Over the years we’ve met many employees and retirees from the United Nations in Rome and across the world. We’re often approached for independent financial advice by people from the Food and Agricultural Organisation (FAO), World Food Programme (WFP) and the International Fund for Agricultural Development (IFAD).
While there are many benefits to working for a UN agency there are also several challenges. Dealing with UN employees requires a specific understanding of these concerns. We’ve found a few common themes amongst our clients from the UN which are explored in this article along with the solutions we often help people to implement to optimise their financial situation.
1. Tax Implications of Retirement
The transition from being a UN employee to becoming a normal tax resident in your chosen country of retirement is an area that can cause some stress and uncertainty as you transition to a different way of life.
The United Nations Joint Staff Pension Fund (UNJSPF) is there to provide for employees in retirement but there is often some uncertainty over how the pension should be treated and taxed in various countries. Another concern is how to manage assets, often held in multiple jurisdictions, which have been accrued while working for the UN but have never been declared to a tax authority.
The answers to these questions invariably lead to further questions which then determine the options available to you.
It is crucial to understand the tax implications specific to the country you are retiring in and to be proactive. By organizing yourself in advance you can be sure of maximum tax efficiency and compliance.
We can help by undertaking a detailed analysis of your circumstances and plans for retirement which allows us to make some recommendations to you. The basis of these are in most cases how to organise yourself to provide the income your require during retirement in the most tax efficient manner in the country you wish to retire to. Our expertise in cross border financial planning and access to an extensive global network of regulated advisors allows us to provide suitable advice in almost all cases.
2. Paying unnecessary taxes
UN employees resident in countries with withholding tax regimes, such as Italy, are often concerned about paying taxes which aren’t actually necessary. For example, if money is saved or invested then growth could be subject to capital gains tax (CGT) which is 26% in Italy. When an asset is sold at a gain CGT is withheld by the financial institution and paid to the local tax authority automatically.
Many UN employees have a unique tax status and are not assumed to be normal tax residents yet holding investments which come under withholding tax regimes could lead to paying unnecessary taxes.
As a result many feel restricted using the limited services offered within the agencies for savings and investments rather than seeking out independent financial advice.
UN employees should not be accruing local CGT liabilities on their savings and investments in Italy or elsewhere. Local banks and financial institutions typically only sell their own products and do not provide holistic planning or make independent recommendations that consider your circumstances as a UN employee.
Through our years of experience we understand your status and have extensive knowledge of the suitable options to help you save and invest without having to worry about local taxes. We are independent so can go to the whole of market to provide the most tax efficient structure to suit your needs.
3. Pensions for Consultants
The UNJSPF is an excellent pension scheme but unfortunately it is not open to everyone. Consultants cannot become members of the scheme and often feel insecure about their long term financial future as a result. The problem is compounded as while working for the UN they do not make social security payments in their host country so accrue no state pension either.
Consultants tell us that they are worried that by working for the UN as a consultant over the long term there is the possibility they could leave and have no pension cover whatsoever.
Contrary to what many Consultants think, they do not need a pension in the traditional sense. Pensions only really work if you benefit from tax relief on contributions (as you will normally be taxed when you take income from a pension) or if your employer is also making contributions.
In addition to this, pensions cannot generally be accessed until at least 55 years of age and commonly much later.
Considering these circumstances Consultants should be saving regularly with an eye to the future and we can provide a simple solution to enable this. We have sourced an ideal solution with UN consultants in mind which has much lower costs than a pension, provides excellent tax efficiency, is extremely secure and above all is entirely accessible at any time, unlike a pension.
The chance to move around the world and work in different cultures is seen by some as an exciting opportunity and by others as a disruption to their lives. Whether you embrace this opportunity or not there is no doubt that working in different countries raises a number of financial concerns.
For example, there are the organisational concerns in moving to a new country, such as how to best manage general banking services. Then how to manage assets (such as property, savings and investments) that you have in the country you are leaving. Often the situation can be quite overwhelming and priority is given to other concerns such as learning the local language or finding the right school for the children. As a result people choose to do nothing and by doing so may lose opportunities and accrue unnecessary tax liabilities.
Working in remote ‘high-risk’ countries can also pose financial problems. Countries are risk rated by financial institutions for the purposes of anti-money laundering and some countries where UN agencies operate are considered high risk or, worse, blacklisted. This can seriously limit access to financial services in regulated jurisdictions. In addition to this, getting good regulated financial advice can be difficult outside of Europe or the US, where there is generally little or no regulation of financial services or financial advisors.
Portability is the answer to these issues, and is something we provide in our solutions to internationally mobile professionals. When we recommend solutions to UN employees we take into account the likelihood of moving country in the coming years whether for work or retirement. We provide solutions that are entirely portable and will continue to function perfectly wherever you go so that your keep on a smooth financial path.
We are also able to provide a wide array of options to people working for UN agencies in most countries, despite the blacklists which many financial institutions follow.
5. Job Insecurity
This is a common concern, in some agencies more than others at present. Facing an extended time out of work can be stressful and consultants have even found that contract breaks can last many months longer than expected.
There is of course a financial planning impact to not having a steady income or becoming unemployed and the concern often revolves around savings plans and pensions which are designed to be paid into on a monthly basis over a long period of time. These types of solution lack flexibility and the person can find themselves paying heavy penalties for withdrawing money and even for not paying contributions for a period of time.
The flexibility and portability of solutions is a key criteria for us. We do not recommend any solutions which are not entirely flexible, in that all of the money you have saved cannot be accessed at any time without penalty. The same goes for contributions, with the solutions we suggest contributions can be adjusted to suit your changing circumstances and can be reduced, stopped or increased at any time. This means that should you find yourself in a situation when you do not have a steady income for an extended period of time you are able stop making contributions and to access your savings without being penalised. Recommending products that are portable also protects you if you have to move country to find a new opportunity.
Over the years we’ve helped numerous clients at the United Nations in Rome and across the world.
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