Don't turn your overseas dream into a nightmare

Growing numbers of people in Britain plan to move abroad, but the financial implications need to be looked at thoroughly. Chiara Cavaglieri reports

Almost half of the UK working population is considering moving overseas to escape the recession, according to a new survey. Research by foreign exchange specialists Travelex has found that 45 per cent of working adults want to relocate, looking for a better quality of life and better job prospects overseas.

More than half of Brits would consider moving abroad if they were made redundant, and for 27 per cent of the UK working population, the new highest tax band of 50 per cent for those earning more than £150,000 has sent them fleeing for countries with lower tax levels.

A life in the sun is enough of an incentive for many people, but does it add up to big savings? Australia has always been a firm favourite for expats and is currently the number one emigration hot spot with 42 per cent making it their top choice. Other favourites included the US, New Zealand, Canada and Spain. Michael, 34, a banker earning more than £150,000, lives in south London but is contemplating a permanent move to Australia to avoid the 50 per cent tax rate. "Jobs are still available in Australia," he says. "I have experience of living there and the standard of living is very different. You've got the sunshine and houses are cheaper. It starts to become quite a compelling argument." If he does decide to take the plunge, Michael wants to return to either Sydney or Melbourne and plans to rent his UK home until property prices have picked up. "There's so much research to do before making that jump. I would recommend getting everything lined up before you go and decide where you want to live and work," he adds.

And on a purely tax basis, there are some favourable alternatives for the UK's top earners as well as the rest of us. In Australia, those who earn more than $180,000 (£88,681) are taxed at 45 per cent; in Canada earnings over $126,264 (£70,772) are taxed at only 29 per cent, and in the US workers pay just 35 per cent on earnings over a huge $372,950 (£238,395).

But transferring assets, arranging a mortgage, applying for visas, obligatory medical costs and flights will cost thousands of pounds, so in-depth research is vital if you're planning a big move.

With the exchange rate against the pound in a sorry state, it may make more financial sense to leave money in the UK and only take what is needed for day-to-day expenditure. Then, at a later date, more appealing exchange rates can be fixed using a forward contract. Specialist currency brokers are more likely to secure the best rates and tend to have lower transfer charges than banks. "It's important to understand how exposed the value of your money is if you're going to make regular payments abroad. You could protect against fluctuating exchange rates by taking a one-year, forward contract which fixes the rate," says Tony Wilson, UK director of Travelex. Set up a bank account abroad as early as possible and send a test payment to the new bank before transferring large sums of money, preferably before you leave the UK.

But there are often other unexpected costs to take into account such as banking and healthcare. In some countries, including Australia, it is standard to pay for a bank account, which may be an issue for those used to free banking here in the UK. Medical and health insurance can be another sticking point as in many countries expats will need to buy local insurance to cover for medical costs.

Pensions are another consideration. "In general, it should be relatively straightforward to transfer your UK pension, as long as the pension regime is broadly similar," says Simon Webster, managing director of chartered financial planners Facts & Figures. As long as the pension scheme is recognised by HM Revenue and Customs as a qualifying recognised overseas pension scheme, the transfer can be processed in the same way that it would be in the UK.

There may even be benefits to transferring a pension to another country. In Australia, for example, there is no tax payable on the income drawn from a pension fund. And you can take up to 100 per cent as a lump sum without having to buy an annuity. But the situation varies from one country to the next. Britons who have already reached the state pension age will continue to receive payments, but if moving to a Commonwealth country such as Australia, Canada and South Africa, instead of increasing in line with inflation the pension will be frozen at the level reached when they left the UK. Expats claiming for winter fuel allowance in the UK are still entitled to the benefit when they move, as long as they are moving to a European Economic Area country.

How much time a retiree spends abroad will also have a big impact; those who spend more than 183 days at any one time, or 91 days a year over four years in Britain, will have to pay UK taxes. "If you're retiring and thinking about buying property you would do well to understand the tax implications. If you're living in both countries you need to find what will alter your tax status," says Christopher Wicks, director of advisers N-Trust . Retirees moving abroad should also check whether their current pension scheme will pay into an overseas bank account and whether their annuity company will transfer money overseas free of charge.

And then there's the question of coming back. In South Africa, for example, there are exchange controls on those leaving the country: anyone emigrating may face difficulties taking all their money with them should they decide to return to the UK. Other factors for returning Brits will be exchange rates and the fact that the cost of living and the property market could be considerably different upon their return. There is the risk, experts warn, that the cost of returning to the UK could make it almost impossible to do so.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Suggested Topics
News
Young Winstone: His ‘tough-guy’ image is a misconception
people
Sport
Adnan Januzaj and Gareth Bale
footballManchester United set to loan out Januzaj to make room for Bale - if a move for the Welshman firms up
Arts and Entertainment
Ellie Levenson’s The Election book demystifies politics for children
bookNew children's book primes the next generation for politics
News
Outspoken: Alexander Fury, John Rentoul, Ellen E Jones and Katy Guest
newsFrom the Scottish referendum to the Ice Bucket Challenge, our writers voice their opinions
PROMOTED VIDEO
News
i100
Sport
Yaya Sanogo, Mats Hummels, Troy Deeney and Adnan Januzaj
footballMost Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
Arts and Entertainment
L to R: Hawkeye (Jeremy Renner), Captain America (Chris Evans) & Black Widow (Scarlett Johansson) in Avengers Assemble
film
News
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
Arts and Entertainment
Pharrell Williams' “Happy” was the most searched-for song lyric of 2014
musicThe power of song never greater, according to our internet searches
Sport
Tim Sherwood raises his hand after the 1-0 victory over Stoke
footballFormer Tottenham boss leads list of candidates to replace Neil Warnock
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
Voices
Strictly Come Dancing was watched by 6.9m viewers
voicesIt has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
Arts and Entertainment
Roffey says: 'All of us carry shame and taboo around about our sexuality. But I was determined not to let shame stop me writing my memoir.'
books
News
i100
News
Caplan says of Jacobs: 'She is a very collaborative director, and gives actors a lot of freedom. She makes things happen.'
people
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

    Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

    Selby Jennings: Quantitative Research | Equity | New York

    Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

    Selby Jennings: SVP Model Validation

    Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    Day In a Page

    War with Isis: The West needs more than a White Knight

    The West needs more than a White Knight

    Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
    Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

    'The day I was shot by the Taliban'

    Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
    Revealed: the best and worst airlines for delays

    Revealed: the best and worst airlines for delays

    Many flyers are failing to claim compensation to which they are entitled, a new survey has found
    The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

    The stories that defined 2014

    From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
    Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

    Disaster looming? Now you know where to head...

    Which British city has become the first to be awarded special 'resilience' status by the UN?
    Finally, a diet that works: Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced

    Finally, a diet that works

    Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced
    Say it with... lyrics: The power of song was never greater, according to our internet searches

    Say it with... lyrics

    The power of song was never greater, according to our internet searches
    Professor Danielle George: On a mission to bring back the art of 'thinkering'

    The joys of 'thinkering'

    Professor Danielle George on why we have to nurture tomorrow's scientists today
    Monique Roffey: The author on father figures, the nation's narcissism and New Year reflections

    Monique Roffey interview

    The author on father figures, the nation's narcissism and New Year reflections
    Introducing my anti-heroes of 2014

    Introducing my anti-heroes of 2014

    Their outrageousness and originality makes the world a bit more interesting, says Ellen E Jones
    DJ Taylor: Good taste? It's all a matter of timing...

    Good taste? It's all a matter of timing...

    It has been hard to form generally accepted cultural standards since the middle of the 19th century – and the disintegration is only going to accelerate, says DJ Taylor
    Olivia Jacobs & Ben Caplan: 'Ben thought the play was called 'Christian Love'. It was 'Christie in Love' - about a necrophiliac serial killer'

    How we met

    Olivia Jacobs and Ben Caplan
    Bill Granger recipes: Our chef's breakfasts will revitalise you in time for the New Year

    Bill Granger's healthy breakfasts

    Our chef's healthy recipes are perfect if you've overindulged during the festive season
    Transfer guide: From Arsenal to West Ham - what does your club need in the January transfer window?

    Who does your club need in the transfer window?

    Most Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
    The Last Word: From aliens at FA to yak’s milk in the Tour, here’s to 2015

    Michael Calvin's Last Word

    From aliens at FA to yak’s milk in the Tour, here’s to 2015