Personal Finance: Money Q&A - Sterling future for your euro windfall

We want to make the most of Fr500,000 we are about to get (in euros) from the sale of our house in France. A large part of the money will be used to pay off a mortgage. The rest we could keep in a French franc/euro bank account, or we could possibly put it in European-based PEPs. Any thoughts would be welcome. We are hoping to take early retirement even though our pensions are inadequate.

MK, LONDON

It seems as if you are thinking of this just because you'll have money in France. That could be a mistake. Holding deposits in a foreign currency always carries the risk of currency fluctuations. Many manufacturers and others are desperately hoping for a fall in the pound against the euro, and this does seem quite possible. But you cannot rule out a rise in the pound, which would cost you dearly.

If you had a spare pounds 50,000 to deposit, would you seriously consider putting it into a euro account - or a dollar account for that matter? Some people would be happy to take such a risk, and it could be a reasonable one to take within a balanced portfolio of investments. But for others it would be wrong. If you're a UK resident doing all or most of your transactions in sterling, you should think in sterling. The fact that you happen to have some euros coming your way is not material. Look at your overall financial needs and goals.

Likewise, go back to first principles before deciding whether to put your money into "European-based" PEPs. Actually, all PEPs are "UK-based" insofar as they are a UK tax perk for UK residents and they require cash subscriptions in pounds. You would have to convert your francs/euros into pounds to invest in a PEP. You could then choose an investment fund specialising in European companies if it were appropriate.

For the record, money invested five years ago in the rest of Europe has done well. Seventeen of the top 20 unit trust PEPs over five years have invested in other parts of Europe, according to the brokers Chase de Vere.

However, some pundits would see that as a good reason not to invest in Europe at this moment. The classic mistake of many private investors is to pile into a particular market, country, sector or individual company after it has had a good run.

It is impossible to say where you should invest this money without knowing all your circumstances and what other investments you have. But if you are planning to retire on inadequate pensions, do first consider the pros and cons of making additional voluntary contributions to your pension scheme.

Write to the personal finance editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a phone number; or fax 0171-293 2096; or e-mail i.berwick@independent.co.uk

Do not enclose SAEs or any documents you wish to be returned. We cannot give personal replies, nor can we guarantee to answer letters. We accept no legal responsibility for advice given.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you passionate about sale...

Ashdown Group: Graduate Developer (Trainee) - City, London

£25000 per annum + benefits: Ashdown Group: A large financial services company...

Ashdown Group: Marketing Assistant - Financial Services Sector - London

£20400 per annum: Ashdown Group: An established and highly reputable organisat...

Recruitment Genius: Financial Services Graduate Training Scheme

£20000 - £100000 per annum: Recruitment Genius: We are a successful and establ...

Day In a Page

War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future
Berlusconi's world of sleaze: The astonishing lifestyle once enjoyed by Italy's former PM

Berlusconi's world of sleaze

The astonishing lifestyle once enjoyed by Italy's former PM
Disney plans galactic domination with endless Star Wars spin-offs

Disney plans galactic domination with endless Star Wars spin-offs

Films and theme parks are just the beginning. Disney believes its control of the now decades-old franchise can bring in merchandise and marketing millions for years to come
Could the golden age of the gaming arcade ever be revived in the era of the Xbox?

Could gaming arcades be revived?

The days when coin-ops were the only way to play the latest video games are gone. But a small band of enthusiasts are keeping the button-pushing dream alive
Edinburgh Fringe 2015: The 'tampon tax' has inspired a new wave of female comedians to reclaim period jokes

Heard the one about menstruation?

Yes, if you have been at the Fringe, where period pieces are taking centre stage