With a stop-loss or­der you can set a min­i­mum rate at which to make an ex­change. This means you can wait to see if the mar­ket im­proves and know ex­actly how much you’ll get for your trans­fer if it doesn’t. So, if there’s a sud­den slump in the cur­rency mar­ket, you would be pro­tected from the worst of it by hav­ing the or­der in place.

If bro­kers of­fer it, there is also the op­tion of tak­ing out a limit or­der and stop-loss or­der to­gether to cover all the bases. This can en­sure that you get an ex­change rate within a cer­tain range, re­gard­less of whether cur­ren­cies rise or fall. It is de­signed to tar­get a favourable ex­change rate above cur­rent mar­ket lev­els, but at the same time en­sures you don’t lose out should ad­verse cur­rency fluc­tu­a­tions oc­cur.

REG­U­LAR OVERSEAS PAY­MENTS (ROP)

While many of the ser­vices of­fered by cur­rency bro­kers are help­ful if you’re plan­ning a move to France, many peo­ple need to con­tinue mov­ing money across once they’re liv­ing there.

Some of the most com­mon rea­sons for need­ing to move money to France once liv­ing there in­clude:

• Mak­ing mort­gage pay­ments

• Pay­ing util­ity bills

• Pay­ing in­ter­na­tional school fees

• Pay­ing rent

• Mov­ing pen­sion pay­ments

If you need to make cur­rency trans­fers like this on a reg­u­lar ba­sis then a reg­u­lar overseas pay­ments (ROP) ser­vice could prove in­valu­able. This works by au­to­mat­i­cally trans­fer­ring a spec­i­fied amount of funds to a des­ig­nated bank ac­count at the same time each month. As well as re­mov­ing any worry or has­sle about mak­ing re­peat trans­fers, giv­ing you more time and free­dom to re­ally en­joy liv­ing in France, you can make hun­dreds of pounds of sav­ings a year if the bro­ker of­fers fee-free trans­fers.

Liv­ing in France can be a deeply re­ward­ing ex­pe­ri­ence, giv­ing you the op­por­tu­nity to meet new peo­ple, try new things and im­merse your­self in a dif­fer­ent cul­ture. If you’re wor­ried about mov­ing your money across with you, don’t be – there’s plenty of help avail­able to re­duce the has­sle and leave you with more money to en­joy liv­ing your new life. Oliver Mere­dew is a cur­rency an­a­lyst at TorFX torfx.com

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