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When it comes to savings, many people are naturally reluctant to move their money or do anything that could impact the total value – even if the associated risk is small.

Savings accumulated over many years could be intended as a contingency fund, a retirement budget, or a financial cushion to support bigger purchases. The issue here is that expat savings advice will rarely centre on leaving savings in situ since there is the potential that, with low earnings and rising inflation, your wealth could slowly begin to depreciate before the time comes to dip in.

Here we compare some of the various savings strategies to help you compare and contrast your options for making the most of your assets.

Moving Savings Safely – Advice for International Transfers

The first thing to look at is how you move your cash, which requires planning as much as shipping your belongings or finding a new property abroad.

It’s useful to think about:

  • Currency exchange rates – booking an FX rate in advance could save a substantial amount if you suspect the exchange rate is likely to change. Professional guidance is recommended if you’re transferring large amounts into another currency.
  • Access to your wealth – even if you have a separate savings product, you may need to tap into those resources after relocating. It can be trickier if your accounts are held in a UK branch without a presence in your new home country.
  • Payment costs – if you wish to provide for continuing obligations back in Britain (such as utility costs on a property), it can get expensive to pay from an international account. Maintaining an active account in the UK might be more cost-effective.
  • Deposit protection – the FSCS consumer insurance scheme protects savings up to £85,000 per person, per bank in Britain. The insurances overseas differ, and it’s wise to check any bank you intend to open an account with is suitably registered with an equivalent scheme.

Finally, before we talk about what you do with your savings, it’s important to mention taxes.

There isn’t a UK wealth tax, so you don’t need to declare or report your cash savings aside from interest earned – but that often isn’t the case abroad.

You might be obliged to pay a wealth tax and declare your liquid assets, so having an experienced wealth manager familiar with the regulations in your new home country will help you avoid falling foul of non-declarations.

Maintaining a Retirement Savings Account

Next, we’ll compare some of the options. You can certainly leave your savings where they are, usually accumulating small amounts in interest over time. There isn’t any mandatory requirement to transfer savings overseas.

Provided you maintain up-to-date contact details with your bank, it’s unlikely they’ll have any reservations about keeping your savings account live.

The complication is that this isn’t entirely risk-free.

  • Interest rates are very low and have been for several years – you won’t earn much in the way of returns, with most easy-access savings accounts offering around 0.67% to 0.71% annual equivalent interest rate (AER).
  • Inflation is a real risk and means the longer you leave your savings stationary, the less they will be worth.
  • In November 2021, UK inflation hit 5.1%, so earning 0.7% against that level of inflation clearly poses a problem.

Based on average interest, a 0.7% rate means you’ll earn £71 per year against a £10,000 balance (inflation notwithstanding). Hence, it’s unlikely to be the most profitable option as a long-term investment strategy.

You might opt to keep your savings but shift your account to a low-inflation currency. If that currency is the same as in your country of residence, you further mitigate the risk.

Balancing Risk vs Returns

We talk a lot about investment risk because it’s a fundamental factor in choosing which products to invest in. There isn’t a universal solution, so it’s advisable to consult a professional wealth manager to assess your risk exposure and structure a savings vs investment plan to meet your retirement goals.

The normal rule is to save for immediate expenditure such as an upcoming property purchase or paying for family tuition.

Longer-term requirements, such as saving for your retirement, are usually better served through investment, given the higher potential returns.

High Yield Savings Accounts

A compromise between investing and saving is to look at a high-yield account.

This option is one of many, and the most suitable account depends on how quickly you need access to your money and when you anticipate drawing on your savings. For example, a notice account means that you commit to depositing your savings for a minimum period or give a notice period before making a withdrawal. Current interest rates are around 1.08% – 1.1% on the highest interest products.

Fixed-rate bonds work similarly, but equally, mean you won’t have speedy access to your cash. Fixed-rate products offer interest from approximately 1.34% – 1.36%.

Overseas Savings Options for Expats

Expat investment options are broad, so you could decide to retain your savings in a conventional savings account, either in the UK or overseas. Other options include investing or transferring funds to a higher-return savings account.

ISAs aren’t normally a great option for most expatriates. While they offer security and tax efficiencies for UK residents, you cannot pay into an ISA or open a new one if you are a resident elsewhere.

The other options that may be worth considering include:

  • Offshore investment bonds: these essentially work as a life insurance policy in the form of a tax wrapper, which contains several investment funds.
  • ROPS and SIPPs: these pension transfers are complex, but in short, they mean transferring your pension to a tax-efficient scheme with reduced limitations, higher lump-sum withdrawal access and a greater degree of investment freedom.
  • Property: property investment is common in an expat retirement portfolio. It could include your primary home as well as rental properties that provide a regular income, in addition to an appreciating asset.

Of course, the returns available on these investments, while usually far higher than savings interest, will depend on where you live, how much you invest, and the level of risk associated with the specific product.

The takeaway, though, is that there are multiple ways to invest your savings safely, to boost your wealth without the potential to lose out if inflation continues to rise.

Please visit the Chase Buchanan SIPPs vs ROPS Guide for more information about the aforementioned pension schemes.

The Advantages of Professional Expat Savings Advice

In any scenario, the best solution is to seek professional advice to ensure you make sound decisions about the right ways to leverage your savings to contribute to your retirement budget.

The correct strategy will depend on multiple factors, but a skilled adviser will assess your circumstances, evaluate your requirements, and make recommendations about the most suitable way forward. While potentially feeling like the safest option, leaving cash in savings seldom is.

If you would like to discuss the most advantageous solutions for you or explore potential investment opportunities, please contact your nearest Chase Buchanan office. Alternatively, we’d invite you to visit our article, Expat Retirement Planning for further reading around saving for retirement years as a UK expat living abroad.