What to be aware of when moving abroad

Published by Laura Whitcombe on 10 November 2011.
Last updated on 11 November 2011

Auckland, New Zealand

Life in the UK has been an uphill struggle in recent years. More than 2.5 million of us are out of work, house prices have fallen throughout the land - London being the exception - and the cost of living continues to spiral. So you could be forgiven for thinking that lots of us must be upping sticks to greener pastures.

But you'd be wrong.

In fact, in 2010 net emigration of British citizens (the difference between those emigrating and those returning from abroad) fell back to just 43,000 - the lowest since 1999. In the year to December 2010, for every three British citizens leaving the UK two were moving back, according to the International Passenger Survey.

The reason so many of us are staying in the UK is mainly economic: most emigrants are aged between 25 and 44, and leave because of work. But the UK isn't the only nation being hurt by a contracting jobs market. Hotspots for British expats, such as the US, mainland Europe and Australia, are all feeling the strain of unemployment too.

The jobless rate in the UK is currently 7.9%, whereas in the US it's 9.1% and in the eurozone it's 10%. The Australian unemployment rate is lower than the UK's at 5.3%, but its strict immigration rules mean the number of immigrants arriving is at a seven-year low.

Bad timing

New Zealand is another popular destination to have been hit by unemployment. In 2008, Agnes McCormack, 45, a local authority project manager from north London, and her architect husband Alasdair, 50, relocated to Auckland with their three children. The family love living in New Zealand but admit they hadn't factored in the economic crisis that was unfolding when they moved.

Alasdair started job hunting in February 2009, in the midst of the recession. "Jobs for architects were as rare as hens' teeth," recalls Agnes. "I didn't have any luck securing a job either, as the amalgamation of Auckland's four city councils into a 'super city' was under way, meaning recruitment was on hold."

The couple had to take temporary work to keep their finances ticking over. By the summer, Alasdair had secured a six-week contract as a project manager for Auckland City Council and soon after Agnes found a temporary job as a teaching aide at her children's school.

"The money was terrible," she says. Since then, the couple's job prospects have picked up. Alasdair has been headhunted for another role with Auckland Council, and Agnes has also found a job with the council, securing a big pay rise.

But with unemployment still a global problem, it's hardly surprising that people are deciding to stay in the UK.

House prices

Another reason people are opting not to emigrate is house prices.

Since 2008, property prices have struggled both at home and away. In the year to December 2008, average UK property prices sank by nearly 16%, according to Nationwide. During this time, Agnes and Alasdair were unable to sell their home in Stoke Newington, London.

The impact of low interest rates on your mortgage choices

"A potential buyer dropped their offer price by £150,000 at the last minute, just before we were due to exchange contracts," she explains. The house remains unsold.

Meanwhile, many of those who sold up in the UK and bought abroad have been trapped by falling property prices overseas. In 2004, Marian Henderson, 62, moved to Spain and bought a picturesque £750,000 four-bedroom house, complete with a swimming pool and stables. But by January 2011, the value had plunged to £270,000.

She has been trying to sell the property since 2007, after her husband died. "I've cut the price as much as I can, but it doesn't seem to make any difference," says Marian. "I am desperate to leave Spain, but the market has totally collapsed, and until I can sell I can't afford to come home."

When it comes to property and the various selling methods and laws around the world, it's a case of better the devil you know for many people.

Watch out for fluctuating exchange rates

Fluctuating exchange rates haven't provided much encouragement to head overseas either. British holidaymakers visiting the continent have been hit in the pocket by the dwindling pound for years. But exchange rates are even more important when you emigrate, as you are dealing in large sums.

Four ways to get the best exchange rate

James Hickman, managing director of foreign exchange brokers Caxton FX, urges emigrants to be savvy when they transfer their cash. "One of the biggest mistakes expats often make is just asking their high street bank to transfer money overseas without checking the exchange rate.

"They will almost certainly get a very poor rate that could be equivalent to airport cash rates, even on large transactions such as the transfer of the proceeds from the sale of their home."

Pensioners retiring abroad can also be hit hard by adverse currency movements. During the week commencing 20 August 2007, the pound to euro exchange rate was £1/€1.4745. Four years later the exchange rate was £1/€1.1447. This means someone retiring to Europe four years ago has lost nearly a quarter of the spending power of their UK pension, and that ignores the impact of inflation.

Retiring abroad: When the dream becomes a nightmare

John Lawson, head of pensions policy at Standard Life, urges all would-be emigrants - working and retired - to think about their state pension and what, if any, reciprocal agreement is in place with the country they are moving to. Where the UK has a reciprocal social security agreement (such as the EU), UK pensioners are entitled to any increase to the UK state pension.

However, outside these countries the amount of UK state pension they will receive is frozen at the level it was when they emigrated.

"If there isn't a reciprocal agreement in place, then you need to be very careful your retirement income is sufficient to cover your living costs over a long period of time. Over a 20-year retirement, your basic state pension could halve in real terms," warns Lawson.

So if you're tempted to emigrate to popular retirement countries such as Australia, Canada, New Zealand, and the US, which don't have reciprocal arrangements, make sure you have enough funds to provide you with an adequate pension in the future.

You also need to bear in mind residency, as it will decide which country you are taxed in and how much you pay. It is fairly straightforward: if you're in the UK for more than 183 days in a tax year, you are a UK resident and pay UK tax. Once you've emigrated, watch how often you return: visitors who average more than 91 days a year in the UK over four years are considered a UK resident by the taxman.

When life's tough at home, it's easy to think that packing up and leaving the UK for good might be the best option. But most of the reasons we are currently feeling the pinch apply to the rest of the world too. Maybe it's not so bad in Blighty after all.


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