The unforeseen costs of moving to another country
Property may be cheaper and the sun may shine, but don't be blinded, says Kate Hughes
Saturday 19 January 2008
Money is tight and it will be drizzling in Britain for another three months. Moving to Australia or Spain is looking even more attractive than usual, especially once you realise that you could swap your three-bedroom semi in Birmingham for a mansion in a private cove on New Zealand's South Island, with the boat thrown in. In fact, 52 per cent of those leaving these shores for good said they were escaping the high cost of living, and over one third of the UK's population is considering emigrating at any one time.
But, while packing your worldly goods for cheaper climes, be sure you don't throw away cash along with unwanted belongings. Unnecessary costs, fees, charges and missed opportunities from exchange rates, could cost you thousands, just at the point you need money the most.
If you want to be one of 500 Brits who ups sticks every day, Spain, France, Portugal, Italy and the rest of the European Economic Area (EEA) tend to prove the least hassle. However, with the pound at its lowest exchange rate against the euro to date, the cost of moving across the Continent is not as small as it used to be.
Although the exchange rate against the US dollar is still relatively favourable, that, too, has been dropping fast over the past few weeks, while further afield, against the Australian and New Zealand dollars it is also slipping.
If you're thinking of moving abroad, the exchange rate is crucial, as you're often transferring your life savings, says Jonathan Quin, of currency exchange broker World First.
"The actual move is usually at least six months after a decision is made, but you can fix the exchange rate in advance using a forward contract," he suggests.
"If you were moving to France, Spain, Australia or New Zealand, you would have at least 10 per cent more money if you had fixed the rate six months ago. On a typical £500,000 emigration, this is a staggering £50,000 extra, simply by avoiding an adverse exchange rate move."
When transferring assets in Europe, a euro-denominated account is a must if you expect to earn and spend your money in euros, and want to avoid heavy transfer penalties. A euro account in the UK is also useful if you are expecting to spend and earn in both countries. If transferring regular sums such as your pension income abroad from a British bank account, it's worth using a specialist currency exchange, such as HiFX (www.hifx.co.uk) or Currency UK (www.currencyuk.co.uk), to avoid extortionate transfer charges and exchange rates.
And if you plan to keep an account or have other financial obligations in the UK, it may be worth nominating a trusted UK-based family member or close friend to officially manage your affairs.
More than a million Britons have their state pensions paid overseas, with 74,000 in Spain alone. But the country you are in could make a big difference to your pension income. If you have already reached state retirement age in the UK, you should receive your UK state pension and occupational pension in full if you move to another country within the European Union. If you move to a non EEA country, you can still receive the income but the value of your pension will be frozen. If you have not yet reached state pension age, investigate the state pension system in your new country of residence, before deciding on where you plan to build up your savings.
Missing a trick on benefits could also mean you lose out on thousands of pounds. If you are working for a UK-registered company within the EEA, for example, you are entitled to both maternity and sick pay, provided your employer is paying National Insurance on your behalf. If you had been claiming your winter fuel allowance you can also continue to do so in countries which are members of the European Union. And, surprisingly, if you have been receiving Jobseeker's Allowance for a month before you leave the country and you are going abroad looking for work, you could be entitled to that allowance for up to three months in any EU country.
Then there's tax. You may harbour dreams of waving goodbye to Her Majesty's Revenue & Customs, but tax for expats is complex. You will probably be taxed in your country of residence, but if you spend more than 183 days at any one time, or 91 days a year over four years in the UK, you are subject to UK taxes. Inform the Revenue of your change in residency, and be careful you don't get taxed twice – check for a double-taxation treaty with the UK and your country of residence.
Wills and inheritance tax are also very tricky, and the way your estate will be treated after you die may surprise you. In Spain and France, for example, the powers that be can override your dying wishes to ensure you provide for your children, rather than giving your property to your spouse outright: make a will to comply with local law, and remember that you will still need a binding UK will if you keep property or other assets in the UK.
All this is before you've even left. Don't forget to plan for the significant cost of getting in to your country of choice. Fees, one-way flights, and shipping a family of four with two children under 16 to New Zealand will set you back around £10,000 based on conservative prices for flights and all the reductions for families and children. Don't forget that initial application fees for visas in the majority of countries are non-refundable, and you could get hit with further costs for obligatory medicals, or even unofficial backhanders in some countries to ensure your visa application "arrives safely". And without wishing to put a dampener on it all, it is also worth considering how you would approach returning to the UK if necessary. While relocating could, at a push, see you in a palace in South Africa, bear in mind the full effect of the downsize you would face on returning to home soil. Many expats simply find that they cannot afford to come home, so sooner rather than later you'll have to decide just how big an issue that may or may not be for you.
There are a vast number of organisations that claim to make it a smooth transition and offer specialist information about one aspect of a move abroad, or who provide a comprehensive service that will do everything from helping with your boxes, and finding schools for your children, to sorting out your visa fees and arranging your mortgage for you.
If your employer has initiated your relocation, they may have a contract with a relocation company, which is often free for use by the employee and worth being your first port of call.
In fact, the majority of relocation companies are business oriented, but www.compare-international-movers.com or the European Relocation Association ( www.eura-relocation.com) have a comprehensive list of general and specialist members, like TTH Relocation Management ( www.tth.co.uk), Khalil & Kane ( www.kkpa.com) and Arpin International ( www.arpinintl.co.uk) whose areas of expertise range from immigration consultants and lawyers to language experts, and who operate throughout Europe and worldwide.
'It's the chance of a lifetime and we're going for it...'
Jane Kettley, 37, a nurse from Norfolk and her family are leaving the UK for Vancouver in Canada this week. She says she feels more excited than nervous or concerned, and found that, though the plans have taken 12 months to put in place, re-arranging the family's financial and personal circumstances was easier than she expected.
"It was a family decision," she says. "We had always talked about retiring to Canada, but then a nursing job came up, and we brought it forward a few years. Even when I applied for it I wasn't 100 per cent serious, but it's the chance of a lifetime, so we went for it," she says, although she admitted the family had only been to the area once. Jane believes the move will be particularly good for her 16-year-old. "Sean is keen to pursue a career in medicine, and the opportunities for his education are very good over there," she says. "The rest of the family is very supportive of our decision, and I think we will have plenty of visitors from the UK."
"We have sold our house in the UK for around £200,000 and plan to purchase a home just outside Vancouver, though we will be renting while we get on our feet."
Unfortunately, the value of Jane and her husband's UK pensions will be frozen as they are moving to a non-EEA (European Economic Area) country, but they do not plan to draw from them outside the UK. "We have closed all our accounts except to pay final bills," she says. "We will open accounts once we arrive and are using World First to transfer our assets so the money will be ready to go in Canadian dollars once everything is set up. That is a huge relief and we don't expect problems."
Nor is Jane worried about the financial implications should they need to return. "If we need to come back to the UK, we will simply try to do the same thing reverse," she says. "We expect to own our property outright in Canada, so we should be able to come back if we have to."
Ten things to think about before you emigrate
* Have realistic expectations – do a thorough research job
* Consider ways of getting the most out of the exchange rate
* Don't overextend yourself financially – you don't need the house on the hill to justify your move
* Do not ever pay a company to find you employment
* Talk to others who are going through or have been through the process
* Integrate. Become new locals rather than staying as expats.
* Don't get stuck into a rut – at least once a month do something or go somewhere new.
* Involve your friends and family in your plans for emigration.
* Investigate your benefits and pension entitlement
* Take into account the cost of returning to the UK
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