Transfer money from US Dollars to British Pounds

B.Ashford

Hi guys,

Well basically my dad passed away earlier this month unexpectedly and his life insurance via his company have sent my mum a cheque for around $500,000. I have checked and that works out to be around £322,000.

Basically how can she get the best conversion rate and she has had advice that she does not get taxed on this lump sum, does that sound right?

I was thinking it could be better for her to open a USA bank account and transfer it in the future?

Thanks in advance.

bowlhead99

Unless she has ongoing ties with the US and expenses in dollars to provide for as she goes forward with her life (and I presume not if she doesn't already have a USD bank account) I would recommend against having a USD bank account and dripping it in to pounds over a long term. Dollars will not currently earn very much in the way of interest at current interest rates. And basically a dollar is worth a known amount of pounds today and an unknown amount tomorrow.

The smart move is to get the cash value now, in a form that is useful (which for someone in the UK is generally pounds sterling, whether the ultimate plan is to spend on living expenses, or property, or an investment portfolio with UK based fund managers).

Below is a graph of GBP / USD rate over last 20 years. You can see that the current rate is not paricularly bad against the long term average; if it stays in a range 1.40-2.05, you might be more likely to do worse than better if you hold on and pick a random date in the future to exchange it instead.


People will have different views on this, but assuming you do not have psychic abilities alongside a degree in economics I'd suggest you don't try and second-guess the markets, as you stand to lose a meaningful amount through speculation.

She may decide that within a portfolio of investments for her future she would like to have some exposure to the USA (with which most people with long term investments would agree, because the USA stock market is a large proportion of the world's investible market); but this doesn't mean she should keep it in USD and try to make US-based investments with it - she can take the pounds today and deal with her future goals when she knows what they are, later.

In terms of converting the money, her high street bank is very unlikely to have the best rate and she will be best calling up a specialist currency broker and asking for indicative rates on a one-off trade. When she's ready to do a deal she will need ID to meet their money-laundering compliance obligations.

Brokers will have a 'spread' between the buy and sell rates, in other words if the mid-market interbank rate you've seen on the internet is 1.55, and she only wants to move $500k rather than $500m, she will not get to sell at 1.55; for example she might get to sell dollars at 1.555 to the pound or buy them at 1.545, while the broker gets the profit in between. At an airport for a few hundreds worth, the tourist rates will be more like buy dollars at 1.40 or sell at 1.70, but she will do much better than that. My figures are more to show how it works rather than live examples.

PS sorry for your loss etc which probably goes without saying.

SliAbhaile

I'm sorry for your loss.

As bowlhead99 says if you have no immediate reason to keep USD (no property nor other ties in the States) then your mother is better having the money in the currency of the country she lives in.

If you are looking to exchange the money I would recommend http://currencyfair.com.

I am a late-comer to specialist currency brokers such as these and am sorry I never tried them before. I have property in France, have received inheritances from Ireland and in the past simply let my bank do the transfers. It costs a fortune doing that.

Use a specialist broker and you will save. If you have any doubts about the size of the sum involved then do several smaller transactions. You could even use different brokers to mitigate your risk.

I moved an inheritance from EUR to GBP last year with http://currencyfair.com and after agonising over whether to risk it or not in the end I rationalised that they haven't set up a business which has been thriving for five years just to steal my transaction.

The process was as smooth as silk - I have no connection with them.

Buzby

Since you only have a check and not the funds, I would first ask the payee if they could cancel this and pay he Sterling equivalent via SWIFT to a UK bank account.

There may be a small charge by your bank, for receipt, but much cheaper than attempting to negotiate such a large amount or a foreign cheque.

Texfed

ask your mother in the US to get into forums over there cos im surely there is a service out there that is american based that can transfer to the uk. im sorry for your loss..as SliAbhaile says get a currency broker but discover before going for the one decisive one you come accross you might save money 8) good luck