Will foreign currencies kick sand in your face?

MONEY TALK

As Well as escaping dreary Britain, an extra plus of going on holiday recently has been the unusual strength of the pound.

Sterling rose some 15 per cent against European currencies in the last quarter of 1996. A pricey Paris at seven and a half francs to the pound in the autumn sun - two quid for a glass of local plonk - became slightly more affordable at eight and a half francs to the pound as winter closed in.

Elsewhere, while a rate of two US dollars to one pound is long gone, you've been able to get $1.60 or more since the autumn instead of $1.50.

Earlier this month Thomas Cook was predicting a further strengthening of sterling in 1997 - another 5 cents or more per pound for those Florida- bound, for example.

This positive picture needs to be reversed for those with unit trust- type investments in foreign stock markets: a strong pound means investments are worth less when translated back into sterling.

This week, however, the pound stumbled, raising the question of whether the recent gains against other currencies might be wiped away. Most analysts doubt this pessimistic scenario, but holiday makers may still wonder if they should go out and buy their currency now for spring or even summer holidays?

The answer is probably not. Buy your currency now and you may end up saving a little. But you could just as easily lose out by the time you come to go on holiday; currencies are volatile creatures. Meanwhile, you'll be holding a currency you can't use and won't be earning interest on.

A far cleverer tip for managing your holiday money is to think plastic. Credit cards particularly, but also cashpoint withdrawals of local currency and debit cards, normally give better exchange rates than cash or traveller's cheques and with none of the security risks of cash. Plastic will not work for every country, but with just a smattering of spare cash you should be okay in much of Europe and the US.

Investors, meanwhile, can comfort themselves with the knowledge that, over the years, they have tended to benefit from a general decline in the value of sterling.

THE IDEA of a pensions price war may not set too many pulses racing. But the improved value offered by more and more personal pensions is welcome, if not before time. First Virgin Direct, then Eagle Star and now investment firm Flemings all aim to offer cheap, comprehensible products with the flexibility needed by today's workers, for example to stop payments at any time without penalty. More companies can be expected to follow suit.

If this competition does galvanise you into action, my advice is that you first get hold of a copy of the Independent/ Independent on Sunday's new 52-page guide to pension planning, free to readers. The guide, sponsored by Equitable Life, will tell you a lot of what you need to know about pensions, including what to expect from the state and how to make the most of company arrangements. Call 0800 137 372 or cut out the coupon below. Think of it as the first step to what should be the longest holiday of your life.

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