In a world where the economy feels like a roller coaster ride, UK expats need to understand their investment options. Challenging economic times? Check. Fluctuating exchange rates? Double-check. Rising interest rates and living costs? You bet. For expat investors, these hurdles make it crucial to seek sound advice and explore all possible investment avenues.
The Expats’ Dilemma: Traditional investment options might not always be available for non-residents, leaving many expats scratching their heads.
A Balanced Portfolio: A diversified portfolio is often the best strategy, utilizing a few different solutions. Yet, it’s still essential for expats to get a grip on the available investment options and determine which ones align with their goals.
Offshore Investment Bonds
Think of offshore investment bonds as life insurance policies dressed up as tax-efficient investment funds. These bonds are often based in tax-friendly countries like the Isle of Man, Jersey, and Guernsey.
Tax Benefits: Depending on your country of residence, offshore bonds can provide suitable income tax and capital gains tax opportunities, making them a sweet deal for expats. Even if you return to the UK, with the right bond, you can benefit from a reduction in the capital gain, which comes down to the time you spent abroad during the investment period. This is known as time-apportionment relief.
Advisor’s Role: Independent advice is crucial here to navigate the potential minefield of fees, underlying investments and the right choice of bond based on your future plans and risk tolerance.
Pension Plans
Pensions are the bedrock of any investment portfolio, providing a safety net for your golden years. The rules surrounding your options such as how you can access your money in the pensions you have left behind, is an important factor to consider when you move abroad.
An international SIPP may give you greater control as well as flexibility on drawdown, investments and ongoing management, whilst still having a plan that is under the UK regulatory framework.
Expats also have the added perk of a QROPS, which is just an offshore pension scheme in simple terms, that allows individuals to transfer UK pensions overseas, though the benefits have diminished in recent years.
If you are continuing to work abroad, then just like the UK, the country you move to will often have company or private pension plans that you can contribute to. Pensions do not come under your estate for UK inheritance purposes, so are often a good asset to use for estate planning.
Trusts
Trusts offer a strategic investment option for expats, providing benefits such as asset protection, tax efficiency, and estate planning benefits.
By placing assets in a trust, expats can manage and preserve wealth across generations while potentially mitigating tax liabilities in both their home and host countries. They can often offer flexibility in managing distributions, which can be tailored to beneficiaries’ needs, such as education or healthcare.
Trusts can be complex, especially when dealing with cross-border assets, therefore we would always recommend seeking professional guidance to ensure the trust is structured properly to tailor your and your beneficiaries to navigate complex international financial landscapes,
Property Investments Abroad
Property remains a favourite among expats, whether it’s a primary residence or rental property. I often see expats hold onto their properties in the UK, even after moving abroad. If rented out, these can provide a steady income whilst abroad.
Tax Considerations: UK Rental income may be subject to UK income tax even if you are abroad, and selling properties might attract UK capital gains tax, making it imperative to plan and declare accurately.
Investment Platforms
Investment platforms are online services offering a broad array of financial products. They can reduce costs and boost flexibility, but expats might find their options limited due to complex tax, reporting and financial regulations when buying and selling investments.
Alternative Investments
From startups to crypto, alternative investments are all the rage but come with higher risks. Always perform thorough checks and seek independent advice to avoid the pitfalls of too-good-to-be-true offers. These types of investments also may be harder to find or even understand for some normal investors.
International Bank Investments
International banks offer wealth management services, but be wary: their advisors might be restricted to in-house products, potentially limiting your best options. Always verify if the advice is genuinely independent.
ISAs
ISAs are a staple for UK residents, but expats can’t open new ones or contribute to existing ones. Holding an ISA before moving abroad may still offer tax advantages, depending on your new country’s regulations.
Speaking to an Independent Specialist
It is also worth asking your UK adviser if they can continue servicing you once you jump overseas, as their licenses may limit the advice.
Want to dive deeper into expat investments? We offer a free introduction to tailor advice to your unique situation. No strings attached, just sound, independent guidance to help you navigate your financial journey abroad.
