If you’ve recently moved to New Zealand from the United Kingdom – or even if you’re just considering it – you will most likely have had to navigate the exchange rate to a certain extent.
Visitors or recent arrivals often have a sort of mental tally running to convert prices into the currency they were used to back home.
New Zealand’s dollar is currently worth roughly half a British pound – but it moves around constantly.
Here is how that can affect your pension transfer.
Exchange rate impact
While you might be able to shrug off minor movements in the exchange rate when you’re heading to another country on holiday, it’s quite different for a pension transfer.
When you’re considering moving a significant sum of money, even small variations in the currency can have a big impact.
For example, if you moved £500,000 when the rate was 48NZc to the £1 you would end up with $1.034 million. But if you shifted when the exchange rate was 50c, you would only get $1m.
Because currency markets move around all the time, the timing of your transfer can be important.
Over the past 10 years, the exchange rate has been as high as almost NZ60c to the £1 and as low as NZ40c.
What to watch for
It is always hard to predict the future, including exchange rate movements.
But you can keep an eye on economic indicators to get a sense of what might lie ahead, and whether waiting could give you a better outcome.
Sometimes it will come down to how the New Zealand economy is performing in comparison to the UK’s. Temporary pressures and headwinds affecting one economy may not be hitting so hard in another – and there are also structural factors that can shift around.
If inflation is higher in one country than the other, for example, the currency there is likely to be comparatively weaker.
But if that inflation has led to higher interest rates, that might not be the case. Higher interest rates encourage foreign investors to put their money into a particular country and that can push up the currency, too.
Current account deficits can weigh down the value of a currency – as can public debt. Trade is a factor, too. Countries that are exporting more than they import usually have stronger currencies.
Don’t go it alone
There are a lot of considerations that will go into any decision to make a pension transfer, and expert advice will be important as you work through what is most appropriate for you.
We can help you to make informed decisions about the process, including when the time might be right from an exchange rate perspective.
Managing exchange rate is key
Depending on your needs, you could consider transferring funds in British pound sterling (GBP) and have them invested in GBP until you are comfortable with the exchange rate. This can provide more flexibility and control over the timing of your currency exchange, and we don’t see this as a barrier to making the transfer.
Our advice process can help you maximise the value of your retirement funds to get the most out of your life in New Zealand.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.