More and more UK residents are seriously considering emigrating. Recent research from Alliance & Leicester Inter-national suggests that six million Britons will be working or retired abroad by 2020. In less than 10 years, one in eight Britons will retire abroad and by 2020 this figure will be one in five.
There are a number of potential catalysts for this trend. Property prices are one. House prices in nearby countries look cheap compared with the UK. Another is logistics.It is easier than ever for people to take the plunge and move overseas.
The internet and mobile phones mean people can keep in close contact and budget airlines mean that visiting home or having relations over to visit is not necessarily a huge expense. With this emerging trend, there are TV programmes to match. Series such as No Going Back and A Place in the Sun have captured this trend and inspired thousands more to consider moving to sunnier climes.
The trend for Britons to move abroad to work or to retire will create opportunities for IFAs. Advisers are likely to come across more and more would-be expat-riates among their clients. The one thing that this type of client needs is ongoing quality financial advice. If clients have an idea that they might like to move abroad, then IFAs should bear this in mind when structuring their financial portfolio.
There are a number of considerations but the tax considerations of those moving or working abroad brings offshore investments to the fore. Let us look at a couple of instances of people working abroad and people retiring abroad.
As well as those looking to retire abroad, there is a growing trend for people to work abroad. At present, just 250,000 Britons leave the UK to work but this figure is set to treble by 2012 and top two million by 2020.
Consider someone who is basically as an employee of a UK company, but because of the time they spend working outside the UK they are not able to be a member of the UK pension scheme. An example might be a high-earning salesperson working in a number of countries on successive six-month tours of duty, perhaps for a subsidiary company or a series of subsidiary firms.
They may have the choice of joining a number of foreign schemes – with a number of different rules – or to have their own plan. In such a case, an offshore life contract that can take regular or single premiums might be an attractive alternative, giving the benefit of virtually tax-free growth and, with careful planning, reduced tax by taking the benefit in the most advantageous domain.
Alliance & Leicester International predicts that in less than 10 years, one in five people will be planning to retire abroad – around 2.3 million people. If this is a client's aim, it should be planned for now. There is no doubt that the portability of an offshore life contract can help here.
We all know that it is never too early to start a pension. For a UK resident, starting a plan now will help to fund pre-retirement or retirement abroad. As a UK resident, there is the attraction of the offshore tax regime within virtually tax-free growth while accumulating money.
Another reason to consider an offshore investment plan alongside a pension is the concern of having all your eggs in one basket, hoping that the UK pension will be taxed favourably, when a life contract can be cashed in and the benefits taken as a lump sum in the most advantageous way allowable under the rules of the country concerned.
The offshore life contract has the simplicity of growing tax-free and then having the tax treatment determined in the country concerned at the time the benefits are taken – with your client having full control of when that might be.
Many IFAs may feel that they would like to have some idea of the tax regimes the client may face, depending on the country that they have chosen for their retirement or residence.
Recently, the Association of International Life Offices produced a series of guides outlining the tax position in the most popular destinations to work and to retire. There are ten in all. There are also two tax guides for UK residents for working and retiring abroad and a practical guide of issues to consider. This technical support aims to provide advisers with the fundamental know-ledge and confidence to discuss the issues with clients.
As more and more people decide their long term future lies outside the UK, IFAs will find this type of client will make up an important part of their client bank. These clients will need solid financial advice from the moment they decide on this route. Advisers will find that offshore investments and tax planning are paramount. Life companies and the Association of International Life Offices can help them with the products and technical support they need.