Whether you’re thinking about retiring abroad or have already made the leap, managing your finances effectively can make a big difference to the quality of life you’re able to enjoy in your golden years. By making your pension stretch that little bit further you could enjoy more meals out, day trips and activities, so it’s well worth taking the time to do a little research.
Does it cost money to make pension transfer payments?
Even if you have substantial savings to fund your retirement, it’s likely that you’ll be using your pension payments to cover general living costs. In order to get your pension transferred from your country of origin to your retirement destination, you’ll need to engage with foreign exchange.
If you’ve never had to deal with currency transfers the process can seem a little daunting, but with the support of the right provider you can enjoy seamless pension transfer payments and potentially get more for your money.
Although people often use their bank to manage their foreign exchange requirements, specialist providers, like leading currency brokers, may be able to save you time and money.
When using a bank you may find that you’re being charged every time your pension payment is exchanged for your new domestic currency. Over twelve monthly payments those charges can certainly add up, so it would be wise to research your bank’s forex policy to determine whether you could find a better deal elsewhere.
Charges vary considerably between institutions but can be anywhere from £10 to £40 per transaction.
It may also be worth remembering that some banks will have a limit on how much you can transfer in a day, so if you wish to move a large amount (to fund a foreign property purchase, for example) you may have to do it in stages, accruing new charges every time.
Reputable currency brokers, however, can conduct transfers on a fee-free basis – so you don’t have to say goodbye to any of your hard earned pension!
What other benefits can brokers provide?
Perhaps one of the most significant advantages of using a broker is that they can provide a number of pension transfer options, so you can tailor your transactions to your personal requirements. For example, with a broker you have the ability to set up regular overseas payments (ROPs) plans to ensure your money is transferred automatically on a date of your choosing. A ROPs plan is much more flexible than a standing order as you can amend transfer details as and when you like.
Additionally, brokers are able to offer you more competitive exchange rates, with some undercutting the rates provided by banks by as much as 90%.
You also don’t have to worry about fund security when using a reputable broker. If a broker is authorised by the Financial Conduct Authority (FCA) and adopts segregated client accounts then you can rest easy in the knowledge that your money is in a safe place.
Additionally, the currency market is extremely volatile and subject to massive swings, so looking into risk-management solutions could be very beneficial when making larger transfers. With some brokers you can use a ‘forward contract’ to fix an exchange rate up to two years ahead of the actual transaction, meaning you can budget effectively and know that your transfer won’t be affected by negative movements.
What difference does the exchange rate make?
As mentioned previously, currency brokers tend to offer exchange rates which undercut those offered by the banks, but what difference would a better exchange rate make to your pension transfer payments?
To give you an idea, we’ll use some example exchange rates on a transfer of £1,500 into Euro’s on a monthly basis. Your bank might offer to conduct the transfer at a GBP/EUR rate of 1.23, but a currency broker could move the same payment at a rate of 1.26.
At a rate of 1.23, your £1,500 would equate to €1845. Whereas, with a rate of 1.26, your £1,500 would equate to €1890.
That’s a difference of €45. Over the course of 12 months that could see you €540 better off even before you take transfer fees into account.
If your bank’s standard transfer fee is £25, using the fee-free services of a currency broker would save you a further £300 a year, or €378 at an exchange rate of 1.26.
That’s a total annual saving of €918, and the savings are more substantial the more money you move.
Need to move your pension payments abroad? Research your options
Research is key when deciding what option best suits your needs with regards to transferring money overseas. Whether you’ve got large or small international money transfers to manage, you could benefit from the support and guidance of a reputable currency broker so it’s well worth taking the time to look into your options in this area.
When deciding which provider to use, make fund security a key consideration and ensure the company you’re considering is both authorised by a body like the FCA and operates segregated client accounts.
You may also want to check out some online reviews to see which companies other people recommend.
With a little research and forward planning you could save time and money when sending your pension payments abroad.
So, to sum up… look into your options, make your money go further and get the most from your retirement.