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Five traps to avoid when transferring money to and from the UK

Navigating international finances can be complicated, no matter how seasoned you are at transferring funds overseas. Knowing the common pitfalls of sending money abroad can save you a lot of trouble (and hopefully some money too).

Five traps to avoid when transferring money to and from the UK
Photo: tbtb/Depositphotos

The changeable market keeps most expats on their toes with exchange rates, fees and timings. Whether you’re sending money to friends or family in far-flung places or repatriating money back to the UK, you should know the most common mistakes people make when transferring money internationally.

That’s why we’ve collaborated with international payments specialist Hargreaves Lansdown to help you avoid falling into these traps.

Stop losing money on international transfer fees with Hargreaves Lansdown

1. Forgetting to check the exchange rates

Whether you’re a small business or an individual, chances are you’ve used your bank to make international currency exchanges and transfers. After all, this is the most obvious option. But it’s also often the most expensive option as you could be paying well above the odds.

Even the smallest change in the exchange rate offered by your provider could cost you hundreds of pounds (possibly thousands). So it’s important to shop around for the best rate.

Save as much money as possible by looking at currency specialists, such as Hargreaves Lansdown, as the exchange rates they offer are often better than the banks’. This is especially beneficial when transferring large amounts of currency for more expensive purchases such as property.

2. Paying transfer fees

Although still a common practice, it is unnecessary to fork out extra for high bank transfer fees. Incurring a flat fee can sting if you’re sending relatively small sums across country borders. Some currency specialists offer individuals or small businesses regular payment plans for recurring payments which help to keep costs down.

There are providers, like Hargreaves Lansdown’s currency service, that offer low or no transfer fees. This can save you up to £30 on each and every transaction, which really adds up if you are making multiple transfers or paying invoices. 

3. Making insecure payments

Not all currency specialists are created equal, some are more secure than others. Make sure you’re protected financially from the moment the money leaves your account to when it reaches its destination account.

The terminology can confuse the most clued-up of people but there is a huge difference between whether a firm is authorised or registered with the Financial Conduct Authority (FCA).

Hargreaves Lansdown’s Currency Service is an FCA-authorised service, which in practice means they are legally bound to keep your money transfers separate from their company funds and provide financial safeguards proving their stability.

Whilst registered firms may choose to safeguard your money, they aren’t required to do so. And they don’t have to provide the FCA with as much detail about their business, so the regulator can’t check on their financial health.

4. Leaving it until the last minute

Don’t leave yourself at the mercy of the exchange rate on the day you transfer. If time allows, savvy savers should plan their transfer as far ahead as possible. This gives you more flexibility as you’ll have the option to fix an exchange rate for the future, or target a specific rate. 

If you’re fixing an exchange rate you’ll have the peace of mind to know what a future purchase will cost you, regardless of whether rates move up or down. Targeting a specific rate will enable you to make the most of improvements to rates, but doesn’t offer protection if rates move against you. Both of these options are only available if you plan ahead.

Bypass bad exchange rates with Hargreaves Lansdown

5. Not keeping up to date on the latest news

You wouldn’t expect to be well-versed in current events without consuming the news. The same goes for your finances. Without monitoring the latest market developments it leaves you vulnerable to making the wrong decisions in the fast-moving world of finance.

Stay on top of trends and currency movements and how to best position yourself to take advantage of the highs and avoid the lows. Hargreaves Lansdown offers a free weekly report on their website and via email, making sure you get the most from your payments. Please note, their service does not provide personal advice, but can provide information for you to decide what’s right for you. If you’re unsure please seek advice.

Download your free guide to international currency transfers here.

This article was produced by The Local Creative Studio and sponsored by Hargreaves Lansdown July 2018

The Hargreaves Lansdown Currency Service is a trading name of Hargreaves Lansdown Asset Management Ltd. One College Square South, Anchor Road, Bristol. BS1 5HL, authorised and regulated by the Financial Conduct Authority as a Payment Institution under the Payment Services Regulations 2017, see www.fca.org.uk. FCA Register number 115248. Registered in England and Wales. Registration number: 1896481.

For members

EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

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