Questions Of Cash: Moving money when working abroad can be a costly affair

Q I am about to spend a year abroad to do research. I will be paid my salary in a UK bank account and I am switching to Cahoot from Halifax because of Halifax's inefficiency.

How should I arrange my affairs? Almost all banks charge a 2.25 per cent overseas handling fee for use of a debit or credit card abroad, and a 1.75 per cent foreign currency fee, a total of 4 per cent. If I take out £2,000 over 10 weeks I pay an £80 fee. RE, Bristol.

You should consider an account with a bank operating internationally, enabling you to make low-cost transfers between a sterling and euro account. Citibank offers one with transfers over the internet. A bank spokeswoman says there are no transfer fees and a competitive exchange rate is used.

Because transfers are made through one bank the money is instantly credited to the receiving account. A local bank may make charges for withdrawals, which can be done on a Citibank card. Citibank requires £2,000 to open the accounts, or monthly income of £1,500.

Brian Capon of the British Bankers' Association advises you to check the services banks offer and exact charges. He adds: "If you open an account with a bank abroad, ask if it will charge for running your account, for receiving transfers, or for other transactions, including withdrawals."

QI am 39, with 17 years invested in a company final-salary pension scheme. Present contributions are £95 per month on a salary of £22,250. The pension is 1/60th per year of membership and the final pensionable salary is salary minus lower earnings limit.

I am unlikely to remain with my employer until retirement, which means my deferred pension increases by inflation each year. Is it sensible to continue contributions or should I set up an alternative arrangement now? If I leave the scheme, should I defer the pension or transfer my personal account to an alternative arrangement?

It seems in a final-salary scheme, the final years bring value (allowing for inflation, a salary will be much higher at 65). In a private scheme, the most value is in the earliest contributions. Does this mean if I leave my present employer soon, I would should have invested in a private scheme from the start? KL, by e-mail.

Carl Melvin, of Pension Transfer Solutions, says: "You should stay in the final-salary scheme, which is the best way of building pension benefits. The employer scheme also offers life cover (a death-in-service lump sum) and dependant's benefits (if you are married). The exception is if you know the employer is in serious financial trouble and the scheme is likely to be wound up. If you leave your employer, you will secure deferred pension benefits, but you must consult an IFA with pensions' expertise.

"Your thinking on the benefits from a final-salary scheme is correct. The longer you are in it the higher your pensionable salary should be. So why opt out when you still work for the same employer? Much better to take the pension benefits for as long as you work there.

"You have pinpointed the magic of compound returns; the early money does the hard work. But you can have both options. Stay in the final-salary scheme, but make private provision. You are eligible for a 'concurrent' personal pension and should save regularly to enhance your retirement income."

QI am executor of my late father's will. I need to invest £75,000 held in trust for a sister, with a good a rate of return while ensuring the capital is not eroded. I want it spread into several investments. PB, London.

Philippa Gee, investment director at the IFA Torquil Clark, says: "The sort of investments will depend on the type of trust already in place and I would suggest you check this first. The low level of risk reduces the options. You should keep cash to meet occasional expenses such as legal costs or tax. Look at National Savings products, such as two- and five-year fixed-rate bonds. These do not offer staggering returns but provide certainty.

"If it is acceptable to tie up remaining sums for longer periods, you could consider an investment bond and choose a lower-risk fund, or those with a capital-protected element."

If you have questions about personal finance, write to Questions of Cash, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail cash@independent.co.uk. We regret that we can reply only to letters published here. Please send copies, not originals, as we cannot return material.

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