How you can save money, moving money
By Charles Purdy, Director, Smart Currency Exchange

Many British ex-pats in Cyprus send or receive money to or from the UK and in the process they unintentionally lose money. In some cases, losses can be up to tens of thousands.

Initially, most ex-pats are introduced to the international payment process when they make a payment or payments from the UK to Cyprus for a property purchase. The general series of events consists of the property buyer putting down a deposit and then sending one lump sum or a series of staged payments from their UK bank to a solicitor’s account in Cyprus. Afterwards, their international payments tend to become smaller and sent on a regular basis. Many Brits receive their UK pensions, investment payouts or funds from savings through UK bank to Cyprus bank transfers. And in some cases, many Brits send funds to the UK for mortgage payments or to top up their UK funds for visits.

There is no doubt that banks profit from international currency transfers. So today, I am going to explain how a Forward Contract works. Aside from saving you money on better exchange rates and reduced or eliminated fees, expats have a wide range of options. Rather than being forced to take the exchange rate on the day that the money needs to be transferred, there are alternatives. The most common option is to buy a Forward Contract. A ‘Forward’ will allow you to reserve a currency exchange rate today, yet not have to pay for it in full or send the bulk of the money until an agreed date in the future.

Take John and Jane Wilson as an example. They moved to Cyprus during the middle of 2010. They were worried that sterling may again lose value against the euro so they contacted us and explained that their joint pensions came to £2,120. They wanted to make sure that the amount they received each month didn’t decrease due to changing exchange rates. After talking with us, the Wilson’s decided to buy a ‘Forward Contract for a full two years. This means that they fixed a set exchange rate for the course of the next 24 months. They set up an automated standing order system that allowed their pension to be sent to our bank in the UK on a monthly basis. Once the money arrived at our bank, it would be exchanged from sterling to euros at a rate of 1.203 every month for the next 24 months. In August, they received €2,550.36 in their Cyprus bank account and will continue to receive the same amount every month until the middle of 2012. To set up this facility, the Wilson’s simply had to open an account and pay a small administration fee for the regular payment system.

If the Wilson’s decided against fixing a currency exchange rate, their monthly amount would vary each month. As such, it would decrease along with a weakening sterling rate. For example, in November 2010 they would have received an amount 7 % lower – from €2,550.26 down to €2,374.40! If the exchange rate stayed at this level then they would effectively lose one month’s pension payment over the course of the year. Banks often fail to offer, or even mention the alternative of fixing a currency exchange rate for use in the future yet it’s such a valuable tool. The option of buying a ‘Forward Contract’ gives you peace of mind that your pension payments won’t decrease in value.

Visit the Rightmove Currency Zone to find out more about how you can save money, moving money.