x Abu Dhabi, UAESunday 21 January 2018

Finding your comfort zone

Despite the downturn, UK residents share how they see the Emirates as a land of opportunity.

Graeme Fisher, 38, an architect who moved to Dubai in 2006, keeps his savings portfolio in both local and offshore accounts.
Graeme Fisher, 38, an architect who moved to Dubai in 2006, keeps his savings portfolio in both local and offshore accounts.

For Theo Hildebrand, moving to Dubai from the UK made a lot of financial sense. Mr Hildebrand, 28, who arrived in the UAE last August with his partner, Asia-Marie, says a tax-free income meant that he could build up a much-needed nest egg and finally get a foot on the property ladder.

"I left London because I couldn't afford to buy a flat, even though I had a good standard of living from my income," he explains. "I had worked out that it would take me several more years to build up a deposit." Since taking a job with a public relations agency, Mr Hildebrand has enjoyed a higher standard of living and improved his ability to save. While he didn't wish to reveal the particulars of his saving scheme, he says the goal is to slowly secure a 25 per cent deposit on a two-bedroom flat in London. He then plans to rent out one or more of the rooms to cover their expenses and earn extra income.

Still in his 20s, he doesn't expect to achieve this goal tomorrow. But Mr Hildebrand says working in Dubai has placed him on the right path to long-term savings. In other words, he doesn't plan on leaving anytime soon. And Mr Hildebrand is not alone. According to a recent HSBC International Bank survey - comprising more than 3,000 people in 50 different countries - about 80 per cent of expatriates would rather continue living in the UAE than return home. The survey also found that the UAE ranks as an ideal financial location for expatriates.

Almost 90 per cent of respondents reported an increase in their disposable income since moving, and more than two thirds say they are saving and investing more than they would in their home country. However, the financial picture for expatriates is not perfect. Another recent study, conducted by NatWest, found that while the majority of British expatriates claim that they feel better prepared to weather the financial storm than if they had stayed in the UK, more than 95 per cent of the poll's respondents are concerned about the value of their savings back home because of the decline of sterling.

"This research shows that expats are concerned about the effects on savings due to fluctuating exchange rates that the global downturn has caused, but not to the extent that they largely need to save more and spend less," explains Dave Isley, the head of NatWest International personal banking. But the financial crisis has certainly altered the behaviour of at least one British expat couple. Graeme Fisher, 38, an architect, and his wife, Sasha, moved to Dubai in 2006. His main strategy for coping with the downturn is spreading their money around, which he says provides piece of mind.

"We have savings here in the UAE which attract more than five per cent tax-free interest, but we also put money in offshore accounts, which, although they pay less interest, spreads our assets and our risk," he explains. Mr Fisher says he hopes that the exchange rate for the dirham and sterling will balance at a mutually beneficial level, because he said he thought it was affecting the local economy as a whole.

"I get paid in dirhams, so the declining pound has benefited us in our buying power in the UK and for sending money home," he says. "But it's not a good thing, however, for the UAE economy, as British tourists are finding it incredibly expensive to visit here." So is packing up for the UAE still worthwhile? With the right strategy, the answer seems to be yes. Rhiannon Davies, the director at the online expat guide ShelterOffshore.com, remains optimistic about the savings of British expatriates, provided these savers maintain the right perspective.

"Exchange rate fluctuations need to be kept in relative proportion because there are times when the exchange rate will go against you, and times when it will be in your favour," she says. "Rates have to be looked at over the longer term, because when it comes to saving and investing, it may not have as much of a negative impact as you might expect." Andrew Hagger, a spokesperson for UK-based financial comparison website Moneynet.co.uk, said that unless expats are paid their income in the local currency, they will always be at the mercy of the exchange-rate fluctuations between the sterling and the dirham. When it comes to their state pension, the situation is more pronounced.

"Although British pensioners living abroad can have their UK State pension paid to an overseas bank account, this means that it will be sent in sterling and converted at the exchange rate at the time," Mr Hagger says. So with the exchange rate against the pound in a sorry state, it may make more sense for some British savers to leave a large portion of their savings in the UK. Ms Davies suggests that then, at a later date, a more attractive exchange rate can be fixed using a forward contract company.

"This will help offset the negativities of weakened exchange rates," she says. "Forward contracts can sometimes help and are well worth a look. Time and time again it has been proved that these companies offer far better rates of exchange than any high street bank. "These specialist currency brokers are more likely to secure the best rates and tend to have lower transfer charges than banks." These contracts allow clients to use a specific exchange rate for a specific period of time; of course, the rate may improve over time, but the main advantage is that you will know your exact exchange rate and be able to factor it into your planning.

As far as banking accounts go, Ms Davies explains that many Britons living in the UAE may need a local account into which their salary can be paid and from which their local expenses will be taken. But, she says, they should not necessarily consider bringing all of their financial assets to the UAE, as this may be detrimental to their financial health. If you are looking for a savings account that is based in the UAE, Mr Hagger suggests HSBC, which is offering a savings account that pays 3.5 per cent annual interest.

For those savers who want a UK-based savings account, rates have dropped rapidly over the past 12 months, making it crucial for British expats to shop around for the best rates. Keep up to date by checking financial comparison websites such as www.moneynet.co.uk, www.moneysupermarket.com and www.confused.com for the latest news. If you are a saver who can tie money up for a period of time, and are not concerned about rates rising, why not consider a fixed-rate account?

"In the UK, the best rates are currently found in the fixed-rate savings market," Mr Hagger says. "You can get four per cent for one year with ICICI Bank UK on a minimum investment of £1,000 (Dh5,997) with your interest paid annually." Another option, he said, is West Bromwich Building Society, as this account pays 4.22 per cent with a monthly interest option for deposits of £50,000 (Dh297,000) or more.

Expatriates are fortunate in that they have many options, Ms Davies says, but their decisions should reflect their personal circumstances, financial goals and potential repatriation schedule. "Many expats in the UAE find that an offshore bank account is the healthiest place for excess cash," she says. "Then, by working with a financial adviser, they can find the most advantageous and positive way to get this money to work for them."

But unlike typical savers, most expatriates have the additional benefit of being able to save on taxation on savings, or at least defer payment of this taxation before any offshore savings are brought back onshore. "Expat savers should look into their eligibility for higher returning, taxation-saving offshore solutions and, if they are eligible, as many in the UAE are, they should consider embracing these offshore alternatives, as they give savings an additional boost," Ms Davies explains.

Caroline Oldham is a good example. She says maximising her savings after emigrating to the UAE came naturally. Ms Oldham, 24, a senior financial coordinator for De Vere & Partners, moved to Dubai just four months ago from Harrogate, England. And she is already is seeing the financial benefits. "I save in the Isle of Man and transfer on HSBC Global View to my Dubai account," she said. "I will shortly be setting up a retirement plan offshore, as the benefits are huge."

Ms Oldham believes it is important to save from a younger age so you can save less for a longer period of time. Most people, she says, don't realise the importance of saving for the future to ensuring a comfortable lifestyle after retirement. "Make the most of your time abroad and utilise your expatriate advantage," Ms Davies says. "You may be earning more or in a position to save more than your peers back home and onshore. Therefore, find out how you can best ramp up your savings with tax-efficient investment vehicles so that you get ahead in the financial race."