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Over the last few years, the financial picture has been consistently gloomy. With interest rates and inflation finally beginning to slow and indications of economic recovery over the months ahead, many expats are changing their focus, looking for opportunities for improved returns and greater portfolio growth.

Spring is always a great time of year for international expatriates to take stock, review their investment portfolios and analyse where there is room for a strategy refresh.

After an extended period of inflation, many investors have been proceeding with caution and reservation, avoiding any moves that could potentially negatively impact their retirement planning – often meaning that higher returns and tax efficiencies are now key to meeting investment and retirement goals.

The International Economic Outlook for the Year Ahead

We’ll start with a brief recap of how economies and financial markets have adjusted in the last few months since expat investors often review the bigger picture to ensure they make astute investment decisions in light of predictions and forecasts.

Regardless of whether you are a British expat living in Europe, an EU citizen who has relocated to the US or Canada or have become a permanent resident or dual citizenship holder in your chosen country of residence, you may have offshore investment assets, overseas bank accounts or products like an Individual Savings Account (ISA) that are impacted by global economics.

The latest World Economic Outlook, published by the International Monetary Fund (IMF) in January 2024, states that:

  • Globally, growth is expected to remain stable at 3.1% in 2024, rising to 3.2% in 2025.
  • International inflation averages are forecast to fall to 5.8% this year and further to 4.4% in 2025 following a down-revision of next year’s projections.

IMF figures also indicate that inflation in ‘most regions’ is dropping faster than originally expected, which will be welcome news for many.

Of course, the impact of recent inflationary markets and investment risk may be limited, depending on your objectives and investment time horizon. Expat investors who invest in low or minimal-risk products and activities to generate retirement income growth may be less interested in immediate forecasts and more focused on long-term projections.

Understanding the Importance of Tailored Expat Investment Planning and Strategy

The starting point for any investment review or portfolio health check is your core aims, aspirations and anticipated returns – any two investors may have very different expectations, attitudes to risk, or plans that dictate when they expect to draw on their portfolios or extract value from investments to fund relocations, property purchases, ongoing lifestyle costs or retirement.

Taking stock of your current portfolio and how investments are performing in relation to your financial goals is key, where you have a clear understanding of varied factors, including:

  • Your mix of diversified products, which could include investment funds, high-yield savings accounts, a life insurance policy, offshore bonds, additional properties generating rental income, and a pension plan.
  • Whether your investment income, in the form of dividends, interest or other earnings, is being managed in a tax-efficient manner. Many investments, retirements, and savings products offer tax benefits, depending on your country of residence and where you are considered a tax resident.
  • Opportunities to further diversify your portfolio, increase or decrease risk, or take advantage of new investments and products that will support a better financial future.

Most expatriate clients we work with use this review process to revisit their financial targets, analyse exposure to currency risk, and set benchmarks that might dictate the minimum investment they choose to make and the proportion of their wealth they allocate to offshore investments or a particular stock market.

Linking back all decisions to your primary investment targets is essential, particularly where the economic landscape – while tentatively positive – is far from stable. Any changes to central bank policies, interest base rates or tax regulations, particularly following the forthcoming UK general election, could have further impacts.

Speak to a Local Adviser

Reviewing Expat Investment Options in Light of Tax and Location Considerations

It’s important that all expat investors rely on independent advice from an appropriately experienced financial adviser – who understands the value of local investments vs offshore investment bonds, for instance, with a firm understanding of how any decisions you make could affect your tax situation.

While base rates and inflation are relevant, anybody living overseas must recognise that their position as a non-resident or tax resident will impact their tax liabilities. For example, if last year you were living abroad in a new country and relocated part-way through the financial year, you may have been assessed as a non-tax resident.

That will normally mean you remained a UK resident for tax purposes and will have been liable for UK income tax against earnings, investment and interest revenues and capital gains tax for any gains realised.

If you are now categorised as a tax resident due to the length of time you have spent in your selected country of residence, we suggest seeking financial advice since your tax profile may have changed significantly.

Rather than selecting investment opportunities purely based on fixed period returns, general stock market performance or interest in emerging markets, we typically begin by evaluating your tax status to ensure you first address any imbalances in your investment profile and look for solutions that will ensure your investment returns are not unnecessarily eroded by tax exposure.

Balancing Investment Opportunities With Risk Management

Risk assessments are a fundamental aspect of making good investment decisions, keeping an eye on the bigger picture rather than depending on metrics that may not substantially impact your long-term targets.

We’ve mentioned the elections planned this year in Britain that will affect UK expats. Still, other changes, such as the end of the Non-Habitual Resident (NHR) Scheme in Portugal, changes to property taxation in France, and the potentially temporary removal of the Lifetime Allowance (LTA) in the UK, may all have far-reaching ramifications.

Although most countries have double taxation agreements in place that prevent any tax resident from paying duplicate taxes on the same earnings or event, these are not universal. Nor do current positive forecasts preclude the potential for interest rates to rise once more or for predicted performance and financial market health to dip.

As always, the right way forward is to consult your wealth manager to analyse how your investment portfolio is performing now and how well that aligns with your goals to make informed decisions based on all the factors that matter most to you.

*Information correct as of April 2024