claire600

Hi there

We are moving over in March 09 and I have some savings and don't know whether to move them over ... do I have to move them?

The interest rates seem so poor in comparison tas well as the current exchange rate compared to 2 years ago ....

Any advice welcome

Thank you

Claire

BristolUK

Yes, interest rates are low in comparison, but the falling pound has more than wiped out the higer interest rates over the last couple of years.

It's tempting to think it can't fall any lower, but that thought first came to me when it was about $1.95 and it's fallen another 10c since then.

You can get GICs and achieve around 4.5% over a five year period. That closes the gap without the risk of currency changes.

gibsonslanding

i can definatley say that premium bonds are fine to leave where they are...just give them a change of addy, once settled....

as to isas's, not sure yet...still trying to find out.

BristolUK

If you're not paying UK tax, there's no advantage to an ISA. Unless there's some sort of bonus after a qualifying period.


Similar tax free accounts will soon be available in Canada.

JonboyE

Just to say that you cannot add funds to an ISA if you are not resident in the UK, but you can leave it there.

There is no right advice. Right now interest rates look relatively good in Canada, but who knows if the Bank of Canada will reduce interest rates in the short or medium term? If, like me, you are risk averse, then the best way might be to get your savings into the currency you will spend them in as soon as possible. You might lose out on a bit of interest and some FX gain if the pound strenghtens, but you will not suffer if the pound falls.

As BristolUK says, from January 1st you can put $5,000 a year into a tax free savings account and if you could lock into a GIC at 4.5% that looks a good way to go.

If you are happy with a bit more risk then you might want to leave your savings in the UK and see what happens.

toffee1980

Hi Claire,

I think this is a tough one to call. We've been in Canada for about a year now and decided to leave all our savings in the UK (you're OK to keep your money in an ISA while abroad, you just can't add to it). This has worked fine for us so far as we haven't needed that money and it's been getting good interest in the UK compared to Canada. However, interest rates in the UK have now fallen to 3% and the BoE may bring them down lower in 2009, so the interest rate isn't really much better than Canada any more. At the same time the pound has weakened against the dollar, so our savings in Canadian dollar terms have decreased in value. As I say, this hasn't really been a problem so far as we haven't needed the money. But if we decide to buy a house in the next few months we would need to access our UK savings, and if the pound continues to weaken this would probably make leaving our savings in the UK seem like a bad idea. Conversely, the pound could strengthen again and / or Canadian interest rates could come down and then we would have been right to leave the money where it was.

Clear as mud, right?! Bottom line is, you could do either depending on your view with regards to interest and exchange rate changes in the future. Your decision will also probably depend on whether you will need to use those savings in the coming months, if not it may be easier to leave them where they are.

Cheers,
Christian

BristolUK

There is still a big difference in interest rates on savings though.

Perhaps you should change who you have your savings with.

Ignoring the exchange rate issue - as hard as that is - Cahoot is still paying interest on UK savings @ 6.05%. The best available in Canada on 'savings' is around 3%

When I came here in 2004, ING paid the best rate on savings that I saw. The other banks have now caught up with ING. PC Finance will pay 3.05% while ING is now only 2.7%.

My UK Cahoot account has consistently been paying double the best of Canada's rates and still is.

It's just a shame about the exchange rate.

toffee1980

BristolUK,

That 6.05% gross interest rate with Cahoot is on balances over 1 million pounds - if I had that much money in the bank I don't think I would be so worried about counting my pennies!!! In the 1 - 50,000 pound bracket, for example, the interest rate is 4.5% - similar to what you say you could achieve from a GIC in Canada. So I guess it depends on how big your savings are...

Furthermore, savings rates in the UK will come down further in time as the BoE has just slashed the base rate by 1.5% to 3.0% - there's a bit of a time lag between the BoE cutting rates and it showing up in the high street banks, but trust me they will come down. Once that happens the rates probably won't be much better than you would get in Canada.

Discuss.

BristolUK

Ah, if only I had that much.

I hadn't noticed this change. I do actually get a higher rate from Cahoot. It was a special rate guaranteed at the time I opened the account and there was no minimum necessary. I did notice some time ago that it paid a bit more than the standard but it wasn't that big a difference.

Obviously things have changed somewhat and they now seem to be paying greatly differing amounts according to balances.

It looks like I would be getting the 4.5 rather than the special rate I'm getting.

So, for new accounts with Cahoot it's not as good as I thought - although proceeds from a house sale (£100k+) are still going to get 5% and more, compared to the 3% in Canada.

The GIC rate of 4.5% (and most are lower) is not that much less, but it's only really achievable if you can leave the money there for 5 years. Not practical if the money is needed to buy a home, or other things, in Canada.

But 3% in Canada is less risky than 4.5% in the UK and seeing the £ drop again. Imagine the frustration, though, in transferring the money to Canada and then seeing the £ recover its losses.

I'm glad I'm not stuck in this predicament now. It was frustrating enough in 2005 to lose a few cents in the £ between agreeing the purchase of our home here and completion date. But to lose 30c is awful.

claire600

Hi there

Thank you for the replies - I think I will hedge my bets and leave the ISA and premium bonds - move some money and leave a bit so I can support my son at Uni when (not if) he needs it!

I also have a Cahoot account and did not realise I was not getting the 6.05% always stated in large print on the emails and website Doh!

Thank you again

Claire