This article describes how a relatively asset-rich but income-poor retiree in Australia, especially one from Sydney, can attain a comfortable life in Malaysia.
It's often been reported in Aussie newpapers that many retired Aussies are finding it hard to cope with the high cost of living in the major Aussie cities, especially if they rely heavily on their meager state pensions. The so-called Age pension for a married couple goes up to A$500pm, excluding rent assistance - this is an extremely low for anyone to live on, especially in Sydney. My feeling is that a very basic cost of living for a retired Sydney couple would cost some A$2000 (MYR 6k) per month, excluding house rental but including eating out once a week at a medium-price restaurant.
In order to supplement their retirement income, some people have resorted to taking up reverse mortgages i.e. borrowing cash using their homes as collateral, thereby using up the equity in their homes to achieve a more comfortable lifestyle. The problem with this approach is that the borrowed money & the accrued interest charges keeps growing exponentially until the borrower ends up with increasingly smaller equities in their own home & there is little left over to cover the major medical expenses expected in most people's terminal years, not to mention little residual value left in their homes for their next-of-kin.
I think that very few Aussie retirees are sufficiently familiar with living conditions in their neighboring Asian countries to be able to properly assess the possibility of living their retirement years in a low-cost country like Malaysia using the equity in their own homes. For example, how many people realise that the basic monthly cost of MYR6k/month described above is in fact a very comfortable budget for living in Malaysia. This applies to living in KL & is definitely more than generous a couple living in other cheaper locations. Extending this argument further, this budget borders on luxurious living for other cheaper countries such as Thailand or Cambodia.
Besides the disparity in the cost of living between Australia & other Asian countries, there is also the big gap in house prices. For example, a typical 3-bedroom unit (1200 sq ft) in Sydney would typically cost between A$600k & 800k (MYR 1.8-2.4 million) whilst the same unit in KL would cost a third of that! This means that if a retiree who fully owns a $800k unit could cash out & swop it for a very similar one in Malaysia, leaving a net cash balance of MYR 1.6 million (AUD 500k). The latter could earn AUD 32.5k pa @ 6.5% in a 1-year term deposit. This amounts to MYR 104k pa or 8.6k /month, which amounts to a fairly comfortable budget for living expenses in Malaysia, especially away from the capital cit, Kuala Lumpur.
Alternatively, one could invest in Malaysian REIT's (Real Estate Investment Trusts) which are basically property trusts. They are traded on the Bursa (Malaysian Sstock exchange) & typically invest in commercial property, distributing nearly all of their net rental income to their shareholders in the form of quarterly or semi-annual dividends. The REIT prices are a lot more stable than ordinary shares & far less risky than those in developed countries because they are legally forbidden from participating in property development projects ang have very strict gearing (borrowing) limits. The latter two factors were the primary causes for the major losses suffered by many property trusts in developed countries during the last Global Financial Crises.
Malaysian REIT's can be purchased in the same manner as ordinary stocks & shares by opening a trading account with any one of the Malaysian stock broking firms, many of which are associated with major banks. Examples include the broking arms of Maybank, CIMB, Public & Hong Leong Bank. The commissions charged by brokers range from a high of 0.7% (for phone orders done through their sales reps known as remisiers) to less than 0.05% for internet trades. Besides broker's commissions, other transaction costs amount to ca. 0.13% of transaction value. Bursa Malaysia is totally scripless i.e. owners are credited with a share holding account with the Bursa Depository, the cost of which is included in the 0.13% mentioned above.
Live stock prices are provided at no cost by the major broking firms who also provide their clients with free analyst reports. The Bursa website also has one section where many free analyst reports are provided for free.
Monday, June 13, 2011
Saturday, June 11, 2011
Banking in Malaysia for Foreigners
Opening a Bank Account in Malaysia
In general, non-residents are not allowed to open bank accounts in Malaysia unless they can show evidence of an impending residence permit such as an application for a work permit or MM2H.
How do I ensure that my Malaysian assets are inherited by my nominated beneficiaries who may not reside in Malaysia?
Make sure you have a will signed & witnessed in Malaysia covering all your Malaysian financial assets & properly identifying your beneficiaries, wherever they reside. The problem with foreign ID documents such as passport or driving licences is that they need to be revised every few years.
Note: Ensure that you have a separate will covering your assets in EVERY other country to ensure ease of will probate.
Does a will need to be "stamped" to be valid?
Answer from my niece, a solicitor: No
How do I get a will prepared in Malaysia?
Any law firm or professional will-writing firm will do this. A simple will used to cost ca. Rm 500 a few years ago.
I prepared mine for free using a template provided by a solicitor - you simply fill in the list of assets, name(s) of beneficiary & executor(s). In this way, I can update my will whenever required e.g. when I open new bank accounts or changes occur to passport numbers (mine or my beneficiaries).
I'd gladly email the template to any interested party.
Who can act as witness to my will signature?
Your signing of your will must be witnessed by 2 persons, none of whom can be a beneficiary. Witnesses should preferably be someone residing locally who can be contacted for verification purposes. Could be your bank manager, barber, anyone.
Can I name my next-of-kin as the executor of my will?
Yes, you can name anyone to be the executor, as long as he/she is willing, but obviously you should choose someone in whom you have complete trust to ensure that your will is carried out in full accordance with your expressed wishes. You can name multiple executors.
Remember that your will executor has to hire a solicitor to probate your will. I think that means getting a court order directing the banks, Land Office, etc to change to new owner's name for each of your individual assets.
What is the easiest means of allowing my next-of-kin to access my Malaysian bank account?
It's important to note that probating of a will in Malaysia is time-consuming (3-6 months is common). There are various means of avoiding such a delay (answers courtesy of my Customer Relations Officer):
a) If your next-of-kin is residing in Malaysia with you e.g. your spouse, the easiest way is to have a joint banking account where EITHER party has authority to carry out all transactions e.g. signing of cheques, telegraphic transfers, having separate ATM cards & separate internet access.
b) If your next-of-kin, e.g child, is not residing in Malaysia, you (or your spouse) can still open a joint bank account with the child if he/she can physically be present at the account opening. Dear Children - let's do this on your next visit to KL.
It's best to choose a non-fee paying account with internet facilities & remember to keep the account active with at least a nominal transaction every 6 months.
c) Let your next-of-kin overseas know your ATM PIN's &/or internet user names/passwords.
This allows the recipient to move funds from your account to any other external account prior to will probate which may not happen for a few months, possibly longer.
Please note that there are daily limits on ATM cash withdrawals & internet transfers to non-linked bank accounts, including your own accounts with another bank. I'm not sure if there are limits on the quantum of telegraphic transfers initiated via internet banking which does not require the presence of the account holder.
How do I transfer share investments to my next-of-kin?
All share investments in Bursa Malaysia are held in the name of an individual owner - no joint accounts are allowed. However, each Bursa account must nominate a single next-of-kin, so the name of account holder is automatically changed upon probate of will. This may take a few months so these shares will be effectively suspended over a fairly long period - not very desirable at the best of times. To overcome, this, you can assign power of attorney over your share account to anyone you choose & advise your remisier or stock-broker accordingly - a standard blank form is available from your remisier.
As an aside, each Bursa share account has a nominated bank account to which all dividends are paid automatically. Thus it's not a bad idea to open bank accounts for each of your beneficiaries as early as convenience allows (refer earlier discussion on bank accounts).
What happens to my Malaysian house, car or other assets in the event of my death?
Ownership of these assets will be transferred to your beneficiaries upon probate of your last will & testament. They, in turn, can choose to dispose of these assets at will, in which case having a pre-existing bank account could be of great help.
Ideally, your beneficiaries' bank accounts in Malaysia should be linked to their home bank accounts to allow personal internet fund transfers to be transacted once they have returned home. This will minimise transfer costs & also allow them to fine-tune the timing of fund transfers to optimise forex rates.
In general, non-residents are not allowed to open bank accounts in Malaysia unless they can show evidence of an impending residence permit such as an application for a work permit or MM2H.
How do I ensure that my Malaysian assets are inherited by my nominated beneficiaries who may not reside in Malaysia?
Make sure you have a will signed & witnessed in Malaysia covering all your Malaysian financial assets & properly identifying your beneficiaries, wherever they reside. The problem with foreign ID documents such as passport or driving licences is that they need to be revised every few years.
Note: Ensure that you have a separate will covering your assets in EVERY other country to ensure ease of will probate.
Does a will need to be "stamped" to be valid?
Answer from my niece, a solicitor: No
How do I get a will prepared in Malaysia?
Any law firm or professional will-writing firm will do this. A simple will used to cost ca. Rm 500 a few years ago.
I prepared mine for free using a template provided by a solicitor - you simply fill in the list of assets, name(s) of beneficiary & executor(s). In this way, I can update my will whenever required e.g. when I open new bank accounts or changes occur to passport numbers (mine or my beneficiaries).
I'd gladly email the template to any interested party.
Who can act as witness to my will signature?
Your signing of your will must be witnessed by 2 persons, none of whom can be a beneficiary. Witnesses should preferably be someone residing locally who can be contacted for verification purposes. Could be your bank manager, barber, anyone.
Can I name my next-of-kin as the executor of my will?
Yes, you can name anyone to be the executor, as long as he/she is willing, but obviously you should choose someone in whom you have complete trust to ensure that your will is carried out in full accordance with your expressed wishes. You can name multiple executors.
Remember that your will executor has to hire a solicitor to probate your will. I think that means getting a court order directing the banks, Land Office, etc to change to new owner's name for each of your individual assets.
What is the easiest means of allowing my next-of-kin to access my Malaysian bank account?
It's important to note that probating of a will in Malaysia is time-consuming (3-6 months is common). There are various means of avoiding such a delay (answers courtesy of my Customer Relations Officer):
a) If your next-of-kin is residing in Malaysia with you e.g. your spouse, the easiest way is to have a joint banking account where EITHER party has authority to carry out all transactions e.g. signing of cheques, telegraphic transfers, having separate ATM cards & separate internet access.
b) If your next-of-kin, e.g child, is not residing in Malaysia, you (or your spouse) can still open a joint bank account with the child if he/she can physically be present at the account opening. Dear Children - let's do this on your next visit to KL.
It's best to choose a non-fee paying account with internet facilities & remember to keep the account active with at least a nominal transaction every 6 months.
c) Let your next-of-kin overseas know your ATM PIN's &/or internet user names/passwords.
This allows the recipient to move funds from your account to any other external account prior to will probate which may not happen for a few months, possibly longer.
Please note that there are daily limits on ATM cash withdrawals & internet transfers to non-linked bank accounts, including your own accounts with another bank. I'm not sure if there are limits on the quantum of telegraphic transfers initiated via internet banking which does not require the presence of the account holder.
How do I transfer share investments to my next-of-kin?
All share investments in Bursa Malaysia are held in the name of an individual owner - no joint accounts are allowed. However, each Bursa account must nominate a single next-of-kin, so the name of account holder is automatically changed upon probate of will. This may take a few months so these shares will be effectively suspended over a fairly long period - not very desirable at the best of times. To overcome, this, you can assign power of attorney over your share account to anyone you choose & advise your remisier or stock-broker accordingly - a standard blank form is available from your remisier.
As an aside, each Bursa share account has a nominated bank account to which all dividends are paid automatically. Thus it's not a bad idea to open bank accounts for each of your beneficiaries as early as convenience allows (refer earlier discussion on bank accounts).
What happens to my Malaysian house, car or other assets in the event of my death?
Ownership of these assets will be transferred to your beneficiaries upon probate of your last will & testament. They, in turn, can choose to dispose of these assets at will, in which case having a pre-existing bank account could be of great help.
Ideally, your beneficiaries' bank accounts in Malaysia should be linked to their home bank accounts to allow personal internet fund transfers to be transacted once they have returned home. This will minimise transfer costs & also allow them to fine-tune the timing of fund transfers to optimise forex rates.
Introduction
This blog primarily primarily describes my life experiences & my opinion on a range of global issues affecting the world today.
I am not a great communicator nor do I speak out publicly often. In private, though, I have never been short of ideas or opinions as I have traveled widely & experienced life in many countries during my working life. The idea of starting a blog only came to me last night while reading an ex-Canadian's blog about his retirement life in Malaysia on the MM2H (Malaysia My 2nd Home) scheme. So why not start a blog about my life experiences so that my children will one day have an easy reference of what life has been for their parents?
I was born & bred in Malaysia but spent most my working life overseas in Brunei, Europe the Middle East before settling down as a naturalised Australian in Perth, Australia. My children live in Sydney, while my wife & I spend a large part of our retirement years in KL on MM2H.
While this blog mainly covers personal issues, I hope it can also provide useful pointers for any reader who is thinking of visiting Malaysia or residing there during his/her golden years. I hope to also blog on banking, financial & investment issues for newbies to Malaysia. For more details on the MM2H program, refer to the links which I hope to set up (once I figure out how).
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