2015 - 2016

Payment systems

Foreign exchange

Ms R wanted to transfer her UK pension to New Zealand. She asked her bank for investment options and it recommended one particular investment product offered by its investment partner company. This product was in NZD, meaning her UK pension money had to be converted before being invested. The recommended investment met Ms R’s investment needs, allowing her to withdraw some money to repay debt and earning returns on the rest.

Six months later the bank received a cheque for the pension’s value but asked the UK pension provider to send a telegraphic transfer instead. Ms R objected to this because she wouldn’t have had any control over the exchange rate applied to the money. Ms R and the bank then reviewed her options and decided it would be best to transfer the pension into a pounds sterling investment product so the money didn’t have to be converted during the transfer process. Then, when the exchange rate was suitable, Ms R could tell the bank to convert and she would get the rate available that day. Unfortunately, when the funds were received the exchange rate had plummeted and Ms R decided to leave the funds in the UK investment product for a number of years.

Ms R sought independent investment advice and was concerned about the lack of advice the bank and New Zealand investment provider gave her. She complained to our office. The bank supplied a copy of the cheque initially sent by the UK pension provider. Ms R hadn’t known about this and said the bank told her it wasn’t possible to transfer the money via cheque. We told Ms R that we couldn’t consider a complaint about the management or advice she received from the investment provider, however we did investigate her concerns about the bank’s involvement in transferring the pension.

It was clear to us Ms R didn’t understand foreign exchange risks associated with transferring her pension. We thought the bank should have given her information about this to decide the best way to transfer her pension. If the bank had given her such information, we thought she would have decided to transfer the funds into the pound sterling account in the first instance – six months before she actually began this process.

We thought the bank was liable for any direct loss Ms R suffered from the time when the money was actually received and when it would have been without the delay. If the money had arrived six months earlier, Ms R could have taken advantage of a better exchange rate and gained $50,000 more. She also could have repaid some debt and saved on associated interest costs. However, during the delay the pension’s value increased by £35,000. This meant Ms R was better off even taking into consideration the foreign exchange loss and other costs. Therefore there was no direct financial loss.

We proposed $9,000 in compensation for disruption to financial planning and lost investment opportunity. However, Ms R did not accept the offer and the case was closed.