How to invest/protect €240,000?

EnglishTutor

We're investment novices, we know the basics, but now need help.

My wife and I have just sold our holiday home in Europe. On exchange, in August, we took a deposit of approx €50k that we converted to sterling (rate 1.16) and put £20k each into a Cash ISA with T212 - each £20k is spread JP Morgan £2.5k, Barclays £8k, Natwest £9.5k

Since exchange, we’ve received a further € 77k for the contents, but as the Euro has weakened against Sterling - now 1.207, we’ve been reluctant to exchange, so placed the Euros on deposit with T212, currently earning 3.7% and spread across - JP Morgan €64k, Barclays €10k, Natwest €3k. These deposits are in my sole name and combined with my ISA are all below the £85k protection limit for each bank.

Now we have just received the balance of the completion monies of €240k and they are sitting on a Starling Euro account earning no interest and are obviously exposed as in excess of £85k

So we're seeking ideas of the best way to maximise interest in the short term as well as spread the money around to make sure we’re protected under the FSCS limits

PARALLEL

I wouldnt worry about the FSCS limits. Banks, since the big collapses, have strengthened their balance sheets to such an extent, it's unlikely we would see the events of a few years ago. You need to concentrate on protecting your cash in any euro exchange to sterling. That's were your risk is. I'd put your €240k witht the bank earning you 3.7%, and sit out this high exchange rate for a little while. Its about £2k per 1 cent drop in exchange on that amount, so you are going to take a bit of a hit until it gets back to 1.16. You can earm €11k interest in a year from your €240k. Sit it out for a year, unless you need the cash and watch the rates. If it stays high, your interest will cover your conversion loss back to sterling. If it improves, you might make a smal gain. An alternative is to approach a broker for an improved rate on such a large amount. You can set a rate at which you'd like to exchange at, and they carry out the deal at that rate. You would probably have to update your expectations on a regular basis, but they may be able to negotiate a better rate for you.

PARALLEL

Try XE. I used them to convert sterling to € when I bought some properties in Spain. You could probably get a personal broker to talk directly, rather than just using an app.

EnglishTutor

@parallel Thanks so much for your input and calculation.

Re exchange, I use Atlantic money, which as proved to give excellent rates for a one off fee.

Voyager2002

An obvious question is what you intend to do with the money. If you plan to buy another property in the Euro zone, exchanging back to sterling would make no sense at all.

Don't forget that you will have to pay tax on any interest that you earn (outside an ISA) and will not be able to offset your exchange rate losses against this. So you might consider some kind of investment that gives a capital gain instead of interest.

Albermarle

I wouldnt worry about the FSCS limits. Banks, since the big collapses, have strengthened their balance sheets to such an extent, it's unlikely we would see the events of a few years ago.

It is probably fair to say this goes against the usual advice dispensed on this forum.
Although you make a valid point about most of the big banks and building societies, I am not sure I would be so relaxed with that amount in Starling.
Starling Bank fined £29m by watchdog over ‘shockingly lax’ crime controls | The Independent

EnglishTutor

Albermarle said:

I wouldnt worry about the FSCS limits. Banks, since the big collapses, have strengthened their balance sheets to such an extent, it's unlikely we would see the events of a few years ago.

It is probably fair to say this goes against the usual advice dispensed on this forum.
Although you make a valid point about most of the big banks and building societies, I am not sure I would be so relaxed with that amount in Starling.

Agree re Starling, reducing to £85k asapVoyager2002 said:

EnglishTutor

Voyager2002 said:

An obvious question is what you intend to do with the money. If you plan to buy another property in the Euro zone, exchanging back to sterling would make no sense at all.

No more properties abroad for us, too much hassle.  Pensions are sorted, so the plan is now to use the money to travel, help family etc, so short term investment only

jimjames

PARALLEL said:

Its about £2k per 1 cent drop in exchange on that amount, so you are going to take a bit of a hit until it gets back to 1.16. 

Who knows if/when it will get back to 1.16 again? It's dangerous trying to time it but I guess if you want to reduce that risk you could do half and keep the rest in Euros in case it drops back. It's equally possible that the rate will rise more if there is a trade war and France's government becomes more unstable if it can't meet the euro budget requirements.

PARALLEL

Agreed on your point about Starling. The strongest balance sheets lie with the biggest exactly because of the past.. Might be worth considering a move to a more recognised banking group who have done this. While you research, dropping to £85k will give you peace of mind. Also agree on currency hedging. Dangerous game and should be left to professionals, who get it spectacularly right (Soros), and spectacularly wrong. My gut feel is rates will be arounf 1.19 to 1.20. Annoying as I exchanged to € at 1.12 in 2017. Heady days for euro sales back to sterling!! Not sure we will see those again. You need to place your Euro funds gaining interest and drizzle it in to the UK. I wouldn't expect miracles on exchange though. Take the interest where you can and use it to cushion the exchange pain.

EnglishTutor

PARALLEL said:

Agreed on your point about Starling. The strongest balance sheets lie with the biggest exactly because of the past.. Might be worth considering a move to a more recognised banking group who have done this. While you research, dropping to £85k will give you peace of mind. Also agree on currency hedging. Dangerous game and should be left to professionals, who get it spectacularly right (Soros), and spectacularly wrong. My gut feel is rates will be arounf 1.19 to 1.20. Annoying as I exchanged to € at 1.12 in 2017. Heady days for euro sales back to sterling!! Not sure we will see those again. You need to place your Euro funds gaining interest and drizzle it in to the UK. I wouldn't expect miracles on exchange though. Take the interest where you can and use it to cushion the exchange pain.

1.12 ouch!  I remember the heady days of 1.5, when we bought our property and also the night before the Brexit vote queing up with several other ex pats trying to get as much cash out of the ATM's. I agree re the strategy of take the interest and just watch the markets, hope for a few shocks in our favour, but don't be too greedy and If it gets into 1.19 territory start converting some.