Career Wealth Management
Hello and welcome to the fourth episode of Essential Finance, a video content series in partnership with bdhSterling. Focused on providing financial planning to the business and expatriate community in the UK.
I’m Jessica Sullivan the member engagement and project manager at the Australia – UK Chamber of Commerce. In the fourth episode in our six-part video series we will focus on career wealth management, taxes and salary sacrifices, and how this compliments our series today on how to best equip the repatriate and expatriate community with the tools and advice to manage their wealth.
Our valued sponsor for this series is bdhSterling and they are a key partner for our chamber member network, given their considerable expertise in financial planning and wealth management. Today from bdhSterling, Paul Lawson-Tyers, a financial planner, joins me for an episode focusing on taxes and salary sector sacrifices opportunities.
I’m delighted to speak with you today. Paul, welcome and thank you. I trust life has been kind to you and like me you’re enjoying the change of season at the moment with the weather.
Indeed, yes. Life’s good thank you very much.
Good to hear Paul, let’s dive right in with a bit of follow up from our last episode with your colleague Paul Davies, regarding pensions. Are there any particular tax incentives for making pension or superannuation contributions in either market that we should be aware of?
Yeah, certainly from the UK perspective, there are some really good tax benefits to paying contributions.
If you pay into a UK scheme you get full tax relief on that contribution. Now, as somebody that might be returning to Australia, to retire in Australia in future, that really gets enhanced, because you can get your tax relief now. Eventually, we can help you to move your pension over to Australia, where from age 60, you can take the benefits entirely tax-free. So, you really benefit from that tax relief that you got upfront, any growth that you might achieve on it because you’ll never give back the tax relief. It’s free money essentially.
It’s a pretty good incentive. Sounds good to me, Paul. Moving on, are there any reciprocal market tax incentives that we should keep on top of? Particularly as ex-pats moving between the UK and Australia?
There are no particular tax incentives, I would say, as such that we can really think of. It’s more of a case of ensuring that you know the tax position and there can be some advantages to perhaps timing your move according to when tax years start and end. Obviously taking advantage of different things that you can invest in and how they might be treated differently in each country for tax purposes, is really where the money can be made.
Definitely, wonderful insight Paul, thank you. An interesting question for you. When working in the UK a proportion of our earnings goes towards the National Insurance contribution, taxes and a pension. Is there a way to salary sacrifice to invest more in a pension pot?
Yes, there is, it’s available for most people from their employers. It’s worth speaking with your employer about what they can and can’t do as far as it’s concerned.
But salary sacrifice can be a good way of boosting what goes into your pension. So, effectively what it means is that you take, on paper, a drop in salary, but the employer then pays that in as a pension contribution. So, because your salary is effectively reduced it means that you pay less in terms of National Insurance contributions and taxes and that’s where you get your reliefs there.
But with some employers, they will also be making a saving on National Insurance contributions and they may be willing to actually pass on to you as an additional contribution into your pensions.
You really then boost the pension from that, from that point of view. So, as well as getting your tax relief that you will hopefully never give back if you end up in Australia in the future, you’re also getting that boost, potentially from your employer passing on savings that they’re making.
Amazing Paul, thank you. I’d be keen to chat to you now about asset protection, many of us will have had to reassess our living costs, and potentially pivot our careers due to the current environment we find ourselves in. How can we make sure our assets are as protected as possible?
So, it’s all about financial planning, basically. Obviously, that’s something that we can help people with but, just planning your own finances in general.
Yes, the last year has obviously been quite extreme, but then again on a year to year basis, we tend to find the clients circumstances change slightly anyway.
They may have more or less available income depending on whether they might have had some big expenses for example during that year. So, it’s always about reviewing things constantly.
Now as far as last year is concerned, of course, there have been two different effects that people have experienced. Those people that have had difficulties with their employment, and may have had a drop in income as a result of that, will obviously be finding themselves needing to make savings to their expenses, they might not have as much to put into investments.
But of course, you do have the flip side of that for those people that have been lucky enough to be able to maintain their employment and not have any drop in that over the last year but are working from home, particularly for those people like myself, that have to travel miles to go to the office.
If you haven’t got those travelling costs involved, parking, the incidental costs of just going to the shops maybe more often than you would if you’re at home. Some people are actually saving quite a bit over the last year. The best way you can really protect yourself for the future is to make sure that actually those savings that you’re making, are put to good use, that they are put into investments maybe extra pension contributions. Putting yourself in a better position for the future.
In terms of protecting yourself, just being able to ensure that your existing investments are in the right place and invested in the right way. But also to just make sure those extra savings that you get, as much as it might be tempting to go out and have a spending spree. It might be worth thinking about what to do with those to protect yourself in the future. Not only to build up funds for the future, but also to protect yourself in case anything like this happened in the future, that did have an effect on you.
Advice such as yours is incredibly invaluable Paul, and it’s exactly why our membership base really does need to consider taking sound financial advice.
For those who have may have considerable savings, what is the best way to protect the legacy for future generations?
Yes, so while you are in the UK, the main thing to consider is that the UK has Inheritance Tax. Now, Australia doesn’t have Inheritance Tax. So, if you are in Australia in the future, then as long as you are not deemed to be domiciled in the UK, then you may well find that you can pass on all of your assets to your beneficiaries, without having to think about any taxes to pay on them.
However, even if you’re not domiciled in the UK for Inheritance Tax purposes, anything that you actually hold in the UK will be subject to it. So, it’s really important to first of all be clear where you are domiciled.
If you’re Australia and have been in the UK for five years, for example. The chances are that you won’t be deemed to be domiciled in the UK. So, therefore, it’s only any assets you have in the UK that will be subject to Inheritance Tax.
If you’ve been in the UK for the last 20 years. Then you are likely to be deemed domiciled in the UK for Inheritance Tax purposes, and therefore, your worldwide assets would be caught by Inheritance Tax. So, if you’ve got a large estate, that will be subject to it. Then, there are things that you can do. You can get very complex, setting up things like trusts. You can go more basic with things like life insurance to cover the tax to make sure that your actual assets can pass over to beneficiaries they’ve got the options to pay through the tax.
But other things like gifting your assets to your beneficiaries, while you’re still alive that can be really effective as well. Paying money into a pension, if you’ve got it lying around and you’ve got an available contribution. There’s an allowance each year, you can make in pension contributions if you’ve got funds available with that money lying around, you could perhaps put into your pension. Because pensions are sheltered from Inheritance Tax.
So, there’s little bits and pieces that you can do but Inheritance Tax is a very complex subject. There are financial advisers out there that literally just concentrate on Inheritance Tax because it is very complex. It is something that’s worth having a conversation with somebody like ourselves in the first instance, because in a lot of cases there are quite simple solutions.
They’re not wrong, they’recomplexities are fairly deep and that’s why taking the right advice is so crucial Paul. One final question, what advice do you have for ex-pats considering a move back to Australia?
Really start looking at your finances in general, as early as possible. You might think that you’re going to move back in 5 – 10 years. But clearly, there could be some very good opportunities that you can take advantage of now, by planning in advance.
I’ve always thought about the pension contributions for example, an annual allowance, that you will have to pay into that setting, maybe take advantage of that as much as you can. Also, you know if you’ve got other investments that you’re looking at, even if you’re looking at setting up one now, for example, make sure it’s set up in the right way for the future.
If you’re moving to Australia in the near term, and you’re just setting up an investment now, it may turn out by the time you move that it would actually be a very tax inefficient place to have it because the Australians will deal with things in a different manner. That might be based on the UK investments that the Australians might pay them differently to the UK to the tax treatment. ISA’s are a classic example of that.
So, there could be some really good opportunities to try and plan ahead and make sure that you’re doing the right thing with your money right now. Really, that’s where we can come in as a benefit. Help you to do some proper planning going forward, including what happens then once you arrive in Australia and beyond that as well.
Magnificent, thank you so much for that Paul. It’s quite timely then in closing out today’s episode. What is the best way for our network to get in touch with you and your colleagues at bdhSterling so they can maximize theirfinancial planning going forward?
Just come through our website, there’s contact details on there or you can email an enquiry directly to us. One of the advisers, may well be myself, will then contact you to start discussing what your plans are, what your objectives are and help you go forward from there.
We can set up a free initial consultation, they’re still being done by video at the moment, of course. Microsoft Teams, Zoom, anything like that works really well.
We can have a chat about your circumstances and then if you ask us to, we can start to put together some advice.
Fabulous, it’s been a real pleasure, Paul, thank you for joining me again today. In the next week speaking with your colleague Stephen Ford checking all things property, bricks, mortar and money.
Stay tuned for the next edition of Essential Finance with our partners bdhSterling.
I've always thought about the pension contributions for example, but isn't this an annual allowance, that you will have to pay into that setting, maybe take advantage of that as much as you can. Also, you know if you've got other investments that you're looking at, even if you're looking at setting up one now, for example, make sure it's set up in the right way for the future.