US Edition 
'We want to emigrate to Australia, but can we afford to?'
Money Makeover: We look at how one couple can boost their savings and investments to fund their dream of a permanent move
Daniel Warwicker and his partner Melanie Nelson-Strom are determined to start a new life in Australia.
They want to swap their tiring commute from their rented home in Surrey to London and long work hours for a more balanced lifestyle on Queensland’s Gold Coast, a sub-tropical surfing mecca that enjoys year-round sunshine.
The couple think they need to save £15,000 to make the move. They also want to build up a deposit for a house and start putting a decent amount of money aside for their retirement.
The move won’t be cheap – flights, shipping costs and visas will quickly add up.
But Mr Warwicker, 41, a security technician, says he has already lined a job up with a company that fits security equipment. His future employer is flexible on his start date and has offered to sponsor his visa.
Mr Warwicker earns £35,000 in his current job and he has been offered a salary of AU$60,000 (£31,165) in the new role.
Miss Nelson-Strom, 30, is a sous chef at Michelin-starred London restaurant HKK. Fortunately her profession is on the skilled occupations list, meaning there is a shortage of workers in Australia and she has a high chance of being approved for a visa. She earns £30,000 now and expects to bring in around AU$60,000 once employed in Australia.
The couple are in the enviable position of having no debt at all, and they have managed to save £3,250 over the past two months towards their £15,000 goal.
After paying rent of £795 and other essential bills, they have around £1,700 a month between them to save or invest.
Both have Isas but they don’t maximise their savings each year. Mr Warwicker has just over £5,500 in a stocks and shares Isa, as well as 180 Standard Life shares worth around £1,000. Miss Nelson-Strom has £3,250 in a cash Isa.
Sensibly they both pay into workplace pensions and have combined pension savings of around £20,000. They’re keen to make sure they have a good income in retirement and are unsure whether it is best to transfer their pension savings to Australia or leave the money invested in the UK.
Stocks and shares Isa
Dennis Hall, of financial advice firm Yellowtail Financial Planning, said:
“The couple has saved £3,250 towards their £15,000 target, which I assume is the money held in the cash Isa. At this rate it would take another seven months to save the full amount from their monthly income, but that ignores the stocks and shares Isa savings and the Standard Life shares. The value of these two investments could trim almost four months off the time it takes them to build up their moving fund.
“Mr Warwicker has an Isa portfolio consisting of one fund and three individual shares, so it’s not really a balanced holding. With 79pc of the portfolio held in the Aberdeen Emerging Markets Fund it’s also quite high risk. Over the last five years we’ve seen this fund fall from top quartile performance (think Premier League) to consistently performing in the lower divisions, and lagging behind the Global Emerging Markets index. He’s made money, but not as much as if he had simply bought the equivalent tracker.
“He also holds shares in National Grid, Lloyds Bank and BP. Despite the fall in the oil price BP’s share price has held up fairly well, recovering from a 52 week low of 373.25 pence per share to around 472 pence today. Lloyds’ forecast earnings appear to be almost back to 2007 levels, but the business is fundamentally changing, with a greater concentration on traditional banking in the domestic market.
“In the future there is likely to be better growth and profitability in other sectors. The real disappointment has to be the shares in National Grid, which have lost money in 2015 whilst the FTSE 100 and All Share indices have risen – making a strong case for diversification.
“Ignoring the National Grid shares the portfolio has made money in recent months, however markets can be fickle, and it’s probably time to cash-in. With such a short term goal I would recommend selling riskier assets and securing what they have made by adding it to their cash savings. A bird in the hand is worth two in the bush as they say.
“Turning to pensions, they need to be aware that moving permanently to Australia will cause their UK state pension entitlement to cease being “up-rated”, meaning it will no longer increase by inflation or any other increases. Both can still claim the pension at normal retirement age whilst in Australia, but its real value will be reducing every year. If they change their plans and decide to return to the UK, then indexation will apply once more.
“Pension legislation in Australia has moved ahead of the UK in relation to compulsion and contribution rates. Employers in Australia must pay 9pc of your salary into your superannuation (pension) fund. It is worth checking whether this is on top of the salaries they expect to make, as this could impact on cash flow once over there.
“Then there’s the issue of whether to transfer any UK pensions across to Australia. This is exacerbated by Australia’s “six month rule”. The rule means that you are taxed on the investment growth in pension assets from the date of arrival in Australia to the date the pension funds transfer if more than six months have elapsed.
“There’s limited time to decide whether Australia will become their permanent home, and for many people the reality is different. You don’t have to transfer your pensions when you move, and if the plan is to return to the UK, then why would you? It is a difficult choice to make at this stage.”
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Geraint Davies of Montfort International said:
“This situation is as much about visa management as it is about financial planning. A key point for anybody moving overseas is that invariably the type of visa they have impacts on the tax liability and therefore the financial planning. A temporary resident of Australia is exempt from tax on foreign assets and foreign income for example, whilst a permanent resident is not.
“It may be an uphill battle getting Mr Warwicker a visa as a security technician unless he has other qualifications such as a degree. It’s probably better to focus on Miss Nelson-Strom as the prime “applicant for a permanent residence skilled visa application, with Mr Warwicker on the same visa application but as her partner. They will both be able to work under this arrangement.
“I think the couple will need at least £15,000 after their arrival in Australia to fund their settlement. The cost of applying for a permanent visa alone will be around £6,000. Add to that airfares, the deposit for initial rental accommodation, the shipping of chefs knives and personal effects and possible periods of unemployment and the costs quickly add up. It would be a mistake to rush the move and try to do it with less in the bank.
“As well as boosting their savings, it might be worth considering taking out an income protection policy. Neither will have access to the Australian social security service, Centrelink, for unemployment or sickness benefits for two years after arriving as Australian tax residents.
“On the pensions front, the couple should not even contemplate moving their pensions to a Qualifying Recognised Overseas Pension Scheme (QROPS) until they have settled fully in Australia. If they transfer their pensions and then have to return to the UK they will face some very testing and complex tax issues.
“Even with permanent residency, it’s a major decision to move a pension from the UK to Australia. Invariably transfers to an Australian superannuation scheme when conducted by an Australian adviser are on an execution-only basis. If there is problem with the decision then they will have to take responsibility for it. And if they decide to return to the UK, the pension would have to remain in Australia until they are at least 60. We would advise always involving a UK and an Australian adviser in any transfers.
“Instead of transferring their UK pensions, I would look to align the investments to the Australian dollar so they are not as exposed to currency risk.”
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