Home » Expat Focus Financial Update 23 May 2016

Expat Focus Financial Update 23 May 2016

Expats in Australia hit by lifetime allowance

British expats are among those living in Australia who could see their plans for retirement being derailed following legislation that limits how much they can save into their pensions.

That’s because the Australian government has brought in a lifetime allowance cap for pensions of £250,000 or A$500,000. In comparison, the lifetime pension savings allowance in the UK is £1 million – it was, until last month, £1.25m.Now the Australian move is to be backdated to 1 July 2007 so any British expats who transferred more than £250,000 could be hit with a 49% tax charge on the excess amount.

Australia is a popular destination for British retirees who could save up to £91,500 into their fund over a year or £207, 500 over three years. The new rules could apparently affect around 15,000 Brits.

One financial expert that deals with British expats in Australia, Alex Norwood at Montfort International, said that any UK national receiving tax relief on their pension savings in the UK may now have to reconsider opting for other savings vehicles for their excess money.

Unlike the UK, it appears that the Australian government is planning to legislate against early access to pension savings with the country’s superannuation system providing money for a worker’s retirement.

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Other planned changes include reducing how much someone can save into their pension pot every year and removing the work test for those wanting to contribute to a ‘Super’ pension scheme between the ages of 65 and 75.

Expats leave Australia due to money worries

Meanwhile, British expat retirees are leaving Australia because of soaring medical insurance bills and frozen state pensions, according to news reports.

Now retired Brits are looking to return to the UK or move to another country with a cheap lifestyle, with those pensioners living on a temporary visa facing particular financial hardship.

To renew the temporary seven-year visa, expats must show proof they have paid for medical insurance premiums, while pensioners who have a permanent visa are covered under the country’s Medicare system which covers most treatment costs.

One pensioner rights group says growing numbers of Brits are looking to leave and says the frozen UK pension is most to blame, coupled with the fast rising private health cover premiums.

Expats' remittances revealed

The amount that expats living and working around the world sent home to families and friends has been revealed in the World Bank Migration and Remittances Factbook.

The data reveals that expats working in the United States sent home $56.3 billion to take up the top spot.

Expats in Saudi Arabia are second place with $36.9 billion being remitted back home, followed by expats in Russia with $32.6 billion, those in Switzerland sent home $24.7 billion and expats in Germany remitted $20.8 billion.

The top 10 is made up from expats in Kuwait in seventh place on $18.8 billion, in France expats sent home $13.8 billion, Luxembourg the figure is $12.7 billion and expats in the United Kingdom sent home $11.5 billion.

The Factbook says that the money transfers are now a major source of income for families around the world, particularly those in poor and developing countries.

The latest figures for 2015, reveal that remittances grew to $431.6 billion, a rise of 0.4% on 2014’s figure.

The data reveals where expats are sending their money to. India is in first place with $69 billion, China is in second place on $64 billion and the Philippines is third on $28 billion. The remainder of the top five is made up of Mexico on $25 billion and Nigeria with $21 billion.

The World Bank says that with the world’s economy picking up, particularly with better economic performance in the United States and Europe, remittances for 2016 should be even higher.

Expats in Saudi should be 'integrated'

A new study in Saudi Arabia is calling for expats to be integrated into their society and for the sponsorship system to be abolished.

The findings revealed that the sponsorship system, called kafala, works by binding migrant workers to their employer and this is making the kingdom less secure since poor treatment from sponsors forces some expats – who make up a third of Saudi’s population – to commit crime.

The study says the kafala system should now be abolished and expats should be integrated into Saudi society. It also recommends that the country’s citizens accept expats and help them overcome their feelings of marginalisation.

The study follows the announcement last month that Saudi Arabia is looking at bringing in a US-style Green Card system which would grant some expats permanent residency in the country.

Middle East expats don't get pay rise

A survey has found that 42% of expats working in the Middle East did not get a pay rise in 2015 and of those that did, 52% were unhappy with it.

The findings also reveal that just 4% of respondents said they had ‘high’ satisfaction with their salary, says Bayt.com, and 64% of respondents in the UAE said their pay last year was lower than the industry’s average.

The survey asked expats across the MENA region about their pay and 31% said they were not expecting a pay rise this year.

Of the expats working in the UAE, 29% said they saved nothing from their pay and 60% said they managed to send some money home every month.

Expats there have also seen their cost of living rising with 8% seeing rent increases, 57% experiencing food costs grow and 55% seeing their utility bills rise.

However, 55% of expats in UAE said they were expecting a pay rise this year, with one in three saying it will be up to 15%. 28% of respondents said they would not be receiving a pay increase this year.

Dutch buy to let offers best yields

Expats moving abroad for work and who rent out their home, or invest in property in their new country, will find the Netherlands offers the best yield for buy to let investments.

The research from currency firm World First says that buy to let properties in the Netherlands will yield 6.75%, which is mainly down to the relatively low price of property there.

The next best countries for investing in buy to let are Belgium and Portugal while the worst are Italy, France and Sweden, where yields are 2.8% due mainly to rent controls and market forces that favour tenants.

The popularity of Brussels for expats means it’s the most rewarding city centre for buy to let, while property in the suburbs and countryside bring the best returns in the Netherlands, then Turkey and Portugal.

A spokesman for World First said: “The research reveals that within the European Union, the Netherlands with its relatively affordable property prices has the highest level of returns. Whereas countries with policies that regulate rent prices such as Sweden and Germany offer relatively low yields.”

Canada's 'start-up' visa hailed a success

Growing numbers of entrepreneurial expats are moving to Canada under the country’s start-up visa programme to help create more companies in the country.

Canada says demand is growing with 51 entrepreneurs becoming permanent residents, and another 50 in the pipeline. Applications are coming from Australia, India, China and Iran, among many other countries, and cover a range of industries including technology, education, banking, food and medical research.

The programme is a five-year pilot in which each entrepreneur needs the support of a Canadian entity – such as a venture capital fund or business incubator – before applying for permanent residency.

The entrepreneurs are launching firms in Halifax, Toronto, Calgary and Vancouver among others.

Canada’s Minister of Immigration, Arif Varani, said: “The programme started slowly but is now picking up steam and every start-up has the potential for creating jobs and economic opportunity. They are also contributing to Canada’s growth and diversity.”

Chinese expats buy USA homes

Chinese expats are the largest group of foreign buyers for homes in the US as they seek safe offshore assets with American real estate proving popular.

The expats are investing in residential and commercial property and in 2015 spent more than $110 billion, says Asia Society.

The investments have helped the American real estate sector recover from its crash and Chinese investors are looking to double their investments this year to around $218 billion, according to the study.

Chinese expats are looking to invest in Los Angeles, New York, Seattle and San Francisco and their investing power puts them well ahead of the Canadians, who for many years were the biggest group of foreign buyers of real estate in America.

The average amount being spent by foreign expats on US homes is nearly $500,000, but Chinese expats are spending around $832,000 on each home and the reasons for doing so are varied with some buying property as they move to the States on investor visas while others are investing for private renting and resale.

Report reveals Brexit’s effect on pensions

With two million British expats living in Europe, a new report has highlighted what the potential effects for a Brexit could be for them.

The report by the House of Lords’ European Union committee warns that expats would be left in limbo while the UK discusses their rights as non-EU citizens.

The report highlights fears over access to free healthcare with expats worrying they will need to buy health insurance or pay for treatment with both options being costly.

The issue of pensions has also been raised, with worries that expat retirees will not receive a state pension increase every year unless the UK has a reciprocal agreement in place with the retiree’s country of residence.

The report also highlights fears that taxes for British expats could rise, particularly around inheritance and property tax and employment rights could be limited, though this would differ between EU member states.

However, the Adam Smith Institute says that a Brexit vote would have little impact on British expats since the EU would offer an ‘off-the-shelf’ solution to the UK similar to the European Economic Area (EEA) deal.

A spokesman for the think tank said: “The option of EEA would have almost no effect because the UK’s single market participation would remain intact.”

Expats in Dubai to be taught about their rights

Four government departments have teamed up in Dubai in a bid to educate expat employees about their rights and duties in the emirate.

The Workforce Training Institute is currently training blue-collar workers, but by 2018 all expat employees will receive training which will, say the organisers, create a healthy working environment that meets global standards.

Expats will learn about labour laws, unified contracts as well as social behaviour and culture. Expats will also learn about occupational health and safety which will be a compulsory two-day course which all expats must undertake, though the training programmes are free.

In other expat news…

British expats living overseas who had not registered to vote in the European referendum have now missed their opportunity to do so, since the deadline for registration was 16 May. There is, however, a legal appeal against the ruling to prevent people who have lived overseas for 15 years from voting. Also, one survey has revealed that around 50% of British expats living in European countries had no idea they could register online to vote in the referendum.

Expats living in Warsaw have been offered the chance to appear in promotional films as part of a new competition. The idea from the city’s local authority is to find expats who enjoy showing their foreign guests around Warsaw’s unusual spots and those expats who come up with interesting routes will be offered the chance of starring in a promotional film. Organisers say they are particularly looking for attractions off the beaten track such as hipster pubs and craft beer venues, with the promotional films being available on Warsaw council’s website and being broadcast on public transport screens and on social media.