Retire Abroad Comfortably
There are all kinds of reasons for people moving abroad. Often it's work-related. For some it's that search for a "better quality of life" (places like France and Spain certainly have much lower population densities). Others are simply retiring to the sun - frequently with the added advantage of cheaper houses and a lower cost of living.
One vital element of any move abroad is your finances: not just coping with day-to-day expenses, but looking longer term. What effect will living overseas have on existing savings and how can you find the best saving rates once you've made the move?
Existing UK Investments?
Let's just qualify exactly what we mean by "expat" before we go on. An expat is someone who lives abroad permanently. Regardless of how often they return to the UK, they are legally and fiscally a resident of another country.
This is important because although there's nothing to stop you keeping current or savings accounts in the UK (and it can be convenient for times when you visit), any interest gained from savings will be taxed according to the rules of your adopted country.
This can make a big difference to things like ISAs and PEPs. They might be tax-free in the UK, but the chances are they are not tax-free abroad. Your "local" tax man will want his slice. In many cases although you can keep these investments, you are no longer allowed to contribute to them. In fact without the tax advantages, it might actually be poor use of your money to do so.
Foreign and Offshore Accounts?
You can continue to add to an ordinary savings account in the UK - but any interest will be added to your income and taxed at the rate applicable where you now live. Whether that's getting you the best saving rates will depend on all kinds of things - including whether you are working overseas or retired and what tax allowances you get. Exchange rates might also be a factor.
Getting the best from your money means keeping an eye on it. If you leave it languishing in any particular account or investment it's probably not working for you as hard as it could. Money markets are volatile. Financial products change regularly. Being a "rate tart" might not sound very polite, but being prepared to change frequently in pursuit of the best return could make a noticeable difference to your income.
You'll almost certainly have a current account in your country of residence, to pay utility bills if nothing else. Have you looked at savings accounts? In France, for example, everyone is entitled to open a "Livret A". The interest rate might not be the highest you'll see but, at the time of writing, they are tax-free up to 22,950 Euros. When many offshore accounts won't even entertain your application for less than £25,000 it's an alternative that gives you at least some return on your money. These particular accounts also allow instant withdrawal without penalty.
Each country will be different, of course, but there are almost always other vehicles for relatively small, regular savings of this kind. You might have to wrap your money up for a period - and whether that's viable for you will depend on your circumstances - but looking at "local" ways to save offers you a variety of savings that can, to some extent, insulate you from problems that might occur in the UK.
If you've got substantial money to put away then the best saving rates at the moment are certainly with offshore accounts. They also frequently offer a spread of currencies to mitigate against exchange rate fluctuations. In the current market, however, even getting one or two percentage points extra is likely to demand an initial investment of £100,000 and may entail relatively large monthly commitments too.
And What About QROPS?
Introduced in 2006, QROPS (Qualifying Recognised Overseas Pensions Schemes) can, under certain circumstances, allow for UK pensions to be moved abroad - or offshore. There are some regional restrictions, so while the EU and USA qualify, Australia and New Zealand do not. This could change, so it's worth keeping up to date with the HMRC website.
There can be many benefits in moving your pension to a QROPS, and getting the best saving rates is only one of them. Tax liability might be drastically reduced - from as much as 55%, right down to zero for some. It may also be possible to take a larger initial lump sum than a UK pension investment allows.
Newspaper headlines might give the impression that QROPS are a boon for all expats, but that may not be the case in your particular situation. It's a complicated area - one where taking professional advice is highly recommended.
Active Money Management - Wherever You Are
As always, balance is the key to keeping your income stable and your savings growing. You really do want to avoid that "all eggs in one basket" scenario. One major benefit of the internet for expats is that you can monitor what's going on in both the UK and where you live. Transferring money between accounts in different countries can often be done in as little as 48 hours. It has never been easier to manage your international finances.
We're not expecting you to spend all your time abroad looking at comparison websites, but putting aside an hour or two a month - perhaps when your bank statements come in - might just make lying back and soaking up the sun even more stress free!
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