Foreign Perspectives

Archive for the ‘Banking’ Category

We’ve been investigating how our banking, investments, savings, pension, and mortgage will work when we move to Australia as we can explore that now rather than wait until everything is happening at once.

Banking turns out to be relatively simple. Many people will use Wise initially which, although not an actual bank, will give you local account numbers in both the UK and Australia. Although both will work for the usual direct debits, payments, and debit card transactions, the Australian one has some limitations, specifically it can’t be used to receive social security payments. However, much better is the HSBC Australia Everyday Global account which is a proper Australian bank account and is the only Australian bank that let’s you fully open an account from abroad (tell them that you’re using it for saving, NOT that you’re going to be moving there); the debit card arrives in a couple of weeks. Although you don’t have to have an HSBC UK Advance account, if you do, you can do instant transfers from it to your HSBC Australia account. The other plus point of this is that HSBC UK will let you keep that account when you’re living in Australia. Transfers in the reverse direction take a day or two unless you have HSBC Premier. You need to use the HSBC Australia account every month or two so that it doesn’t go dormant.

Savings are more tricky as many banks and building societies will require you to close your accounts when you move abroad. Notable exceptions to this are the Nationwide, HSBC, Lloyds, and RBS/NatWest. If your cash ISA is with one of these, you could keep it but a) can’t add more to it and b) the interest will be taxable in Australia as they don’t recognise ISAs. The same mostly applies to investment ISAs and investments generally.

Banking in Australia is a bit different. When you move, you’ll find that many of the UK banks and building societies will close your account so you want to have one or more of the above opened before you move, as you’ll not be able to open them afterwards. As you’ll notice, those I’ve mentioned above are legacy banks and in practice most (all?) of the fintech banks (Kroo, Monzo, Starling) will close your account. If you fancy a fintech in Australia, there’s UBank and Up, but you can’t open those until you are an Australian resident.

Pensions are rather more complex. Due to HMRC requirements, if you are going to transfer your pension then it can only be to an Australian SMSF which is QROPS compliant which in turn means that you’re looking at setup fees of around £2000 and similar annual fees after that. The maximum that you can transfer in this way is A$120000 (£60000) per year (potentially triple that in your first year). Alternatively you could just access your UK pension from Australia and simply declare the withdrawals in Australia (they’ll generally be subject to Australian income tax as if you tell HMRC that you’ve left, they won’t apply UK tax). Given that my UK SIPP costs all of £120/year, my current thinking is that I will just leave it in the UK and make withdrawals as I’d have done if I’d still been in the UK. One thing to note is that you don’t need an international pension and any place that seems to offer one is likely a scam. That said, some normal SIPPs come in a rebadged international version so, my one with AJ Bell does, but it’s just the same with a different name on the tin. You can only transfer defined contribution schemes, not final salary ones nor your UK state pension. If you tell the state pension people, they can pay your pension to an Australian bank account in Australian dollars, or you can get it paid into a UK bank account. As I say, this is a complex area and you’re going to need advice on this.

Credit cards are something that you may want in Australia, however you won’t have a credit history when you turn up obviously and therefore will likely get rejected when applying. Two ways around this are to open an American Express card in the UK before you leave and use their Global Transfer service (basically you apply for a card in Australia and in the application check the box that says existing customer and you should be in business. Their Australian cards mainly come with a fee and to my mind, the best currently is The American Express^® Platinum Edge Credit Card which is A$195/year after the first year but comes with enough supermarket discounts to, for me, cover the cost. If you don’t want a fee, there’s The Qantas American Express Discovery Card and The Low Rate Credit Card. Worth noting is that Amex acceptance seems much lower in Australia than it is in the UK. The other way around no credit history is to apply for an HSBC Australia credit card as they will check your UK credit history; their Premier card is free and their low rate card is A$99/year.

So what about a mortgage? If you’ve a mortgage on your UK home, you’ll likely have to pay that off before you go, or essentially change it into a buy to let mortgage (the interest rate will usually be about 1% higher). You seem to be able to keep a buy to let mortgage going although it’ll be a bit more complicated when you come to renewing any fixed offer that you may have and your choice of banks offering it will likely be more restricted. What about an Australia mortgage? Still to be researched more fully, but they look much the same as UK mortgages, albeit with fewer options and, of course, there’s the business of proving your income in Australia.

Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

With the credit squeeze in full force many people are finding it difficult to source short term borrowing when they need it to tide them over to the next paycheck. This is where payday loans come in and, of course, there are more and more of them on offer every day.

In principle they’re fairly simple in that they are:

1. intended to be repaid from your next paycheck (although you can usually roll them over to the one after that);
2. don’t require a credit check;
3. are from around £100 to £1500
4. require you to be in regular employment of at least £1000/month (usually for at least the previous three months);
5. require you to have a normal current account (usually for at least the previous three months); and
6. be over 18

Approval is very fast and even quicker now that online checks can be carried out by the credit company ie no more faxing of documents.

Although payday loan advances are fairly simple, the sheer number of them that are around means that a little guidance is handy. The rules do change and you’ll find that the legislation on these apparently simple loans is quite extensive.

Applying online is easy and quick, but do watch the amount that you’re paying as it can easily pull away from you.Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

The basic argument of the Yes campaign is that it’s better that the people of Scotland are ruled by the people of Scotland i.e. that independence is a good thing by definition and they’re right. The basic argument of the No campaign is that there’s strength in numbers and they’re right too.

But which is actually best?

It’s certainly very easy to knock down the Yes arguments:

• the support from oil will be a lot less then the sums they are expecting not least because Alex seems to count every penny coming in as tax revenue rather than the 20% or so that would actually come in but even that’s from a much bigger base than he’ll have courtesy of various international agreements which divvy up the amounts based on population rather than land area.
• it certainly would be best for Scotland to continue to use the pound and the Bank of England but that just isn’t a runner so at best Alex will be stuck with his first plan B i.e. use sterling but outside a sterling-zone arrangement. Presumably the banks in Scotland wouldn’t be permitted to continue to print their own money as they do now so the Scottish notes would be replaced by Bank of England ones in this scenario.
• since an independent Scotland simply wouldn’t have the wherewithall to support the banking system, it seems certain that most, if not all, of their banks would have to relocate to England even aside from European laws requiring that. There’s going to be quite a hit to the economy and jobs should that happen. On a related note, the various investment companies based in Scotland are already preparing to move and, of course, you could hardly have National Savings (a branch of the UK Treasury) based in Glasgow anymore.
• the freebies (education, prescriptions, etc.) are mainly dependent on the oil revenue which is somewhat less than Alex seems to think it is or would be and, of course, that knocks the “oil premium” fund on the head too.
• defence industries ranging from Trident to loads of small and medium companies would almost certainly have to relocate because the MOD insists on having various key components made and assembled in the UK.
• the much lauded research facilities in the universities are going to have to find their funding elsewhere as the vast majority of the research institutes which fund them are UK institutions.
• Europe is something of a wildcard as nobody can really say what the outcome of negotiations might be at this stage but it seems unlikely to be plain sailing.

For the No camp, well the argument is that none of the above will happen if they win.

However, it’s not really so simple as that. As the Yes people say, it’s not so much the nitty gritty details but that Scotland should be run by the Scots. Which is grand for those at the top of the pile but not so good when you find (as happened just prior to them joining with England in 1600) that it takes twelve Scottish pounds to buy one English pound, that your job went south and your pension is pretty much worthless.Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

When the Economist mentions something in several different articles it’s a pretty good bet that the something is in big trouble.

Last week they opened with a potted summary of the emergency support fund being set up by the Euro zone governments in an effort to patch up the radically different speeds which they’re running at. Then there was the leader urging leaders to forget about the option of breaking up the Euro and how dire it would be for a time. Finally, there was the briefing going through how it would be done and how difficult it would be to do.

The problem with the emergency fund being explicitly set up is that everyone knows just how much money is in the kitty. That’s sure to prompt some people to stretch that kitty to the limit whether they be speculators or governments wishing that they could just devalue.

Listing the processes necessary to recreate an old currency is frankly just asking for trouble. As they point out, doing so would cause massive upheaval in the financial markets lasting years and knock-on consequences of the real economy in the country doing it internally and through difficulties in trading with other countries during the change-over period. Unfortunately, those countries are already facing years of upheaval and austerity budgets and moreover their country’s finances will be run by un-elected officials from other countries during that period. Wouldn’t the upheaval in recreating their own currencies be worth it for them? At least they’d be able to have a real say in how their budget was run.

One of the major problems they foresee is the logistics of printing the new currency in secrecy. Unfortunately, there is one Euro zone country that doesn’t need to do that. Ireland’s banks already print sterling notes and one, relatively doable, option would be simply for Ireland to revert to their former linked currency explicitly, at least for a while.

So, will it be Ireland that will pull out first? Whoever it is, they seem unlikely to be the last.Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.

Not so long ago there were all kinds of restrictions on transferring money abroad due to currency controls that lots of countries had in place. They’re almost all gone now and it has become more of a natural thing for “ordinary people” to need to transfer money abroad.

Most of the time it’s due to holidays, of course, but an increasing number of us are becoming small scale international jet setters with homes in more than one country and with both of those come a need to transfer money abroad.

Holidays usually involve a different category of currency conversion in that you are on the spot when you need the money, the amounts involved are smaller and you probably don’t have a local bank account. However, whilst the amounts may be smaller individually, added up over the years they will come to quite a hefty sum. Also, many of those who holiday in the same country each year may be considering the purchase of a property there and so have that local account too.

Most people ignore the costs of all those international transactions to their detriment. One friend of mine found that almost 10% of his entire salary was going in such bank charges simply because he was living abroad and using his “home” account in exactly the same way that he always had ie lifting small amounts frequently.

Saving money on those transactions is usually fairly easy. If you don’t want to change your bank, check out exactly how they charge for use of credit, debit and cash cards abroad. You will usually find that debit and cash cards are more economic ways of getting cash than credit cards are in that you won’t be paying interest on the money. However, that’s not to say that they are cheap. Typically a withdrawal of £100 in the local currency will cost you £4 to £5 but note that this includes a fixed transaction charge so withdrawing £20 will cost you around £2 ie 10% whereas £200 would be about £7 ie 3.5%. You can eliminate these charges altogether with some travel money cards.

It’s slightly better if you buy things, usually. Using a typical Mastercard or Visa card will only incur the foreign exchange charge ie buying £100 of goods will cost you £2.75 and that £20 item would be 70p. Therefore you should buy things with the card directly rather than lifting the cash to pay for them.

What about larger amounts ie if you’re living abroad or have a holiday home abroad? Well, if you follow our advice and get one of the better travel money cards you can lift £500 per day which means that it’s quite viable to use that card in conjunction with a local bank account to transfer amounts equivalent to several thousand pounds. You certainly couldn’t buy a house in that way but it’s enough to fund the payments for electicity bills and the like.

If you are talking thousands, then the usual way is to ask your bank to do a SWIFT transfer. This will cost around £25 plus there’s a currency exchange charge (which isn’t widely known). However, that too can be eliminated in some circumstances. For example, if you bank with HSBC then you can do free transfers to an HSBC account elsewhere in the world but the HSBC Premier account that you need to avail of this costs £20/month (unless you have £50,000 or more on deposit with them) so it’s not as useful as it first appears. However, if you are buying in Spain, the Halifax run to a free account which offers free transfers from Halifax UK accounts to Halifax Spain ones. What’s less obvious is that this route gives you a pretty much free way from pounds sterling to euros anywhere in Europe as banks are required to transfer euros at the same level of charges in other European countries as they do domestically ie to get euros in an account in France, you could transfer from the Halifax UK to Halifax Spain and from there to a French bank.

Other options include the use of the specialised money transfer services such as HiFX (there are lots of similar services around).Copyright © 2004-2014 by Foreign Perspectives. All rights reserved.