As the weather grows gloomier and the economy hurtles back towards recession, bidding the Eurozone and UK farewell for pastures new has never looked more appealing. However, the dream could soon turn into a nightmare if you don’t manage your finances, says David Howell, chief executive, Guardian Wealth Management.
Dubai sunny weather and a relaxed lifestyle are undoubtedly good for the soul, but figuring out how to manoeuvre your financial affairs amidst rollercoaster global markets can be a real headache.
Here we look at the top tips for making the most of your money when moving abroad:
While your feet may be firmly planted in one place, your personal finances can often be left to battle two countries, falling victim to separate currencies, exchange rates and costs. You need to consider the country you live, the state of its banks and the strength of the local currency against the pound. Choosing to leave your money at home is an expensive option as bank charges on currency transactions are high and you may well be charged by both your native country bank and the foreign bank too. Whatever the currency risk, setting up a current account in your new country is key for making domestic payments. Failing to do so could result in unnecessary and steep bank charges.
You may have a decent money savings account but it’s how you manage your nest egg that is the secret to success. There are many reasons for wanting to put aside some money but whatever your motivation, it’s worth taking out the time to identify and select the best savings plan for your individual needs. While the UK onshore banking industry is undeniably more competitive than its offshore counterparts, savers can still find a good deal, particularly those willing to commit their money for a while. What you’ll need to consider is the denomination; many offshore banks offer you the choice of holding your account in US dollars, euros or sterling. Most expats continue to have financial ties to the native banks back home, which makes exchange rates a big consideration.
No-one likes the taxman, but he plays an especially significant role for those moving abroad. It’s vital that you review the tax consequences of moving, in particular to establish whether you run the risk of a capital gains tax bill if you ceased to be a UK resident. Expats are urged to check whether the tax treatment they receive differs in their new country and if so, does it make sense to keep certain income streams going going back home? Take premium bonds receipts – tax free in the UK, but taxed in many other countries. You will also need to decide whether to sell or rent your property – an immediate sale is free of capital gains tax in the UK, if it is your main property but could become subject to taxes payable abroad if sold at a later date.
Navigating your pension when you decide to move abroad can seem like a complex task, but pensions are an intrinsic part of your overall wealth management and it makes sense to weigh up all your options. Having an income from a UK pension means it can fall victim to fluctuations. Enter the QROP: a QROP does not function within the same limitations as a UK pension, so if you’re not planning on staying in the UK there’s no reason for your pension funds to do so. Some of the key advantages include investment flexibility, no inheritance tax liability once you’ve been an expat for 5 years and no need to purchase an annuity.
Often overlooked, private medical insurance is crucial whatever your state of health. Nobody knows what the future holds for our personal health or that of our family, so planning for private medical insurance should not be underestimated. For expats, the need to be covered for potential illness or injury is even more critical – when you’re living in a foreign country you may not have easy access to good quality medical care and even if you can, you run the risk of a hefty medical bill at the end of it.