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Brits emigrating abroad could collectively be losing as much as £900 million a year by relying on high street banks that are cashing in by offering unfavorable exchange rates.

Each year approximately 90,000 British families leave the UK to live overseas, lured by the promise of sunnier climes and outdoor living. However, thousands are risking their pot of gold at the end of the runway by paying over the odds for currency exchange and relying on their high street bank to transfer their assets.

On average, a UK family emigrates abroad with assets of £250,000 from the sale of a house, car and some savings.  While they carefully plan their new lives in minute detail, what many overlook is the potential cost of leaving their currency exchange in the wrong hands.  By transferring their worldly goods to their new country via a high street bank, the average family risks losing up to a staggering £10,000 of their assets.  According to research from HiFX, banks typically charge 4% more than currency specialists in unfavourable exchange rates.

Emigration Money Advice
Mark Bodega, Director for currency specialists HIFX explains: “Making the decision to move to a new country is a big undertaking, both emotionally and financially.  The last thing that any family taking the leap would want to do is unnecessarily lose as much as £10,000 in the process.   Unfortunately though, this is exactly the case for the many people who entrust the transfer of their assets from old to new country to their regular high street bank.  This huge loss could be avoided simply by people being aware of the alternatives and making sure they get the best rate for their money, early on in the process.”

As well as falling victim to inflated charges on exchange rates, émigrés are also at the mercy of currency fluctuation as they are rarely able to transfer all their assets in one go.  The time it takes to make a successful visa application and eventually move abroad can be anything from nine months to four years.  During this time, exchange rate fluctuations can have a huge impact on a person’s future wealth because at various points during the process they will have to convert some or all of their assets into the local currency of the new country.  For example, when moving £250,000 to Australia over a four year period, currency fluctuation could mean you risk as much as £45,500.

Bodega continues, “What many people may not realise is that they have the option of ‘fixing’ the exchange rate or taking out a forward contract on the destination currency as soon as they have made the decision to move.  Without doing this many wannabe emigrés are taking a huge gamble with their money.  People need to seek proper advice at the outset from currency specialists, who are also usually able to offer a far better rate of exchange than the banks.”

When transferring all your UK wealth HiFX recommends considering forward contacts. In essence this means people can buy their currency as soon as they start the emigration process and pay for it later (once they have sold their UK house for example).  By doing this consumers are completely protected from exchange rate movements as they have ‘locked in’ the exchange rate at the time of setting the contract.

Mark Bodega adds: “The earlier you begin thinking about your currency requirements, the more likely you will be able to start your new life with as much money as possible. The majority of people emigrating from the UK are not millionaires jetting off to a luxury island, but everyday people who are likely to be most affected by banks charging over the odds for currency exchange and losses through currency fluctuation when transferring their worldly goods overseas.”

Buying and selling currency - your options

Whatever your situation, it is important to identify and minimise the risk that the market may move against you. Unlike your high street bank, currency brokers like HiFX give you access to a number of currency options which ensure you save money on the exchange rate.

I have access to all of the funds – what are my options?

If you have access to all the funds you have two choices: one risk free and one high risk.

The risk free solution would be to buy all of the currency now, thus fixing the cost at the outset. This is called buying currency for spot. You can then deposit the bought currency to earn some interest and send payment when needed.

I do not have access to all of the funds – what are my options? 

If you do not have access to all of the funds at the outset you can still play it safe. The solution is to buy one or more forward contracts.

In essence, a forward contract means that you can buy the currency now, and pay for it later (when you need to make the further stage payments for example). You will be required to pay a 10% deposit now and the 90% balance upon the maturity of the contract. For example, if you wish to buy £50,000 worth of New Zealand Dollars, but do not need to send them for 3 months, you can agree the exchange rate now, place a £5,000 deposit, and pay the remaining £45,000 balance in 3 months. If the exchange rate moves at all in that 3 month period, you will not be affected, as you have bought currency at the originally agreed rate. You may actually fix a rate on all your currency requirements up to 24 months forward.

I have strong views about future exchange rates – what are my options? 

If you have strong views about future exchange rates and are looking to achieve a specific rate, we can arrange a market order.

This allows you to target a better rate of exchange. We monitor the markets on your behalf and, should the market reach your predetermined exchange rate, your currency is bought or sold automatically. Your order is live 24 hours a day and can be amended or cancelled at any time prior to the transaction taking place.

Whichever option you decide is right for you, please remember: 

The earlier you begin thinking about your currency requirements, the more likely you are to get the best exchange rate possible and make your money go as far as you do!

About Denny Jones

Hi there! I am Denny, a personal finance blogger and I love to share tips related to managing finance for a better living. Follow my blog for lots of fresh and exciting tactics to control your finances.
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