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Expat Focus Financial Update February 2019

Fewer expat retirees heading to EU

Brexit has led to a fall in the number of British expats heading to the European Union to retire. According to research from EasyMoney, using data from the Department for Work and Pensions, the number of British expat retirees living in the EU fell by 6,110 last year to 468,790. It’s the first year that the number of pensioners retiring to the EU has fallen since 2007.Among the issues, the investment provider states, are expats being discouraged from moving because of fears over their citizenship rights under a no-deal Brexit scenario and what might happen after the Brexit transition period comes to an end. Unless there’s a specific withdrawal agreement, British expats in EU member states will only be able to retain their Social Security and legal residency rights until December 2020.

Another major reason for the fall in numbers may be the risk to retirees’ pensions, since the UK state pension will only be up-rated for someone living in the European Union if their host country reciprocates, the former pensions Minister Baroness Ros Altmann warns.

UK pensioners not receiving index-linked rises

Government figures reveal that around 500,000 UK pensioners in countries such as Canada, Australia and New Zealand are not getting their index-linked pension increases.

A campaign for the basic state pension to increase every year for expats is under way, but the government says that it would cost £600 million in the 2019/20 tax year if the frozen pensions policy was lifted. The move would affect British expat retirees in more than 100 countries, who would see their state pension payments rising in line with those being paid to pensioners in the UK.

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The government’s figures highlight that Australia is the number one destination for British expats to receive their state pension, followed by the US, Canada, Ireland and Spain.

EU urges clampdown on golden visas

A report from the European Commission is urging a clampdown on member states handing out so-called ‘golden visas’ to wealthy foreign investors. The commission says that the visas open the door to organised crime and corruption.

Several countries operate schemes whereby an investor can invest between €800,000 and up to €2 million (£1.75m/$2.26m) for obtaining citizenship but the commission says there are issues over transparency, security and tax evasion with the citizenship programmes it looked at.

The Justice Minister, Vera Jourova, said:

"Anyone obtaining an EU nationality must have a genuine connection to that member state and there should be no weak link where people can shop around for the most lenient scheme."

The report highlights that so far countries in the EU have received around £22 billion over the last decade from cash-rich investors making a direct investment – the investors are usually Americans, Russians and Chinese.

The commission report highlights that more due diligence needs to take place to prevent money laundering and better monitoring of those applying for citizenship and residency needs to be introduced.

Study reveals expats are not saving enough for retirement

A study has highlighted that 85% of expats in the Middle East are not saving enough money to fund their retirement.

The findings from Hoxton Capital Management, an independent financial adviser, also reveal that 47% of expats say they can’t afford to save and two in three expats are returning home less wealthy than when they arrived in the Middle East.

The firm’s managing partner, Chris Ball, says that expats may benefit from better salaries in the Middle East but they are not making the most of these higher earnings. He added: “Most expats earn more than before they relocated.”

Ball said the lack of savings is usually down to the expat overlooking their retirement because it appears to be too far away but, he added, ‘they need to plan and safeguard their financial future.’

Expats relying on gratuity payments

Most expats working in the UAE are reliant on their gratuity payments to help fund their retirement after leaving the country, one financial advice firm says. The findings from Old Mutual International reveal that 60% of expats depend on these payments to fund or partially fund their retirement.

However, while 84% of respondents said they will receive an end of service gratuity when leaving their employer, 62% say that this payment will not be more than AED 20,000 (£4,200/$5,446). Also, 1% say that they will receive less than AED 5,000.
The firm says that it is crucial for expats in the UAE to create a financial plan tailored to their circumstances.

The survey also highlights that 81% of respondents believe they will continue working in retirement, usually on a self-employed basis and 45% will do so for social reasons and 35% for financial reasons.

Tax refund delays for US expats

US expats are facing delays in receiving their tax refunds from the Internal Revenue Service after the recent partial government shutdown. The imposed shutdown coincided with the country’s tax filing season, but US taxpayers who are living overseas will have to wait after submitting their tax returns to receive any refunds.

One of the issues is for taxpayers living overseas is that they must translate their earnings into US dollars for any paperwork submitted to the IRS and the staff that calculate the average exchange rates were among those who were sent home.

Tax experts say that the IRS will have to inform expats of the relevant 2018 exchange rate so they can request a six-month extension to file their tax forms. US expats are being advised to monitor the situation and take advice if necessary.

Thailand clarifies expat retirement visa rules

Immigration officials in Thailand have moved to clarify the new rules for expats requiring a retirement visa – but there are fears that around a third of the country’s expat retiree population may have to leave.

The new rules will come into force from 1 March and expat applicants will need at least 400,000 baht (£9,900/$12,788) in their accounts through the year for their visas to be valid – the money also needs to be placed in the account at least two months before an expat applies for a retirement visa.

However, officials have also pointed out that for expat retirees looking for a temporary extension there is a requirement to be at least 50 years old to qualify.

Property prices crash in UAE

Real estate firms in the UAE are reporting that property values there have crashed by around a quarter in just four years as an over-supply of luxury housing and low oil prices have combined to force down demand. Prices for property in the Burj Khalifa, the world’s tallest building, have dropped from $1 million to $550,000.

Also, the UAE Property Report which is compiled by real estate agents highlights that properties popular with expats, including townhouses and villas, have also dropped in price.

Saudi Arabia’s economic issues spark expat exodus

A report in the Washington Post reveals that the mass exodus of expats leaving Saudi Arabia is adding to the country’s woes in the midst of an economic downturn. While expats have been encouraged to leave under the Saudisation programme, critics say the plan has backfired and the economy is now being put under pressure. Since 2017, around 1.1 million expats have left the kingdom’s workforce, which also coincides with a fee being imposed on expat dependents. Some sectors are off-limits to expats taking jobs.

One of the problems is that as the expats leave, young Saudis have not taken up the jobs, particularly in retail or construction, and the unemployment rate remains at nearly 13% – it’s been at the same level for two years.

Saudi’s rulers are supporting several major investor conferences to attract overseas investment but it looks unlikely that the Saudisation programme will be paused.

Meanwhile, the value of expat remittances being made from Saudi Arabia fell last year by 3.7%, according to the Saudi Arabian Monetary Authority. They say that remittances are now at the lowest since 2012 when expats remitted SAR136.4 billion ($36.38 billion).

In other news…

According to PwC, the asset and wealth management industry in the Asia-Pacific region will grow more quickly than anywhere else with assets under management doubling by 2025 to $29.6 trillion. This growth will mainly be driven by sovereign wealth and retail mutual funds, the firm says.

The world’s largest asset manager, Black Rock, has opened an office in Argentina aimed at working with clients there and also in neighbouring Uruguay.

Saudi Arabia has announced it will begin offering cash incentives for employers in the private sector to hire Saudis as part of the kingdom’s Saudisation programme. The government says it will offer financial support to help employers pay for those employees earning between SAR4000 and SAR10,000 (£2,066/$2,667) per month.

A tax amnesty announced by Switzerland to give tax evaders there a chance to pay up has seen $44.5 billion being handed over. Authorities wanted its citizens and tax residents to have a chance to report their own tax assets without fearing legal repercussions.

A new buy to let product aimed at expats has been unveiled by Mansfield building society. The new offering has no completion fee and a two-year discounted rate of 3.69% for a 70% LTV mortgage. There is no application fee with prospective borrowers needing a minimum income of £40,000 or be a UK national or a previous UK owner-occupier. Hot on the heels of the Mansfield offering, Tipton and Coseley building society has unveiled a range of buy to let products for expats. There are two discounted and two fixed products for remortgaging and buying an investment property available to expats with a UK bank account.

Dutch expats who want to buy property in the Netherlands and outside of Europe are finding it virtually impossible to find a mortgage provider to help them. This comes as critics have told Dutch media that the banking giant ABN Amro is making it more difficult for Dutch expats to get a mortgage particularly since they began closing foreign bank accounts to cut costs in 2016.

The Central bank of Kuwait has revealed that expats and citizens spent KD 24 billion (£61bn/$78.97bn) last year, which is KD 2 billion higher than was spent in 2017. Spending on credit and debit cards has risen by 14% over the year with cash withdrawals in the country rising by 3%.

Irish expats returning home have been warned they face a ‘financial minefield’ that could leave them out of pocket by thousands of euro every year. The warning comes from Total Health Cover who say expats will be facing a housing crisis and may struggle to find an affordable place to live, they may also struggle to get welfare and they could be paying thousands of euro more every year for private health cover. The firm says a lot depends on the age of the expat, when they left Ireland and how prompt they are in buying health cover when they return home.

Real estate agents in Australia have revealed that expats are now buying properties in Melbourne in growing numbers. The market there has weakened and the value of the Australian dollar has fallen to make buying property in Australia more attractive to growing numbers of expats. Most of them are looking to buy a home to live in when they return to the country. Many of these expat buys are also looking to rent out homes increasingly until they finish working overseas.

Oman’s Ministry of Manpower has revealed that the ban on the hiring of expat workers in a range of professions will be extended for six months. The recruitment freeze was introduced in January 2018 across a number of sectors including media, information and technology and finance. Part of the reason is to boost employment prospects for Omani citizens and private sector employers are being told to give priority to nationals for any new job posting.

Expat tenants in Singapore have taken to social media to highlight problems with landlords withholding deposits when they want to leave. Issues include expats being given unreasonable demands to repair and clean properties before receiving their rental deposit.

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