Archives For September 2015

At present those who hold deposits with UK financial institutions are protected via the Financial Services Compensation Scheme (FSCS). This scheme provides depositors with a guarantee of up to £85,000 each (£170,000 for a joint account) should the UK institution they hold their money with fail. The £85,000 figure was set on 31st December 2010 at the time this was equivalent to €100,000. Prior to this the amount was £50,000.

With effect from 1st January 2016, the EU Deposit Guarantees Schemes Directive will require member states, who are not using the Euro to reset their depositor protection scheme. With effect from the beginning of next year the maximum protection will reduce to £75,000 per person per financial institution or £150,000 for a joint account.

As with the FSCS, depositors need to be aware of who owns the deposit taker they are using as if the parent company fails and you hold accounts with two subsidiaries or more you will only be compensated once.

Investors with more than £75,000 held on deposit should consider holding some of their savings with another financial institution in order to reduce their risk of loss in the event of the liquidation of a bank and incurring a possible ‘haircut’ on their savings.

I last wrote about the importance of having a Will in early 2014. Since then there have been a number of important changes in legislation within the Emirate of Dubai.

On 1st May 2015, the Dubai Government provided for a new service for non-Muslim expats living in Dubai. Under the new service, qualifying individuals may register their Will with the Dubai International Financial Centre (DIFC) Wills and Probate Registry.  In the event of their death, the DIFC Courts will then have jurisdiction over the dispersal of the assets of the deceased.

For those who do not have a Will registered with DIFC, they will be subject to the old regime in which local courts attempt to match  the principals of Shariah with  the wishes of the non-Muslim expatriate – a complex, lengthy and expensive process in most cases. Before the introduction of the DIFC option, moveable assets such as cash and cars were often dealt with in accordance with the Will (provided the deceased had one), however immoveable assets (real estate) were usually subject to Shariah law. Under the DIFC Will, real estate is included providing additional certainty that the deceased’s wishes will be followed.

With many young families in Dubai, a further welcome development is the rules on guardianship of minors. Often when speaking to parents, they worry that their wishes for their children may not be carried out at a very traumatic time, and anecdotes which may or may not have been apocryphal do not set their minds at ease. The DIFC option now provides greater certainty for parents should the worst happen to them allowing them to provide detailed instructions to the DIFC court on what they wish to have happen to their children.

I was initially shocked at the cost of registering a Will with DIFC Wills and Probate registry (US$2,800); however, setting aside the burden of worry about young children being fostered in care for extended periods while legal battles are resolved. For those with an average property in Dubai (cost of about AED2.5 million) the Will represents about 0.4% of the value of the assets you are trying to protect, much less than the stamp duty you paid and probably less than the legal fees you or your beneficiaries would pay to resolve any disputes with the distribution of assets after completing the Dubai court ruling.

So, my recommendation of the week is, if you have property in Dubai or young children living with you in Dubai, you should seriously consider obtaining independent legal advice on the merits of registering your Will with DIFC Wills and Probate Registry.

Most people come to the U.A.E. to clear debts and save money for a future project. Recent surveys have suggested Dubai is one of the most expensive cities on earth for an expatriate. Do you save money on a regular basis either in a bank account or a savings plan of some description? Take part in my poll and see if you save more or less than average. All responses are anonymous but if you want to ask me any questions please contact me using the form below.

School Fees


Now the children are all back at school I thought it would be topical to look at school fees planning. There are now more than 500,000 pupils attending fee paying schools in UK. Based on the latest census published by Independent Schools Council which represents over 1,200 schools in UK. There are more than 70,000 boarding, many with their parents abroad.

Why are more people sending their children to a fee paying school and more specifically: what is the attraction of boarding school and what financial costs are involved?

Smaller class sizes and better average results are often cited as reasons for sending children to fee paying schools. However not every jurisdiction in which expatriates live allow children access to free education. Historically, expatriates in the UAE would only stay for a few years. Therefore, if their children lived with them they would want them to continue to study the curriculum of their home country. Consequently, when the posting came to an end the student would not be disadvantaged on return to their home country. In UAE especially, there are a very wide range of different schools available teaching many different curricula. Those longer term expats who have careers that span the globe with a few years in each location often prefer to put their children in boarding school in their home country. This provides an element of stability particularly during senior school when important examinations need to be taken. There is also a school of thought which believes growing up in UAE does not expose children to the ‘real world’ and they may feel they lack cultural roots. The view here being: a few years in their home country in a boarding school can help ‘ground’ children in reality and teach independence.

Whilst significant variations occur throughout the UK, the Independent Schools Council census for 2015 states average day student pays around £12,900 per annum, about AED75,000 at current exchange rates. Those students who are on a full board basis pay an average £30,000 per annum, about AED172,500. Last year fees increased by 3.5% which is the lowest increase in more than 20 years but still significantly ahead of UK inflation over the same period.

Most parents must plan for many years in advance of sending their child to a boarding school. Whilst bursaries do exist it would not be prudent to assume qualification and they rarely cover all costs.

If your son or daughter has just been born and you would like them to attend a fee paying school in UK on a full board basis starting when they are 11 and finishing when they are 18 you should start saving now. Making a judgement about how much to save means estimating rates of investment return, exchange rates, starting capital, inflation, product charges as well as your view on risk and reward, budget and more. All of these things may change over time. At present assuming no starting capital, I estimate you will need to save between £1,100 and £1,600 per month from now until your son or daughter leaves school. Then there are university costs…

Please let me know if you have any questions or comments.

It seems everywhere I look in the last few weeks I see pictures of stressed traders and a mass of red on trading screens. Newspapers and online headlines read ‘Market Crash’. Naturally, I have received several calls from concerned clients. They want to know: what they should do, how it will affect them, and is the sky falling in on their retirement plans?

First, it is common for these things to happen over the summer months. This is for a number of reasons: low trading volumes result in relatively small trades having a larger than normal impact on the market increasing volatility; the media have little to report (August is known as the ‘Silly Season’ in UK media circles) which means minor stories take centre stage and the same news gets repeated more often resulting in greater impact than normal. And don’t forget Mr. Market from Dr Graham’s famous book on investment ‘The Intelligent Investor’ published more than 50 years ago it is just as relevant now as then. Mr Market completely forgets why he invested in the first place. When he sees markets go down he just follows the herd. Consequently, when markets go down all the Mr. Markets out there make it go down further. For the ‘Intelligent’ investor says Graham this is an opportunity. The Market is offering the ‘Intelligent’ investor an opportunity to buy investments at last year’s prices; an opportunity most would welcome in any buying scenario.

So is the market turbulence all good news? No, of course not. But it must be kept in context. The markets and to a greater extent the media generate a huge amount of ‘white noise’ and it is hard to know what to ignore and what to take seriously. Few private individuals in full time employment have the time and resources to manage their own investment portfolio. Instead they employ a qualified, experienced professional. In conjunction with their investment adviser they put an investment plan in place which is designed to meet their goals within their specific circumstances. These plans tend to be over the very long term perhaps 10 or more years.

Investment advisers are not only useful at the outset of an investor’s financial planning.  Having a third party available helps investors in times of higher than usual market volatility. They help investors remember they are investing for the long term and offer a professional view of the situation. Additionally, when adjustments are needed they are on hand to act as a guide.

Part of any investment plan should be the management of risk. For example, a young person saving for retirement can afford to take greater risk than an older person who has already built up a significant amount of capital and is with a few years of retirement. The degree of risk is reduced as the investor’s goal is approached. This then reduces the impact of market fluctuations such as the one’s we have seen recently.

It is also important to recognise that the media generally focus on just one of the traditional asset classes: equities or shares. Whilst this is an important part of many portfolios, most will also include investment in cash, fixed income and property. These assets react differently to equity markets. This diversification is a fundamental way of reducing risk in a portfolio.

The message is if your portfolio is correctly structured to suit your needs you shouldn’t panic and you should keep focused on the long term. On the other hand, if you are at all concerned about your portfolio you should contact a professional adviser.

As always, if you have any questions or comments please let me know.