15th Sep 2019
The 10 most frequently asked finance questions
We asked the UAM team to get their heads together and let us know the ten finance questions superyacht crew most frequently ask, and then provide their answers. Read on to learn more about a whole range of issues that are often on your mind, like starting your own business, cash bonuses, getting rich, saving for your future, and more.
1) Will I still qualify for a state pension if I work on-board a superyacht?
Advice from Tom Vjestica
The state pension system varies depending on each individual’s nationality but, as a general rule, you’ll need to have paid social security/national insurance contributions in your home country and/or the country(s) you’ve resided and worked in for a defined number of years to qualify for a state pension.
Having declared themselves non-resident, taken advantage of government tax exemptions (in the UK for example) or never declared their income, many seafarers may not qualify for a state pension in their home country.
It is also worth noting that employers in the yachting industry are unlikely to make long term provisions like pensions for their crew. Our recent financial well-being survey showed that only 6% of employers provide pensions to superyacht crew. The onus, therefore, falls heavily on the individual to take control of their financial future and create their own savings and investment plan to make sure they’re set up for the long term.
2) I often get a large cash bonus at the end of a season which I spend on having fun. What is a better use for my bonus?
Advice from Olivia Williams
First of all, you deserve to have fun after a busy charter season!
It’s great to spend some of your cash bonus on a ‘well-done’ for completing a demanding season but, before doing that, it’s also good to know you’ve saved a portion of your bonus.
Once you put your cash bonus into your bank account, there will be little or no interest paid on your money. An alternative would be to create a higher interest savings account to make sure your money works hard for you to provide what you need to satisfy your future goals and aspirations.
3) I’m too busy to work on my finances. How can I make more time?
Advice from Elliot Krauze
Effectively managing your finances is often something that gets pushed down the priority list.
Even when or if you get around to it, it inevitably stagnates, becoming gradually irrelevant and ineffective as your life changes. We may have a responsible partner or family member in our lives that help us get around to it, but whatever the case, working on your finances is probably unlikely to be your forte.
So, why do we let something so important not get the care and attention it deserves? Mostly because life gets in the way.
Earning money followed by the satisfaction of spending it on the things we enjoy is something we all like to do and, as Financial Planners, something we see every day. It’s our job to make sure that you not only sit back and ‘take stock’ of where you are now, but that you put a plan together, stick to it, and regularly review it to ensure it remains current and relevant.
In terms of ‘how do I make more time for it all’, we recommend that you allocate time in your schedule to seek a professional to explore where you stand, then regularly make time to see how you are progressing. Having a professional in the background keeping you on the ‘straight and narrow’ is proven to be the most effective way of achieving your goals, as well as freeing up your own time to do the things you enjoy.
4) I’ve heard of the Seafarer’s Earning Deduction (SED), but I’m not sure how to make the most of it?
Advice from Oliver Maher
If you are UK tax resident and employed aboard a ship operating outside UK waters you may qualify for a reduction in the amount of your income that is subject to UK tax; this is known as the Seafarer’s Earnings Deduction (SED); you must use a Self-Assessment Tax Return to make a claim for the SED.
The three criteria to consider when deciding whether you have a claim, are:
A valid claim period
This means a period of at least a year (365 days) beginning and ending with a period outside the UK.
A period outside the UK can be a;
- period of employment;
- unemployment period, or;
- holiday abroad.
Once a valid claim period is attained it carries on until there is a failure. A failure occurs if, during the claim period, you;
- Spend 183 or more continuous days in the UK; or,
- Break the half-day rule (see below).
The half-day rule is applied at each return to the UK.
- All days since the start of the claim are added together, then divided by 2 (A);
- All days spent in the UK
since the start of the claim are added together (B); - The two figures are compared;
- Where (B) exceeds (A) there is a failure in the claim period.
A claim period ends on the previous return date. Once a claim period ends, a new claim period commences from the earliest possible date you leave the UK.
A valid foreign port for each employment in each tax year
Each employment in each tax year must include at least one voyage or part voyage that begins or ends at a foreign port.
A voyage, or part voyage, that begins or ends at an oil or gas installation (including a rig in drilling mode) located outside the UK and outside the designated areas of the UK continental shelf can be regarded as beginning or ending at a foreign port for this
purpose.
The employment must be on board ships
A seafarer is someone that works on a “ship”. There is no definition of a “ship” in tax law but “offshore installations” are specifically not regarded as ships.
5) I feel like I should have more money left at the end of the month; why don’t I?
Advice from Dan Ward
For the majority of land-based employees with essential monthly outgoings like Tax, accommodation, utilities, food and travel, even if arguably only a few people do it, setting a monthly budget is a necessity.
For crew with minimal outgoings, this isn’t the case.
If you don’t know where your money is going every month, use your last three months bank statements to calculate your average expenditure and allocate your expenses to different categories, like clothes, travel, food and alcohol etc.
From this, you can then see what’s essential and where you‘ve wasted money! Then use this to set yourself a monthly budget you can keep to bearing in mind that, realistically, the majority of crew should be able to save at least 40-50% of their salary.
6) I’m thinking about setting up my own business; how can I save enough to leave yachting?
Advice from Tom Vjestica
Many people working in this industry have the goal of owning their own business when transitioning back to land full time. Working in the yachting industry can be an excellent opportunity to build up the capital necessary to achieve this goal. The key is to quantify the start-up and operating capital that will be required to transform the business from an idea to a profitable venture.
Calculating all required costs and producing a detailed business plan is always a good starting point. Cash-flow is king for a start-up, and a common error is not factoring living expenses into these calculations. Once you’ve calculated the total funding you’ll need, it’s then possible to apply financial planning techniques to determine how much you’ll need to put aside each month to reach this goal.
High Street banks and Seafarer Accounts typically provide 0% interest at the moment, so a better option to help you build your start-up capital is to set up a regular monthly savings & investment account.
7) Are they any alternatives to Standard Bank?
Advice from Olivia Williams
This is one of the most frequently asked finance questions by Superyacht crew. The answer is yes, but what you set up purely depends on what you’re looking for from the account. This is why it is important to think about how you intend to use the account.
Popular alternatives for crew include accounts like Revolut and N26. You can read about these different online banks that are available and suitable for Superyacht crew in our in-depth review.
The Seafarers Standard Bank Account is a real bank account with all the security and facilities you would expect from a proper bank account. You receive a debit card, but you can also take advantage of everything that a real bank account and professional banking facilities provide, including bank statements and tax certificates.
8) What is the quickest way to get rich?
Advice from Elliot Krauze
We should all know by now, that there is no long-term reliable, reputable and robust ‘get rich quick’ scheme. It does happen from time-to-time, but usually, it’s the domain of fictional Hollywood. Rich people get rich by working hard, being smart and dedicated.
There is no hard and fast rule, but ‘getting rich’, is typically about:
- Diversification
- Re-investment
- Multiple income sources
A lot of us, however, class being ‘rich’ and being financially wealthy as the same thing. There is a lot to be said for being ‘rich’ in friendships, relationships, work/life balance, health, stress-free family-orientated lifestyles to name but a few. Everyone is different and what motivates them to be truly happy is unique.
If getting rich quick is purely about the money for you, then we suggest getting a lottery ticket!
9) How is a financial Planner different from a Financial Adviser?
Advice from Oliver Maher
Traditionally, financial advisers concentrate on selling you a financial product to fix a ‘problem’, rather than focusing on financial planning. Financial planning is a service revolving around YOU, not your money.
When it comes to considering future financial goals, most people don’t want to be sold a product. Instead, they want someone to understand them and their dreams and goals. This is someone who can articulate how they get from where they are now, to where they need to be.
People want clarity about their financial futures and a service that relates their life plans to a financial plan. A good financial adviser will do this by supplying a comprehensive roadmap which realises the lifestyle they want to achieve or maintain.
A financial plan includes your life goals, lifetime financial cash flow projection, and an analysis of how your financial position might change. A good financial planner will have the answers to the finance questions often asked by superyacht crew because they will have experience in the industry.
10) I’d like to purchase a property abroad as an investment. Which country do you think will be best?
Advice from Dan Ward
Property investments should always be made with your head, and not your heart.
There are many factors you’ll need to consider before making your choice; long term plans for the property, your budget, if it will be a holiday let or long-term rental, mortgage availability, potential rental yield and exit strategy etc.
There isn’t one country where it’s best to buy an investment property. Buying in London, for example, will always be a may be a long-term investment, but the cost of buying there is prohibitive and likely will never provide the rental returns you need. Buying a cheap property in a fashionable developing country, on the other hand, may seem attractive, but the risks may be higher due to a plethora of reasons including political unrest and crashing currencies as we’ve recently seen in Central and South America.
Most importantly the ability to be able to sell your property to recoup not just any profit but also your initial investment is essential.
We wrote a blog post recently about property as an investment here, which we recommend you read.
