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Expat Investor : January February 2009
NEWS The chance to have a ministry for expatriate affairs A PETITION calling upon the British government to establish a Ministry for Expatriate Affairs has been approved by 10 Downing Street. Petition creator Hannah Beecham, Editor of Expat Investor, urges all expatriates to log onto http://petitions.number10. gov.uk/Expat-interests.By adding your name, you’ll be voting in favour of an opportunity for the disparate expatriate community to have their affairs, concerns and interests properly taken care of by the UK government. The Institute of Public Policy Research records a total number of 5.5 million expatriates. That’s a constituency second in size only to Greater London. “There are myriad reasons why a ministry separate from the Foreign Office is required. In the first instance, it would function as a vital resource, facilitating and supporting the needs of the large and significant minority of Britons who live and/or work away from home. And let’s not forget what a terrific resource Britain’s expatriates are to the mother country. It’s time this disparate community had a government department representing them and their affairs,” says Hannah Beecham You don’t have to be an expatriate to sign the petition. So be sure to tell your family and friends back home about it. Indeed, if there are any British citizens you know of about to embark on a life overseas, pass on the petition link and urge them to sign as well. The petition is open for signatures until 17th August 2009. How not to get currency crunched THE PROSPECT of escaping to foreign climes and starting a new life abroad still holds real appeal for many people in the current economic climate, but as the pound continues to be battered in the foreign currency markets, currency specialists HiFX warns that British émigrés could be risking losing as much as £850 million a year when transferring their assets abroad. In a recent survey, 24% of Britons said they were “seriously considering” leaving the country to avoid the economic slowdown, and, according to the latest figures from the Office of National Statistics, around 85,000 families decided to quit the UK for a new life abroad last year.However, HiFX urges anyone starting a new life abroad to make sure they do so with as much money as possible by avoiding rip off high street bank exchange rates and transfers fees and seeking advice on the timing of currency exchange. On average, a UK family emigrates abroad with assets of £250,000 from the sale of a house, cars and savings. While they carefully plan their new lives in minute detail, what many overlook is the potential cost of leaving their currency exchange in the wrong hands. By transferring their savings to their new country via a high street bank, the average family risk losing up to a staggering £10,000 of their assets, equating to £850 million in total for all Brits emigrating. According to research from HiFX, banks typically charge 4% more than currency specialists in unfavourable exchange rates. Mark Bodega, Director, explains, “With the UK economy in turmoil, the housing market plummeting and the hope of better job opportunities abroad, more and more Brits are considering emigrating.However, with current economic uncertainty, it’s never been more important for people thinking of making a move abroad to do their homework and find out if the grass really is greener on the other side. Making the decision to move to a new country is a big undertaking, both emotionally and financially. The last thing that any family taking the leap would want to do is unnecessarily lose as much as £10,000 in the process, particularly when most people are feeling financially stretched. “Unfortunately, though, this is exactly the case for the many people who entrust the transfer of their assets to their new country via a regular high street bank. This huge loss could be avoided simply by people being aware of the alternatives and making sure they get the best rate for their money, early on in the process.” Beware of additional charges Using a high street bank also means being subject to a number of additional bank charges which include commission fees (up to another two per cent of the amount transferred and transfer charges (usually £25 for each and every transfer)) and finally, depending on where the money is being sent, up to another half a per cent bank The £27 loaf of bread AS BRITAIN’S savings rate hits its lowest level for 50 years, Norwich Union, part of Aviva, is warning young people that they shouldn’t let the credit crunch stop them considering their financial futures now – or they may face regrets in retirement. A new study from the investments and pensions specialist shows that the cost of many household items has risen by more than 20 times in the last 50 years, and predicts that today’s 20 and 30-somethings could be facing a four-figure average weekly shopping bill in another half century, if the trend continues. According to these calculations, 2 EXPAT INVESTOR ? 2058 could see a pint of milk cost around £5.35, while a loaf of white bread could set shoppers back more than £27. A kilo of potatoes could cost nearly £13, while smokers could be stumping up more than £76 for a packet of 20 cigarettes. Norwich Union found further typical 2058 grocery bills could look something like this: ? Butter (250g) ? Flour (1.5kg) ? Pork (loin, kg) ? Cheddar cheese (500g) ? Eggs (a dozen size 2) ? Instant coffee (100g) receiving fees. HiFX, and other currency dealers, will normally transfer money abroad free of charge. Currency fluctuation As well as falling victim to inflated charges on exchange rates, émigrés are also at the mercy of currency fluctuation as they are rarely able to transfer all their assets in one go. Exchange rate fluctuations can have a huge impact on a person’s future wealth because at various points during the process they will have to convert some or all of their assets into the local currency of the new country. “In the last few months, for example, would be émigrés have seen sterling/Australian $ fall from around 2.70 to 2.36. This means the average family emigrating with assets of £250,000 will be starting their new life in Australia with AU$ 85,000 less as a result of exchange rate fluctuations,” says Mr Bodega. “The earlier you begin thinking about your currency requirements, the more likely you will be able to start your new life with as much money as possible. The majority of people emigrating from the UK are not millionaires jetting off to a luxury island, but everyday people who are likely to be most affected by banks charging over the odds for currency exchange and losses through currency fluctuation when transferring their worldly goods overseas.” Fast Facts 22101 ? Pint of bitter £57.98 And although house prices have fallen in recent months, overall the increase since 1958 is huge. So much so that those buying a house in 2058 could be looking at prices in excess of £12.2 million for the average des-res! Paul Goodwin, Head of £14.1 £10.67 £67.32 £98.43 £31.22 £21.23 ? Sugar (granulated, kg) £10.08 ? Apples (kg) January/February 2009 £24.20 Marketing, Corporate and Pensions, says, “These predictions for the future may seem extreme, but the fact remains that many household expenses have risen by 10 or 20 times or more in the last 50 years, so it’s perfectly possible that the same could happen again in another 50 years’ time.” Fast Facts 22100 expatinvestor.com Britons move abroad for a warmer climate BETTER weather is the top reason why UK expats prefer living abroad, according to the latest poll conducted by Alliance & Leicester International (ALIL). The top ten reasons expats rate their new country over the UK are: 1. Better weather (57%) 2. Better quality of life (56%) 3. Higher standard of living (53%) 4. Safer / lower crime rate (49%) 5. Slower pace of life (36%) 6. Higher income (30%) 7. Better food (28%) 8. The expat lifestyle (27%) 9. Mixing with the local people (26%) 10. A more social society (19%) However, there are some downsides to moving abroad. Over half (51%) of expats miss their family, and one in five (21%) struggle with language barriers. Almost one in ten (9%) admit to missing British food. Unsurprisingly, only 4% claim to miss the UK’s weather. Reasons for moving Sixty per cent of retired British expats rate good weather as the factor which sets their new country of residence apart from the UK. A higher standard of living and better quality of life were ranked second and third place (48% and 44% respectively). Expats who have moved abroad to run a business, as well as those who emigrated for family reasons also rated weather as their number one ‘pull’ for living abroad (70% and 60% respectively). Fifty per cent of those who moved overseas for business purposes rated standard of living and safety as joint second favourites, and 45% placed the slower pace of life in their new country at third. After weather, people who emigrated for family reasons felt that the better quality of life and feeling safer in their new country were important – rating them in second and third place (45% and 40% respectively). Favourite locations Australia and Spain came out top as the countries which are home to the most satisfied expats. Eighty- six per cent of those living Down Under voted weather as the best thing about the country, with 80% saying standard of living and 73% quality of life were the best things about the country. However, a massive 87% said that the worst factor about living in Oz was that they were so far away from their family. Spain also fared extremely well, with 92% putting weather at the top of the list, while 85% appreciated the slower pace of living as well as feeling safer in Spain than in the UK. New Zealand also scored highly in the poll due to its favourable costs and high quality of life. Nearly two-thirds (62%) said standard of living and quality of life were the best things about living abroad as opposed to the UK. In recent research by ALIL, New Zealand topped the poll for both of these, as a result of its low costs for food, drink and fuel as well as a favourable tax regime. Fast Facts 22102 Expats lose pensions appeal AT LEAST half a million British pensioners who have retired overseas have had their hopes of seeing an upgrade to their state pensions dashed. The European Court of Human Rights (ECHR) has ruled that the UK Government is not obliged to pay annual inflation-linked state pension increases to expatriates. It rejected an appeal led by Annette Carson, who moved to South Africa in 1989, that they were being discriminated against by the British Government. The group claimed discrimination on the grounds that pensioners are treated differently depending on their country of residence. Pensioners retiring anywhere in the European Union, America and countries such as Israel and Barbados have their state pension increased each year in line with prices, just like a pensioner who stays in Britain. Those living in most Commonwealth countries, including Australia, Canada, New Zealand and South Africa, do not. Their state pension is frozen at the moment they retire, or when they leave Britain if they have already retired. Over time, that results in a pension that falls further and further behind the uprated version, and their purchasing power steadily declines. Ms Carson reports that her pension is frozen at £67.50 a week, the going rate when she retired. But if she still lived in Britain, or any of the countries where state pensions are uprated, she would now be receiving £90.70 a week, the rate for the tax year that has just begun. Some expatriate pensioners in their 80s receive less than £10 a week. Victory in the case could have increased annual payments by hundreds of pounds. The Department for Work & Pensions said: “We do not plan to make any changes to the current arrangements regarding the freezing of UK State Pensions.We will, nonetheless, study the terms of the judgement carefully to ensure that we continue to comply with our obligations under the terms of the European Convention on Human Rights.”
March April 2009