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Your Financial Planning and Moving Abroad Checklist
There are many ramifications of a no-deal Brexit and UK expats are among those who may be the worst affected if a deal is not made. Pension pots and healthcare plans are two of the biggest worries that may see thousands of expats have no choice but to return to the UK.
Regarding the pensions issue, a hard Brexit would mean that state pensions would only be uprated, i.e. benefit from annual inflation-linked increases, if the relevant European countries reciprocate.
Under the triple lock scheme, UK state pensions increase each year by the highest of three measures: inflation, the average earnings increase or 2.5%.
But there is no guarantee that other EU countries will commit to paying for British pensioners’ increases, especially since far fewer of the “host countries” residents have chosen to live in the UK in comparison to the number of UK expats in Europe. This means much less incentive for those countries to maintain the reciprocal relationship.
Figures released on 14 February show that it would cost £600m per year to unfreeze expat pensions, which would mean costs in excess of £3bn over the next five financial years.
When faced with these figures, it seems unlikely that such a policy change will be approved. For the 190,000 pensioners retired to EU countries, this becomes more of a concern as we near the Brexit date without a deal being finalised.
For British EU residents who draw state or private pensions, a no-deal Brexit would likely see the sterling plummet in value and the currency in which pensions are paid fall relative to the Euro. This means that pensioners would instantly be left with less money, presenting a very real problem.
The Healthcare Issue
Alongside the risk of frozen pensions, UK expats are also worried about the impact that a hard Brexit would have on their healthcare. UK expats living in the EU currently have their healthcare costs reimbursed using their S1 certificates but this agreement will no longer be valid should we exit the EU without a deal.
In such a scenario, it would then be up to the individual EU states to decide how they will fund residents’ healthcare. Current government advice is for citizens living abroad to apply for healthcare in their resident country, but there may be certain barriers to access.
If these individuals decide to return to the UK in order to gain access to healthcare, the NHS will only be under more pressure as the S1 situation currently saves them about £450m per year. This is before we even consider the immense pressure of adding more people to the already-overflowing public healthcare waiting lists.
That being said, a return to the UK could be the most likely scenario for many expats and pensioners in particular, who may not be able to afford to live abroad without the healthcare financial support.
Streamlined Financial Planning
When it comes to healthcare and in the light of concerns that we’ve detailed above, if you are moving within the EU then make sure to protect yourself against the worst case scenario. Taking out private health insurance may be a sensible decision, especially if you have a young family or you’re approaching retirement.
If you are planning a move, it’s important to complete all the steps to secure residence rights in your chosen new home and tie up any loose ends in the UK to check that everything is in place and your financial situation is secure.
We would recommend undertaking a financial health check to ensure that all of your wealth and assets are best placed for return on investment and security.
When reassessing your financial situation prior to the move, a professional planner may advise investing in offshore investment vehicles or taking up new and different opportunities to invest your assets that fit better with your new lifestyle.
It is always essential to prepare for a rainy day with your savings and investments but this issue becomes more pressing prior to a move abroad. Make arrangements so that you can access your money in case of an emergency and set this up well in advance of your move.
Expats and Inheritance Tax
Inheritance tax is another important issue to think about, as it is not automatically waived when you move abroad. Your estate may still have to pay it on all your assets in the UK over the standard IHT threshold.
If you are still considered to be “domiciled” in the UK, it may be payable on all your assets worldwide. You must work out whether you are liable for IHT in one or both countries and it would be wise to review your estate to see if there are ways to minimise your liability. IHT is one of the most common causes of financial concern, so deal with it early before it becomes a more costly and troubling issue.
Another priority should be identifying the best overseas mortgage to fit with your circumstances. Where possible, view the property in advance before going ahead with a purchase. You should also hire a professional surveyor to ensure that the building is safe, secure and of the highest quality to minimise any potential maintenance costs further down the line.
It’s also important to check the tax situation and whether your property is subject to capital gains or IHT, as well as any local taxes that might be due.
If you are planning to move abroad in the future or already have the plans in motion, contact Vintage Wealth Management today to discuss your financial arrangements. You can reach us on email@example.com or call 020 8371 3111 to speak with one of our advisers.