Pauline Davis offers important pre-departure advice to actuaries who are relocating abroad
Managing your own moving risks
The skills of actuaries are in great demand throughout the financial sector, particularly in investment, insurance and pensions, and actuaries are increasingly employed by large companies for risk management purposes. The UK qualification for actuaries is one that is highly valued and recognised throughout the world and this provides a wealth of opportunity for those in the industry to not only work within other professional bodies, but to be posted on assignments abroad. Of the qualified members of the UK profession, approximately 40% are thought to be based overseas.
The financial and economic turmoil of the last few years has highlighted the increasing value of skilled actuaries, and their abilities to analyse, understand and manage risk as well as opportunity, to businesses across all sectors. But, how many of those who are considering taking a position abroad have considered their own level of risk relating to what they will leave behind?
The world of corporate relocation has changed dramatically as technology has shaped the ways and whereabouts of businesses. This has resulted in HR departments of large organisations being handed the time-consuming responsibility of organising a successful relocation for employees leaving or entering the UK.
Employers will generally take care of the detailed requirements of an assignee to help them settle quickly into their new location; from family needs, property sourcing, orientation trips and negotiating tenancy terms, all of which can be hard to match alongside those of an organisation working to a specific budget. However, one thing that has become increasingly apparent is the lack of 'departure location' support given to the likes of actuaries in the time leading up to their move from the UK, including minimal advice on what to do with their assets back home. Departure services are often the poor relation to destination services. Decisions relating to what you should do with your assets when relocating should not be taken lightly as they can impact the locality in which a person settles in the future, as well as their long term personal finances.
For Sale or To Let?
The first step for any assignee is to consider their most valued asset which, in most cases, is their home. Then, there are three options; sell, let or leave vacant. For many, the thought of renting out their home can be a daunting prospect, although if the longer term plan is to return, then selling might not appeal either. As with most things, there are advantages and disadvantages to all three. However, even without the on-going uncertainly of UK property prices, renting is usually a far better option, certainly for the first year as it allows time to re-evaluate personal circumstances. Actuaries must recognise that the nature of their job means they can move from different posts quite frequently and therefore they need to leave themselves with as much flexibility as possible. Renting enables someone to retain the benefit and security of having a UK property to return to as well as avoiding any difficulties getting back onto the housing ladder. This is of increasing importance as the worsening Eurozone crisis has meant UK lenders have clamped down on lending to returning expats, and will often require them to be back in the UK for a specified period of time to be able to credit score.
As restrictions on mortgage lending continue to encourage a nation of renters throughout the UK, well maintained properties in desirable locations will let easily and, dependent on mortgage calculations, potentially provide additional positive cash flow. However, for assignees already inundated with a host of other tasks to organise before departing and most likely with no previous experience of letting a property, deciding to do so should come with in-depth research and thought for what is involved, some of which may require external support.
Pre-letting chack list
Inform both the mortgage lender and insurance provider about the move and that the property will be let out (mortgage lender's approval is vital)
Arrange an Energy Performance Certificate (EPC) prior to marketing the property
Appoint a suitable agent to market the property
Negotiate the offer and get references
Ensure the property is compliant with Health & Safety regulations (Including gas certification and an electrical inspection)
Arrange for cleaning, tidying and pre-tenancy maintenance
Prepare inventories, tenant check-ins and check-outs
Draw up a Tenancy Agreement
During the tenancy
Collect rent and deposit from the tenant
Deal with repairs and routine maintenance matters
Liaise with utility companies, local council and service contractors
Make regular property visits to check on condition
Deal with tenancy renewals
Serve notice and deal with end of tenancy formalities
Organise tenant's checkout and negotiate any damages
Income Tax
Another consideration for expats is that rental income from letting a property is liable to UK income tax. Being employed, many will never have had to fill in a self-assessment tax return, but as a new landlord whether profit is made from the property or not, this will now become compulsory. HMRC has identified rental income as an area deserving of scrutiny, so it's important that assignees understand the importance of having relevant information to back up figures. Tax offsetting opportunities are available to anyone who rents out their home which is why it is advisable to get professional assistance to ensure all elements are covered. For example, mortgage interest, ground rent, service charge and repairs can all be offset against tax. In addition, if assignees opt to let their property furnished, there is a 10% allowance for wear and tear on the furniture. As an example, if annual rent is £10,000 a year, with a furnished let the tax would be £9,000 (prior to all other deductable costs).
Property Management
If assignees do opt to rent out their property rather than sell, another option to consider is having the property managed. For those plunged into becoming a 'landlord' for the first time, it not only fills the current service void of taking care of the complexities involved in dealing with UK assets both prior to departure and throughout the length of the assignment, but the cost of the service can also be offset against any rental tax liability. Managing agents can take over every element involved with the rental of a property.
In addition, having a property managed by a professional managing agent can provide one point of contact for anything relating to that UK residence and specialist managing agents will also provide secure web access so that all parties can monitor service levels and keep track of income and expenditure.
Warning: A property let and managed through a local letting agent will only be taken care of for the life of that tenancy, meaning should a void period occur, the landlord/assignee will be left trying to re-let the property or arrange essential works from abroad. Vacant properties require management, someone to move the post, keep it clean, monitor utilities and attend to maintenance issues.
Not all assignees want to forfeit their UK base, nor do they wish to rent it out to stranger and therefore may choose to keep their property vacant. However, properties that are not taken care of can attract attention from unwanted visitors, namely vandals or squatters. Actuaries considering this route need to arrange continuation of management and responsibility from a family member or friend, someone who will move post, pay necessary bills and sort regular cleaning, gardening and maintenance. For those that don't have anyone that can regularly attend to their property, they should consider the help of a professional 'lock-up and go' service which will attend to all requirements including sourcing quotes and co-ordinating any refurbishment work, as well as provide a 'shop and turn-down service' should the assignee wish to return to the property for a weekend visit, for example.
Other Assets
Furniture. Some assignees opt to take their furniture with them as removal fees form part of their relocation package and can help make their new property feel like home. However, assignees letting their property may wish to leave it behind enabling them to achieve a higher rental income from offering a furnished property as well as achieve tax relief from this. Alternatively, assignees may prefer to have all of their furniture placed into secure storage, a facility which could also be managed on their behalf.
Case Study: One Expat Actuary who has moved internationally several times has experienced the perils, well beyond the typical broken frame or dropped box, of trying to constantly transport belongings. He comments "Due to visa issues, my household was packed up and left in storage in a tropical country in the monsoon season for several months. While the moving company had said they would be stored in a climate-controlled environment, evidently the items were not because upon arrival, which was over half a year after it was packed, everything was coated with a white layer of mould. Rather than furnishing the new home, everything needed to be cleaned: cloth items laundered, solid items hand washed, and difficult items like upholstered furniture taken for specialist cleaning. Tens of thousands of dollars of possessions could not be cleaned and no amount of compensation could bring these items back, nor refund the time which I had to be spent on the phone to HR and moving company, trying to deal with the matter."
There are also other possessions apart from the home that someone considering taking a work post abroad may not consider initially but that can have equal importance to the individual. These include:
Cars.Most people moving abroad are quite happy to sell their car recognising that it usually makes more financial sense than having it shipped to the new destination. However, this is another personal decision which some may wish to evaluate the differing options. Taking a car to a forwarding destination involves informing the DVLA of intensions to take it outside of the UK and then sourcing an international car shipping company to transport the vehicle. Some assignees may have a classic car or be reluctant to sell their vehicle so appropriate storage options should also be considered.
Pets. The correct procedure must be followed to take pets overseas and this can take some time to sort out due to stringent medical checks. So, if assignees wish to take pets with them, then plenty of time must be allowed prior to departure to avoid disappointment. Rules vary greatly in different countries regarding the import of animals, and these regulations often depend on the country of origin so it's important to check with the consulate. Airlines also have varying rules for the transportation of pets and costly handling fees should be expected. Those that choose not to take their pets may require assistance in re-homing them.
Considering an actuarial post abroad can be a rewarding and career developing experience but looking back can be just as important as looking forward. Taking the time to consider whether to 'manage' or 'pack-up' your existing life can have lasting consequences. Drawing on additional back-end "hand-holding" support and outsourcing responsibility can be of great value, improving quality of life at your on-going destination or keeping a piece of 'home' in place.
Pauline Davis is a Director at Rushbrook and Rathbone, specialists in property management and corporate relocation partners for organisations, families and individuals
