British IFAs have said that one of the most frequently asked questions they had to answer in 2015 was ‘when will we get better rates of interest on our savings?’
Whilst the Fed upped the funds rate by 0.25% in the US in December, experts in the UK are saying there will be no positive interest rate move in Britain in the near-term.
If this wasn’t enough proof that expats should really be revisiting how and where their money is saved, we don’t know what is!
If you’re living, working, retired or just long-term travelling abroad, why have you got any money left in the UK?
It’s highly likely you could be better off by moving your money abroad, no matter what your financial status or life stage. Whilst interest rates aren’t necessarily better anywhere in the world, you could be getting more on your saved or invested wealth thanks to the likes of institutional interest rates, lower taxation, no currency conversion charges, and more personally appropriate investment choices.
Institutional Interest Rates
Banks need your money. They need you to save it so they can lend it and invest it and profit from it; in return they pay you a rate of interest.
To attract new custom and new funds, banks can advertise and handle client acquisition and management themselves, which requires financial outlay on their part. Or they can accept new business directly from financial advisories, life assurance companies and pension funds.
Acquiring business in this way is cost effective for the bank, and so they give better rates of interest to clients acquired in this way. These rates of interest are called institutional rates.
If you choose an international financial advisory that is qualified by such institutions to place direct business, you too can enjoy institutional rates of interest on your savings, giving them a much-needed boost.
Once you become an expat and are non-resident in the UK for tax purposes, you’re no longer eligible to save tax-free into ISAs, or receive tax relief on pension contributions.
This may mean it makes no sense to keep your savings and investments in the UK.
For some people it is possible to save and invest offshore, i.e., in a nation other than the one in which you are living, and enjoy all of your interest, dividends and investment growth tax-free.
Tax-free growth will of course ramp up the rate at which your savings and investments increase.
Currency Conversion Concerns
Even if you are lucky enough to hold all your wealth in a strong currency, when you come to access it abroad you will have to pay when you convert from one currency to another.
You pay for the exchange and the movement of your money…and if currency values are against you, you may lose out on the real worth of your wealth if you have to change it into another currency at an unfavourable time.
Currencies fluctuate all the time – which is why they are traded. But it’s unlikely you will want to play such a game and run the risk of losing out every time you access your funds.
Therefore, it can make sense to save and invest in a specific currency that you access in your new nation. Or it can make sense to save and invest in a specific internationally robust and respected currency if you’re living in a nation with a very unstable currency.
Considering which currency you manage your money via could enable you to boost your overall wealth status.
Wider Investment Choice
Just as you may have moved abroad to explore new horizons and enjoy fresh opportunities, so taking an international approach to how you manage your money can open your wealth up to new opportunities.
You can explore different currencies, different providers, different structures for holding and investing your wealth…
You can choose alternative markets to spread your risk, or you can just look for tax saving opportunities internationally perhaps.
As an expat you have a real opportunity when it comes to your financial status. You owe it to your future financial security to explore your options with expert advice, and make the most of them.