Sunday, August 1, 2010

Dear Graham, the recent news about the amount of debt here in Dubai comes as no surprise to most of us and that it would affect local stock markets. What I don’t understand is why it would affect the global stock markets the way it has. Why is this and is my money safe in a local bank?

30 countries worldwide report to the Bank of International Settle-ments (BIS) showing the amount of money they have lent.

According to statistics produced by the BIS in June of this year, these international banks have lent $123 billion to the UAE as a whole with Britain having the biggest exposure of $50 billion.

As these lending banks are listed on international stock markets, any exposure to risk will affect their share price and this in turn affects stock markets as a whole.

The BIS does not break down what is owed by each of the individual emirates so the debt in Dubai is not known.

Also, there are other countries, India and Hong Kong for example, that do not report to the BIS so the total debt could be higher.

Debt is not all bad news providing it gets repaid at a premium giving the lending banks a profit, precisely what the lenders were trying to achieve, and still want to. As for your money being safe in a local bank, reports are that it is; and the central bank has made more money available to local banks to provide them with more liquidity.

There is, however, a recent trend to move money from here into offshore regulated banking centres. It is not a difficult process and it can be done without having to jump through a lot of hoops.

I have recently learned that, as a UK citizen my Asian wife will not automatically inherit everything that I own, should I die.

My assets are not great but I do have a lot of life insurance as well as life insurance provided by my employer. Is there anything I can do to make sure she gets all the money?

Presently, as a UK citizen with a non-UK domiciled spouse, the spouse receives the first £380,000 free of all taxes from the estate of their deceased UK domiciled spouse.

Anything over this is then taxed at 40 per cent.

The life insurance that you personally have can be put into a trust that then falls outside of your estate and will be free of taxes.

As for the life insurance provided by your employer, this does not form part of your estate as the policy belongs to your employer.

The employer will decide who they give the money to if you die and ordinarily they would have already asked you where you would want the money to go.

I have been looking at moving my UK pension overseas but I have heard a whisper that legislation is being introduced to make this harder. Is there anything I should be careful of?

Presently, once the UK pension has been transferred to a Qualifying Recognised Overseas Pension Scheme (QROPS), the overseas pension scheme does not have to report back to the UK tax authorities a benefit payment to the scheme member, i.e. you, providing you have been overseas for five full UK tax years.

New regulations have been introduced which affect transfers to a QROPS where the member, you, is able to “direct” the investments.

Such a transfer creates a taxable asset transfer fund (TATF). Any payments from the TATF are reportable to HMRC beyond the five year rule indefinitely.

In a nutshell, if you think that you can do whatever you want with your pension money after being overseas for five full UK tax years, then the chances are that you can't anymore.

However, there is a solution if you use the right scheme.

Graham Wolverson is an independent financial adviser with Pinnacle Asset and Wealth Management. Email him at: graham@yourmoney-matters.com