Living abroad offers many unique opportunities. Choosing to live or work overseas also provides you with the prospect of building a solid investment portfolio. However, there are some important factors to be aware of, including understanding which investment options are available to you. Setting up a solid plan means that you can make the most of your expat status and build a future that offers you greater financial freedom in later life.
Individual Savings Accounts for expats
Although you can open an Individual Savings Account (ISA) when you live in the UK, you generally can’t save into it whilst you are living overseas (specifically no contributions can be made after the tax year in which you make the move abroad). It’s important that you also let your ISA provider know if you stop being a UK resident.
Whilst you are abroad you can keep your ISA open and continue to receive UK tax relief on any money and investments held in it. You can also transfer it to another provider if you feel the need to. As and when you return to the UK, and reclaim your UK residence, you can begin to pay into your ISA again, as long as you take into account the annual ISA allowance.
Offshore investment bonds
One of the investment options available to you when you’re an expat are offshore investment bonds. This is a tax-efficient solution if you’re choosing to invest over the medium to long-term and tends to be effective if you are thinking of a five-year timeframe or longer. Offshore bonds give you the option to invest a lump sum or regular payments, and can help to grow your capital tax efficiently over time.
The tax rules on offshore bonds allow you to defer tax over the course of the investment and manage the eventual tax liability in line with your own circumstances. Once in place, the bond can be used to create a regular income to fund your retirement, and can also be left as an asset as part of your estate.
Pensions, QROPS and the alternatives
In many countries a pension scheme is not a statutory requirement, so it’s even more important to have a robust pension plan in place if you’re an expat. As part of your move overseas, it’s important to review your UK pensions and consider your options. There are a range of specific expat pensions to choose from, all of which can help you to have more control and flexibility over your pension funds.
One pension option is a QROPS (Qualifying Recognised Overseas Pension Scheme) which allows you to move your UK pension into a permitted overseas scheme. These international alternatives can offer increased tax benefits, as you may only pay the tax, if any, which applies in your chosen country of residence.
Investing in property
Owning property has always been a very popular option for British expats. Many people, when moving overseas, choose to retain the family home in order to keep a foot on the UK property ladder, perhaps in preparation of returning in the future.
Doing so can offer an investment opportunity, especially if you plan to let your property over the short or long-term to produce an income stream or cover costs. Given the performance of the UK property market over the long-term this investment option is a popular option for many expats.
Typical investment platforms
There are a range of investment platforms – or custodians – on which to hold your investments whilst you’re overseas. You can use these to hold a number of investments including direct stocks, ETFs, unit trusts, investment trusts and more.
It’s important to always research the cost of trading on each platform so that you don’t impact any potential investment returns. The benefits of these platforms are that they can offer easy access to your investments, with the ability to log in and check performance daily or whenever you are keen to understand how your portfolio is performing.
Investing ethically
Investing ethically, or ESG investing, is a trend which continues to increase in popularity. It’s now a much more mainstream strategy, particularly as climate change and other global issues have become well-publicised. The concept of ethically investing follows a practice of screening out investments that don’t fit with your personal beliefs or values. More actively, this type of approach enables you to choose investments which have a positive impact on the environment or society.
Seeking expat investment advice
Whether you are planning a move overseas, or if you are already an expat, it’s important to work with an expert to ensure that you have a well-considered investment plan. There are a range of factors to consider, but working through your tax, estate and financial options with an expert firm means that you will be able to make the most of your position. When seeking expat investment advice it’s useful to ask for recommendations and look for firms with the appropriate levels of accreditation such as Chartered status.
Investment advice for expats from The Fry Group
With offices around the world, and experience across multiple jurisdictions, The Fry Group can provide a unique position to help support your investment plans. Our advisers, many of whom have lived and worked overseas themselves, can provide advice to you and your family wherever you are in the world and at whatever stage of life. Please contact your nearest office to discuss your situation in more detail.
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