Would it be wise to put my money in sterling account? FINANCE.(Features)

Q I recently retired, sold my house and paid off the debt on some rental property that I own. As a result, I have some money that I won't need for a year or 18 months, at which stage I may invest in property if the market looks right. I have the money on deposit at a good rate but I am concerned about what might happen to the euro. I was thinking of putting it into a sterling account in Britain. I know that there is no way of predicting the future but do you think that such a transfer could make sense?

A It could make sense if sterling appreciated in value against the euro and that could happen, but no-one knows and even the best of crystal balls are very cloudy at this time.

It is possible to make money by speculating on the foreign exchange markets, and that in essence is what you are proposing. But the odds favour those dealing in very large amounts of money who can make significant gains from small changes in exchange rates and whose costs are kept low because of the scale of their operations.

Unlike professional foreign exchange dealers, you would have to pay relatively high commission and wouldn't benefit from the best of market exchange rates.

During the week, one Irish bank was quoting a buy rate of .842 sterling per [euro]1 and a sell rate of .8188. That's a spread of almost 3%.

You are not alone in worrying about the euro. But if you are going to continue living and investing in Ireland or within the Eurozone, the impact of a devaluation of the European currency against sterling might not be all that significant. British imports would rise in price, although competition would likely keep the rise to less than the devaluation. There would be little or no impact on the price of property in Ireland. Whatever you have to invest now, you'd still have in a couple of year's time, plus interest.

If you converted your money into sterling you might make a profit on the exchange rate when you decide to convert back into euros so long as the appreciation was more than enough to cover commission and the exchange rate margins that the bank would impose.

The exchange rate could go the other way, of course. Few experts are willing to predict and there is no consistency among those who do.

The rise in the British VAT rate was expected to push sterling higher. By fuelling inflation, it might prompt the Bank of England to raise interest rates. But there are others who predict the VAT change will depress growth and make an interest hike less likely. In the event, the sterling rate didn't change much.

There's ample reason to be fearful about the euro but there is also the hope that if Portugal manages to stave off the pressure to resort to an IMF/EU rescue, those fears will start to dissipate.

Only you can decide if the risk is worthwhile.

Q I have an internet account with Ulster Bank and was recently informed by the bank that if a withdrawal is made no interest is payable on the account for that month. That's not just in the amount withdrawn but on the total amount in the account. Is Ulster Bank the only bank to impose this rule?

Q National Irish Bank imposes a similar rule, though it pays 3% including bonuses, compared to Ulster Bank's 2.25%, and cuts the rate to 1% for those months in which a withdrawal takes place.

Ulster Bank has an alternative. Its Pathway account pays at least 2.1% (2.5% including a bonus), but you must keep a minimum of [euro]15,000 on deposit. Northern Rock and RaboDirect offer straightforward internet accounts with cash available on demand. Rabo pays 2% and Northern Rock 2.5%.

Sorry but it is not possible to answer all queries. No legal or other liability can be accepted for the information and advice given on this page. Queries for Colm Rapple can be sent by post to the Irish Mail on Sunday, Embassy House, Ballsbridge, Dublin 4, or by email to colm. rapple@mailonsunday.ie

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