Mike and Julie Henson, from Hertfordshire, are about to make the biggest move of their lives. In November, along with their sons Isaac and Alex, they'll be emigrating to Australia, where Julie has secured a job as a midwife.
Although it's an exciting opportunity, it's also a financially nerve-racking time for the family, as Mike – currently the household's main earner – will have to give up his job and look for a new one in an unfamiliar country. Fortunately, he's still sitting on a redundancy payout that he received from his last job. He wants advice on what to do about his mortgage, what his tax position will be once he's moved, and whether it is worth cashing in his endowment policy.
Mike, 46, and Julie Henson, 45, Herts
Children: Isaac, 8, Alex, 6.
Income: Mike £65,000 pa, Julie £18,000 pa.
Monthly spending: tax and national insurance £1,820, living expenses £3,000.
Pension: Mike has 24 years paid into a final salary scheme, and he now pays 6 per cent of his salary into a money purchase scheme. Julie is a member of the NHS final salary scheme.
Debts: £70,000 outstanding on a mortgage.
Savings: £59,000 redundancy payment.
Investments: £14,000 in ISAs, £15,000 in endowment.
We asked three advisers to help him out: Danny Cox of Hargreaves Lansdown, Keith Churchouse of Churchouse Financial Planning and Robert Brealey from Siddalls, a specialist financial planning agency which advises people who are emigrating to France, Spain or Australia.
As the Hensons plan to rent their property when they move, Churchouse and Cox both advise the family to ask their current mortgage provider if they are allowed to keep their deal on a buy-to-let basis. This would be simpler and possibly cheaper than remortgaging.
Brealey also says that keeping their current offset arrangement – which allows them to offset their savings against their mortgage – may also be advantageous for tax purposes.
However, Cox notes that their interest rate is well above what they could get from a regular mortgage. HSBC, for example, is currently offering a 5.99 per cent buy-to-let mortgage with no fee. He calculates that under their current deal, the Hensons are paying almost £900 more in interest than they would on the HSBC deal.
The advisers all warn that the family will be liable to UK tax on any rental income they earn, and will have to declare this income in Australia too (although they won't be taxed twice on the same income).
The Hensons have an endowment policy that matures in eight years' time, at which point it is due to pay them £57,000. Now, however, it has a surrender value of just £15,000. Brealey warns that if they retain the policy, they will liable to tax on it in Australia. However, by cashing it in, they will lose much of the value as well as the life insurance that comes with it. The final decision is complex and it'd be worth visiting a specialist adviser to sort this out.
The Hensons need to decide whether or not they want to transfer their pensions to Australia, or leave them in the UK. Given that the family are not certain that they are going to settle in the country, they shouldn't act hastily. Brealey adds that the Hensons should ask the UK Government for a state pension forecast before they leave. They'll need 30 years of paid-up national insurance contributions to qualify for a full basic state pension, and it may make sense to continue paying these while they are in Australia.
To find an independent financial adviser in your area, visit www.unbiased.co.uk
For a free financial check-up, write to Wealth Check, 'The Independent', 191 Marsh Wall, London E14 9RS, or e-mail email@example.comReuse content