Family Money: Safe investments in Thailand?

By Leslie Wright

Over the years I have come across many clients who have onshore pension schemes, set up through their current or past employers. Others had started up a personal pension scheme whilst they were working onshore in the UK.

A question that often arises is whether or not they can continue to make contributions into an onshore scheme now that they are living overseas.

The simple answer to this question, generally, is “No.” Inland Revenue rules disallow continuing contributions into onshore pension schemes which benefit from tax relief, once the contributor moves offshore.

If the onshore provider - typically one or another of the large insurance companies - learns that you are no longer resident in UK for tax purposes, they are obliged to cease accepting contributions into an onshore pension plan.

Also, once they become aware of your non-resident status, they are obliged to return all contributions they may have continued to accept during the period you have been offshore.

There are exceptions, so if in doubt you should contact your onshore provider to seek clarification of this point.

Transferring it offshore

The question I’m most often asked, however, is whether it is possible to transfer an onshore pension scheme offshore.

While in theory it is possible to do so, in the vast majority of cases Inland Revenue rules require that it be transferred only to an “approved” offshore pension scheme. Approved by them, that is. And for all practical purposes such animals don’t exist in the offshore financial services market.

You may have heard of offshore contributory “pension” plans; you may even have one yourself. But these are simply product wrappers for what, basically, are unit-linked savings plans.

There’s nothing wrong with that provided you are more-or-less permanently resident offshore. Most such plans are very good, with a high degree of flexibility and a variety of beneficial features one can select at outset.

Typically they access a menu of collective-investment funds which range from relatively staid ‘with profits’ funds through to more aggressive equity-based funds in your markets of choice.

You generally have the freedom to include several such funds in your plan, so you can adjust the portfolio to your own preferences and risk-aversion profile. Also, the fund selection can be rearranged in a cost-effective manner to take advantage of changing market conditions at any time.

Some of these plans can be structured with an insurance wrapper that would render them tax-efficient should you ever return permanently to your country of origin; others can be continued wherever you might move to or can be stopped at any time.

In selecting the right one for you, your financial adviser should ask a series of questions to determine your needs and likely future status, and thus what ‘bells & whistles’ should most appropriately be included in the particular plan he would recommend to you.

Gaining access to the cash

But to return to your ‘frozen’ onshore pension, in the case of many of the personal pension schemes provided by UK-based insurance companies, once you reach the age of 50 you are allowed under IRD rules to take a proportion - typically 25% - of such schemes in cash, which you are then free to reinvest offshore however you like. (It should be noted, however, that it would be wise to reinvest it into a suitable offshore investment vehicle, rather than sink it into a beer bar in a ‘prime location’ off Pattaya Number Two Road, no matter how persuasive are the arguments given you for so doing.)

The remainder must remain onshore, and is generally used to purchase an annuity, either with the plan’s provider or on the open market.

Because the annuity (or effectively pension draw-down from it) will be fixed at then-current values, it is wisest not to take the cash element until such time as you are ready to start drawing your pension.

Depending on your age and annuity rates at the time, the typical draw down from ฃ100,000 built up in your pension pot, used to purchase an annuity, is at present only around ฃ6,000 a year. Not a very enticing return.

In the case of most corporate pension plans, members can commute part of their pension for a lump sum, which may well be tax-free. The remaining benefits will be paid out as a regular pension.

The amount of tax-free cash you can take out is determined in different ways depending on how the scheme was set up.

One typical way is 1ฝ times final salary. However, the definition of ‘final’ varies, and that figure is most usually determined by averaging your declared earnings over the previous several years (typically three). And this can be taken only at the retirement age stipulated by the scheme in question - typically 60 or 65.

Then again, some definitions of ‘salary’ may include basic salary only; others may include fluctuating elements (e.g., commissions, bonuses, directors’ fees, or a proportion of these).

The example used – 1ฝ times final salary - applies to what is known as a “60th” scheme. So if Mr A works for the same employer for 40 years under such a scheme, he will receive 2/3rds of his ‘final’ salary upon retirement, less the tax-free lump sum discussed earlier.

It is worth noting that 2/3rds ‘final’ salary is the maximum benefit that can be taken under UK rules.

However, if you wish to take “early” retirement and want to get at your benefits before the stipulated retirement age, this can normally only be done with the approval of the scheme’s administrators and co-operation of your employer.

Typically, this would be given only in the case of chronic ill health or corporate restructuring, whereby your employer is only too glad to get rid of you with a ‘golden handshake’.

Why bother?

The main argument for moving an onshore pension offshore is that onshore funds generally get taxed at source (although you never see this deduction) whereas offshore funds grow free of tax. So an offshore fund is likely to grow at somewhere around 2-3% per annum more than the equivalent onshore one.

Thus there is a strong case for moving as much of your onshore pension as is permissible offshore, where it is likely to produce better growth. Or last longer if you’re drawing down an income stream from it. (Which of course is the object of setting up any sort of pension plan in the first place.)

But going through the exercise of dealing with the IRD and your pension provider is administratively burdensome and can be very time-consuming – unless, as mentioned earlier, your employer offers you a ‘golden handshake’ and their provident scheme’s co-operation in ‘unfreezing’ your corporate pension.

One also has to consider the relative cost-effectiveness of such an exercise. If you’re talking about a relatively modest sum of money - less than ฃ40,000 for instance - the tax gains are hardly worth the hassle.

Beware the defrosters

It recently came to my attention that some financial advisers are offering to help ‘unfreeze’ onshore pensions. How nice, you might think.

However, I have gathered that in the case of at least one Bangkok-based firm which has been advertising this service recently, all they do in fact is arrange to have your corporate pension transferred to a personal pension scheme. The scheme is still onshore, with just a different “approved” provider.

They also generally use the opportunity to sell you an offshore “pension” plan, just to round off your retirement planning.

In fact, an offshore broker should not be signing up anyone for any onshore scheme, because he is probably not properly licensed under UK regulations to do so.

But compliance issues aside, financial advisers without specialist training or help are not competent to assess the suitability of transfer values and the benefits they buy, since assessing transfer values from one scheme to another are notoriously difficult to calculate. The transferring scheme and the receiving scheme may each calculate the value on a different basis.

In addition, transferring schemes may create delays and use calculations designed to discourage the transfer of funds from their schemes (i.e., you may well find yourself subject to penalties for withdrawing “early” from an existing scheme; and will undoubtedly incur a whole new set of charges going into another one).

It is also difficult to identify whether or not the benefits offered in the new scheme are equivalent to the benefits under the old scheme.

In my industry this exercise of persuading you to come out of one scheme to start up another is called “churning” and is very much frowned upon, since the only person who really benefits is the broker.

This is wholly different from an ethical adviser recommending an appropriate offshore investment vehicle to accommodate the lump-sum of cash you are permitted, after obtaining IRD approval, to withdraw from your onshore personal pension scheme upon passing the age of 50 or from a corporate scheme at retirement. Plus providing you thereafter with ongoing advice as to what adjustments should be made to the underlying investments as market conditions change.

Provided the charges associated with such a vehicle are less than the withholding tax saved - in other words, you can take at least a 4-5 year view with such an investment - it makes sound economic sense to move it offshore.

But if you intend to return to your country of origin within, say, a decade of starting up an offshore plan, or will be requiring the capital for purposes other than a pension in less than 5 years, it would be wisest to leave your onshore pension where it is. In many cases it is simply not worth the hassle, and in others an exercise in futility, to try bringing it offshore.

Leslie Wright is Managing Director of Westminster Portfolio Services (Thailand) Ltd., a firm of independent financial advisors providing advice to expatriate residents of the Eastern Seaboard on personal financial planning and international investments. If you have any comments or queries on this article, or about other topics concerning investment matters, contact Leslie directly by fax on (038) 232522 or e-mail [email protected] . Further details and back articles can be accessed on his firm’s website on www.westminsterthailand.com .

Editor’s note: Leslie sometimes receives e-mails to which he is unable to respond due to the sender’s automatic return address being incorrect. If you have sent him an e-mail to which you have not received a reply, this may be why. To ensure his prompt response to your enquiry, please include your complete return e-mail address, or a contact phone/fax number.

By Mirin MacCarthy

Raymond Chow, vice president of World Gems Collection, was born in Guang Dong China. Obviously well educated, smooth and charming, he exudes confidence as he presents his card, with 22 tertiary education degree letters after his name. He looks as if he was born to the vice-presidential position, but nothing could be further from the truth. He was, in fact, a refugee!

His family fled to Hong Kong during the Chinese Cultural Revolution when Raymond was an infant. His father, a wealthy merchant before, was lucky to escape with his life but the new life in Hong Kong was tough, as the family had to start from nothing. In the family of eight children there was not enough money for university and Raymond had to work on a part time basis every day to support himself through high school. This was to become a major shaping influence on Raymond, which left him with a determination to succeed, no matter what the personal cost.

His first job was helping his father in a company selling fashion accessories. Sadly their beloved father who had tried so hard for them died a year later and they closed the shop.

Raymond’s next position was with a training consultancy company where he learned to be a trainer in management science. It was because of that that he began to realize how important self-development and education really was, so he saved to continue his studies. He studied in an international program with Carpendale University of South Illinois, USA. This was a programme where a major part of the classes were conducted by American professors flown to Hong Kong, so the students were able to continue working while studying.

In six years Raymond had six business degrees including letters in Accountancy and a Masters in Business Administration. After graduation he was headhunted by a Taiwanese investment company and travelled constantly between Taiwan, Hong Kong and Cambodia for three years.

Now in Thailand, he is actually no stranger here, being a frequent visitor since his sister married a Thai 20 years ago. His mother was fond of the warm weather and the friendly people so he moved the family to Thailand three years ago. However, because of work related travel commitments, he was only able to settle here one year ago.

Raymond has a diverse set of interests from reading widely and fishing, to collecting pens and watches. His favourite watches are Rolex, and old Hunter K.S. and Railroad pocket watches. “The Railroad pocket watches in particular because the mechanism is far more accurate than other pocket watches.”

His knowledge of gems was gained on the job about 23 years ago when he was a sales representative for a number of jewellers in Hong Kong. He did that for a couple of years and then joined up with a few friends to open a jewellery company, but this they closed a year later when the economy took a downturn.

However, Raymond was undeterred, and six years later the group started another company trading jewellery between Hong Kong, China, Japan, Korea and South East Asia. “It was a small business but it was a good opportunity to meet friends in this region.”

Explaining his outlook on life, Raymond said, “Life is never meant to be easy. It is important to keep trying and not to be afraid of failure. Trying, testing and failing teaches you what to do and is a walkway to another stage of life.” The other qualities he values are to think twice before doing anything, not to make rash decisions and to make thorough plans. While success to Raymond is: “A very abstract word, to be able to achieve some targets and continue; that is success.”

A year ago Raymond brought the World Gems collection to Pattaya. This is what put a stop to his travelling throughout Asia and made him settle here. “The World Gems Collection is an ambitious project to help promote the gem industry in Thailand. The board of directors are all in the jewellery business here, and it is of major importance to supplying gems to other nations.” Pattaya was chosen because as well as being an international city, it is close to Chantaburi, one of three major gem mines in Thailand. “Our target is to build this company to help customers find satisfaction in buying and showing them the original gemstones and craftsmanship. My plans for the future are to help the company to stretch out of Thailand to bring Thai gems into the international market.”

Raymond’s advice to other farang would be businessmen here is considered. “Know your own business. Then consult others’ opinions on how the system works, the government, tax, legal, and culture. Culture is very important here, it would be provocative to start up a business against the culture.”

Spend some time in his company and you find Raymond Chow is a charming man who impresses you with his thoughtfulness and value of quality. “It is not important where a ruby originates from, but most important is to examine the quality of the stone.”

His advice to tourists who want to buy gems is to always go to larger establishments and to ask questions about the shop they are going to visit. Additionally, they should ask more questions when they are buying. And finally, “Be aware that there is a Thai gems and Jewellery Traders Association here to protect the industry.”

I am sure Raymond Chow is going to be a real jewel in the gem industry in Pattaya.

by Mirin MacCarthy

by John D. Blyth

East Africa

Of the three countries, all with confused political histories, served by the one time East African Railways, Tanganyika (later Tanzania) was initially German East Africa; Kenya and Uganda had British and French spheres of influence, and the railways were at first developed accordingly. On all three sections Garratts were needed for the loads and fearsome grades from the coast to the interior and the drop into the Rift Valley to the west. Two types are of real note, eventually known as Classes 57, 58, and 59.

East African Railways Class 57, No. 5711, at Eldoret in October 1967: the narrow “Giesl” chimney should be noted.

For many years the axle load permitted was low, about 11 tons, and this was the main restriction on the first two classes, pre-and post-war versions of the same type, a most unusual 4-8-4+4-8-4 not used elsewhere, and giving the locomotives more wheels that ever went under any other Garratt - 32 in all. All were fitted with the Austrian “Giesl Ejector” post-war, which increased their power output without any strengthening of the frames. Within their limitations they did well, and a picture of one is well justified.

The second notable type, the Class 59, was a true post-war product, one of the heaviest Garratts built, at around 260 tons on the road. Oil-fired, they were designed to take 1,200 ton trains up from Mombassa to Nairobi, working through with relief crews riding, off-duty, in a caboose. The example shown has the original chimney, but the Giesl Ejector was eventually fitted to all the class, enabling even greater loads to be worked. A very substantial increase in axle loading was by now possible, 21 tons. The purpose of this type was to clear the heavy back-log of imports waiting to go up-country from Mombassa to Nairobi, and in this they were a total success.

On the Beira line in Mozambique, Henschel-build Garratt of 1956 heads through the Amantonga forest in 1969. The deflectors alongside the chimney are needed to clear smoke from the forward view from the driver’s cab on these Kylchap-fitted engines.

The 59s were due to the genius of ex-Great Western engineer Willie Bulman, and but for the intrusion of diesels, his next type of Garratt, the Class 61, could well have been the “Big Boy” of the East African metre gauge lines. A number of variants were schemed out, all with a maximum axle load of no less than 26 tons, double 3-8-2 and double 4-8-4 versions being considered, with weights of between 318 and 372 tons being estimated. A unique version which was to tow behind it a condensing tender was also sketched. The advent of diesels saw to it that this, in any of the forms was not to be seen, and it is sad, too, that none of the drawings available are suitable for reproduction. It would have been a classic indeed!

Mozambique and Angola

These two former Portuguese colonies, on the east and west coast of Africa respectively, earned uneasy independence in the post-war period, ending up with unpleasant Marxist governments, and in the second case an invasion and civil war.

The CF Mozambique consisted of a number of lines wending their way westward (inland) from various coastal ports; of these the Beira line is the hardest to work with formidable grades west of the center of Gondola; it is on this line that Garratts were justified, although all but a few were second-hand (at least) from other systems. Most notable were a small batch of double 4-8-2 Garratts from Henschel of Germany, with much in common with the later types in South Africa itself (the GMA/M Classes). They were larger in the boiler, and had an unusual double Kylchap (remember M. Chapelon’s invention described some months ago?), a feature thought to be unique in Garratt practice. It is sad that independence saw a serious deterioration in the condition of these and other fine machines; it would be a sad pilgrimage to Gondola today, even if it were permitted.

Rhodesian double 4-6-4 Garratt raises a smoke screen as it leaves Ramathlabama with a passenger train from Mafeking to Rhodesia in April 1969

In Angola, also not to be visited, the position seems to be even worse, and railways may well be a thing of the past, the erstwhile British interest long forgotten. Of the three lines of the 3 ft. 6 in. (1067 mm) gauge, standard in southern Africa, the Angola, Benguela, and Luanda all used Garratts; the Benguela was possibly the most interesting, with “dopla” working (a second Garratt cut in mid-way along the train), and also wood firing. Unlike old Siam, the precaution was taken to plant several millions of eucalyptus trees alongside the lines; these like to propagate, and grow fast, but such locos can never equal the power outputs of oil or coal fired locos of equal size; this was well recognized, and oil-firing was used on the more difficult section.

My picture shows a Garratt of the Angola Railway leaving Luanda, built by Krupp of Essen in Germany; the unusual styling of these engines ought to be on record in the “Mail”!

Rhodesia

I use this name, non-political, to avoid confusion in my own mind, and anyway, Garratt development was almost all during the British presence there. Many Rhodesian Garratts came second hand from elsewhere, and it is interesting that one of the big successes was the 6-coupled double 4-6-4 type, a sharp change from all the 8-coupled types seen, and originating in some which came second-hand from the Sudan. They were at once popular, and the type, with improvements, was built in appreciable numbers. My picture shows one on a passenger train at the border with South Africa, at Ramathlabama in 1969, with a train which has come from Mafeking. Other modern-types in Rhodesia had much similarity to those on the great South African Railways system which we will look at next week.

by Lesley Warner

Did you ever wonder why there are so many blond women over 40?

How did you feel when you plucked your first grey hair from your head? I must admit to a feeling of shock when I encountered my first one and a feeling of what can I do to stop more appearing. Against popular belief, your lifestyle has very little to do with how quickly your hair loses its youthful colour. Although there are some recent studies suggesting that smokers go grey sooner than non-smokers. There is also phenomenon of “going grey” due to a shock or fright but is not well documented and is hard to explain physiologically.

Hair colour is produced by a variety of human pigments, most notably, melanin. Melanin is produced by melanocytes that are found within the layers of the hair follicle. When hair is produced by the reproduction of the epithelial cells comprising the follicle, newly produced melanin accumulates in the cells and colours the hair itself as it emerges from the follicle. Those people with grey hair make little or no melanin and, therefore, the hair is virtually transparent and we see the colour of the dead cells comprising the hair.

There are several reasons for grey hair and these vary by one’s age. A big one is heredity. If you have genes from your family that code for “turning off” the metabolism of the melanocytes at an early age, you will go grey at a rather young age. If your genes code for grey hair at a later time, you will become grey as you get older. So take a look at your parents and you will know what to expect.

On average, somewhere in your late 30s your hair starts cutting off its production of melanin (or pigment). Hair without melanin is actually white but looks “grey” against the background of the rest of your pigmented tufts. Greying is a gradual process with follicles shutting down over time. With a few greys here and there comes the familiar “salt and pepper” look. For some, the change can come on fast and furious; for others it may be concentrated in just one area of hair, creating a patch or streak effect. Some people face premature greying with grey hairs appearing in the late teens or early twenties.

Luckily, with today’s long-lasting 100% grey coverage hair colours, you can quickly and easily return to the true you - or have fun discovering another colour hidden within! Although it is generally safer to go a shade lighter than your ‘lost’ natural hair colour.

Some grey hairs are particularly stubborn or “resistant,” either harder to colour from the start or quicker to lose colour than other greys. These may be coarse grey hair, prematurely grey hair, or the grey hair around the temples and hairlines. Try these simple strategies to combat those stubborn greys.

Start your hair colouring session by applying colour to the resistant grey areas only. Then put colour on the rest of your hair. This technique gives the resistant grey hairs more time to absorb more colour.

If your resistant grey isn’t being covered completely, try leaving colour on a few minutes longer than your strand test, checking colour every five minutes. And be patient... it may take up to 45 minutes to cover.

Because of their undertones, “cool” ash tones tend to look more “grey” than warmer tones. So if you’re using an ash hair colour, consider a “warmer” gold tone of the same product.

If after leaving semi or demi-permanent hair colour on for a few minutes longer, your greys still show through, you might consider going to a higher level.

Deeper, darker shades tend to cover grey better than lighter shades do.

Good luck.

by Jan Olav Aamlid - President - House of the Golden Coin
http://www.thaicoins.com

Some days ago a friend of mine asked me about some Olympic Coins he had bought for his son in Canada back in 1976. These were coins made for the XXI Summer Olympics in Montreal.

He had fourteen different five dollar coins and fourteen different ten dollar coins struck in silver. They were stuck both in proof and un-circulated. From 76,908 to 165,203 pcs. of each coin were struck in proof. They were sold for much more than face value and today the market price are face value or slightly more.

The story of striking coins with Olympic motifs goes back almost 2,400 years. The Greeks were the first, in the city of Aspendoz in the area of Pamphylia. A coin with the motif of two naked wrestlers on the obverse and a slinger wearing short chiton on the reverse were struck about 400 to 370 BC.

This coin is a Stater in silver that sold in 1982 at a coin auction in New York for about 20,000 baht. Today I believe the price is much higher. The Greek struck several other coins with Olympic motifs, but during the reign of the Roman Emperor Domitian, who ruled from 81 to 96 AD, the games were stopped. The Emperor did not like anything that could be reminders of the Greek traditions.

Pierre de Coubertin (1863-1937) from France took the initiative to start the games again. In 1896 the games were again arranged in Athens. But it took another 55 years before another Olympic coin was struck. This was struck for the Olympic Games in Helsinki in 1952, a 500 Markkaa coin.

The first were struck in 1951 with the mintage of 19,000 pcs and another one with the same motif in 1952 with a mintage of 586,000 pcs. The one from 1951 has a market value of 14,000 baht while the one from 1952 costs about 1,200 baht in nice condition. One might say that the price sounds cheap considering the face value is 500 Markkaa, but in 1963, a hundred old Markkaa became one new Markkaa. The actual face value today for the Finnish Olympic coin from 1951/52 is 5 Markkaa, or about 30 baht. So if you were lucky to pick up some of the Finnish Olympic coins from 1951, you have made a good investment.

The next Olympic coin to be struck was for the games in Tokyo in 1964. It was a 1,000 yen coin with Fuji Mountain on the obverse. Even with a mintage of fifteen million the coin became very popular among collectors and good forgeries exists. The market value of the Japanese Olympic coin from 1964 is now about 1,200 baht in nice condition.

From 1964, Olympic coins have been made for all the Olympics. The investments for the buyers have not always been the best, because the organizers of the Olympics look at the revenue from the sales of Olympic coins as a way to finance the Games. The organizers want the numbers of coins struck and sold as high as possible, but sometimes the market can not take it. The only way a coin will increase in value in the secondary market is if there is someone who wants to pay more than the issue price.

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