Hamburger wants to avoid financial pickle

Carola Husmann
Age: 36
Lives in: East London
Occupation: Advertising buyer
Earns: ?36,000
Mortgage: None
Debts: None
Investments: Offshore savings account, company
shares
Pension: Private pension in Germany
Aims: To find out whether it is advisable to take out a
pension and/or buy a property in the UK given her
non-domiciled status

Carola comes from Hamburg. She has lived in
London for the past three years, working as a buyer for
a German advertising agency. She is currently renting
accommodation in the East End of London for?550 a
month. She likes the multicultural nature of the area,
where there is a large Bangladeshi community, though
she says it has become increasingly 'hip and trendy'.

She is now considering buying a property. She says:
'Looking back, it would probably have been better if I
had bought somewhere as soon as I had arrived here,
bearing in mind how much property prices have risen.
But when I first came to London I was not sure how
long I was going to stay.'

She realises that it would be difficult for her, as a
single person, to afford a place as central as her rented
flat, so she is wondering whether to buy a property
outside London that she could let to, say, students or
in a newly up-and-coming area.

She does not see herself returning to live permanently
in Germany as she enjoys being abroad too much.
She says: 'At the moment I am happy to stay here, but
I am going to try to learn Spanish so that I could
perhaps go to Barcelona in a couple of years' time to
work for my company there.'

She enjoys working for her current employer and also
holds some shares in the firm, although she says it is
difficult to put a value of them. She is, however,
becoming rather worried about her pension. Her
company does not provide a pension scheme and
although she previously contributed to one in Germany,
that is now dormant.

She is saving some money in an offshore bank
account in Jersey, in which she has around ?3,000. As
she has 'non domiciled' resident status here, she can
run that account free of tax. She also has a building
society savings account in Germany, but feels she
needs to be saving more for her future.

She says: 'I want to invest for the long term, but I am
really not sure about the best way to go about it.'

Adviser 1: Steve Travis

Carola is in an extremely tax- efficient position as
a UK resident non-domiciled individual. Her
savings and deposits should be held offshore -
Bradford & Bingley in the Isle of Man has a good
range of accounts in sterling and euros.

Carola could take out a stakeholder pension
while she is in the UK. If she moves on to work
abroad, she can continue contributing to it for up
to five years after departure and get full UK tax
relief. Within the EU there are reciprocal
arrangements for state pensions, so contributions
made in Germany, the UK, and possibly in the
future in Spain would be amalgamated when
calculating her 'working life'.

She must ensure that she pays the local
equivalent of National Insurance contributions as
she moves around Europe, and keeps a record of
her contributions for when she needs to claim her
pension.

Property prices in the UK have risen significantly,
and we would not recommend a client entering
the buy-to-let market without at least a 30 per cent
deposit. I would advise Carola to avoid the type of
property targeted for students - especially if she
moves abroad. Trying to manage an older
property with a regular turnover of tenants would
be a nightmare. It would be far better to go for a
brand new two-bedroom house or apartment in a
provincial city close to public transport.

Steve
Travis works for financial adviser Wilfred T Fry.

Adviser 2: Robert Rackliffe

Carola's tax-free offshore account is a good place
for some of her savings.

While she is eligible for a stakeholder pension,
this may not be the best route for her retirement
savings. I think she should choose a more flexible
vehicle, such as an Isa, which would enable her
to move funds from country to country. She
should make monthly savings into a stocks and
shares fund, which would enable her to shelter up
to ?7,000 each year from tax. Isas can be
encashed at any time without penalty, allowing
her to transfer the monies to an offshore account
or to another country.

There is also considerable merit in buying a
property as a long-term investment, though there
is a danger of buying near the peak of a market.
Perhaps she could buy a property to live in
herself and sub-let part of it to help with the
mortgage payments - under the Government's
'rent-a-room' scheme she could receive up to
?4,250 of rent tax-free.

If the property is kept as an investment and let
out, any rental income will be subject to tax
where it exceeds the mortgage interest. A liability
to capital gains tax may also arise on any growth
in the value of the property. Carola would also
need to consider the costs of maintaining the
property and meeting mortgage payments should
a tenant leave or default.

Robert Rackliffe works for adviser Jackson Batten.

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