Investing as a British Expat – With Tips from FSW Financial Advisors
Buying a villa in Malaga or a condo in Corfu, enjoying the beaches and warm summers, drinking fine Italian wine and eating tapas. To many Brits, this sounds like an ideal way to live out your retirement. However, it is important to make sure you are aware of the financial qualms that can be associated with this dream. As such, the FSW team have provided some tips for investing as a British expats.
Are ISAs still useful?
When in the UK, Individual Savings Accounts (ISAs) tend to be the most obvious choice, however these come with a number of headaches when investing abroad. After the tax year that you move abroad, you are not allowed to open an ISA or put money into it, unless you are a Crown employee working overseas. Existing ISAs that you already have can remain open and will be sheltered from UK tax. However you may end up being exposed to local taxes on your ISAs instead . As such, responsible financial advisors are very unlikely to recommend using an ISA, if moving abroad.
Offshore or international investment bonds are useful long-term saving opportunities which act in a tax-efficient way. These investments can be made as a lump sum or as regular payments and are issued in jurisdictions with high levels of investor protection in tax neutral jurisdictions, for instance the Isle of Man, Jersey, and Guernsey. The attractive prospect with these investments is the tax element. They are only taxed at withdrawal, meaning you can pay into them and allow them to grow without them being taxable. For expats in certain countries, such as Spain, Sweden, and Cyprus, these are especially attractive, as these countries have beneficial tax regimes in regard to life insurance investments.
The Question of QROPS
Another interesting option for expats are Qualified Recognised Overseas Pension Scheme investments (QROPS). These are schemes specifically for expats, allowing them to transfer their UK pension schemes into an international variant to better work to their needs. As such, it allows investors to take their pensions with them when moving abroad. Generally, this transfer will take place tax-free. However, there are exceptions, where you may be required to pay 25% of the transfer value. This could be the case for instance if you are a tax resident in the EEA and you transfer to a QROPS outside of the EEA (e.g. residency is Spain and QROPS is in South Africa). A QROPS does potentially come with a number of tax-related benefits. Nevertheless, there are risks that come with QROPSs. It is important to note that upon withdrawal, the QROPS will be subject to local tax regulations. Also, it is important to be wary of scams, which have a high prevalence among QROPS offers. As such it is always important to get a second opinion from your financial advisor, when considering this type of investment.
If you are considering retiring overseas, it is crucial for you to sort out your financial planning. After all, retirement is to be enjoyed and shouldn’t be afflicted by financial questions and problems. It is important that you organise yourself a financial adviser who can talk you through the economic drama and work out the best plan for you and your family when heading into this stage of your life.
Talk to one of our expert financial advisors today, to discuss your pension planning and achieve your ideal retirement outlook.
- Government, U. (2023). Individual Savings Accounts – If you move abroad. Retrieved from Gov.uk – https://www.gov.uk/individual-savings-accounts/if-you-move-abroad
- The Fry Group. (2022). Offshore Investment Bonds explained. Retrieved from The Fry Group – https://www.thefrygroup.co.uk/insights/offshore-investment-bonds-explained/