Managing Your Savings and Investments as an Expatriate Living Overseas

Financial management is a key consideration when planning a move abroad and following changes to your personal circumstances, such as retiring in your new country of residence.

For many expats, there are numerous complexities, from understanding how tax rules might affect their assets and income and calculating exchange rate risks to looking at ways to restructure savings products and investments that generate more money through higher returns.

While there is no one-size-fits-all solution, and the right savings and investment options will always depend on your aspirations and the type of products, funds and investments you currently hold, we’ll work through some guidance around the factors to bear in mind.

The Importance of Money Management for International Expats

Every country has varied regulations, and putting money or savings into an overseas fund, bond, or scheme comes with potential risks alongside opportunities. For example, if you plan to reinvest your retirement savings abroad, you need to know the tax treatment that will apply – and whether that will affect the net income you have available to cover your living expenses.

Likewise, many popular investment products in the UK, such as a cash ISA, are designed only for British residents. Moving overseas won’t necessarily mean you are obligated to close this type of account. Still, it does mean you won’t be able to make further contributions or take advantage of tax efficiencies.

The takeaway is that savings and investments that align with your strategic financial aims and generate the income or returns you expect in one country won’t always perform or be subject to taxation in the same way in another.

It’s also important to consider how differences in exchange rates and living costs might impact your buying power. Leaving your savings and investments in situ and taking no action is rarely advisable, whereas a thorough evaluation of the available options may help to protect your financial future.

Creating a Defined Set of Savings and Investment Goals

One of the best ways to start evaluating the suitability of your current investment products and savings accounts, alongside cash savings, is to think about your goals and time horizons; the point at which you expect to draw on a fund or account. Of course, much may depend on your individual circumstances and should be reassessed following an international move.

However, if you are unsure whether to save or invest, defining the timeframes at play may be useful. For instance:

• Short-term funding requirements may mean an instant access savings account is appropriate, where you may generate minimal interest but can make withdrawals at your discretion.
• Savings products with a higher or fixed interest rate that require notice when you plan to make a withdrawal might offer better returns, but equally mean that you won’t have access to that money on demand.
• Medium-term goals, such as saving or investing to support a child’s education fees, or to contribute towards the cost of a property purchase can be well suited to either high-rate savings schemes or investment funds. The risk exposure of any product you choose must be carefully appraised with most options providing a time horizon of five to ten years.
• Longer-term financial goals ten years or more into the future are often served best by investment products, although that may depend on whether you are saving towards retirement, whether inflation is likely to erode your overall funds, and whether you are in a position to continue making regular payments.

Keeping track of how your cash savings and investment products are accumulating wealth is equally valuable, regardless of the time frames concerned.

If, for example, you were to relocate overseas and invest with the expectation that the return will be sufficient to cover international school fees, and the interest or dividends achieved fall below your expectations, you may need to restructure to make up the shortfall.

Variances in Investment and Currency Risks Around the World

Expats at any stage of relocation should remain aware that currency fluctuations may have a significant impact on the value of their savings and investments – whether they retain products or assets valued or remitted in GBP or decide to reinvest in an alternative denomination.

A similar principle applies to pension transfers and other retirement funds. The rule of thumb is to save or invest in the currency used in the country where you live, but there may be exceptions.

Ownership of a UK-based property portfolio is a good illustration, where you may need to assess the tax implications of retaining assets in Britain, your future plans to gift property to a child or loved one, or how your assets build into your retirement and inheritance planning.

Where possible, it is better to make these decisions before relocating, especially if there is the potential that you decide to sell. Your tax residency at the time of the sale may influence the capital gains taxes you are exposed to, as well as the net value if you convert sale proceeds into another currency.

Risk tolerance remains important at every stage whether your priority is to accumulate as much as possible in a short time frame or to select assets and investment funds that have greater stability, with equally lower returns alongside reduced risk.

Diversifying Savings and Investment as an Overseas Expat

Finally, any decisions you make around managing your investments, assets and savings should be reviewed to ensure you have a good spread – diversifying means you aren’t solely reliant on one product, one sector, or one jurisdiction.

Expats may have a broad range of possible options, where they might diversify by allocating their wealth into a range of different markets and assets, such as British, European, American and emerging markets, and between cash, equity investments, property and bonds.

Spreading your investments in this way reduces the risk that one underperforming product or market will prove detrimental to your overall financial health. Any concerns about the diversification of your portfolio should be raised with your fund manager or one of our specialist private wealth managers.

If you’d like any further information about the factors to consider when managing savings and investment as an expat or the topics we’ve covered here, you are welcome to get in touch with Chase Buchanan to access professional, independent wealth management guidance. Our skilled advisers can help reduce unnecessary tax exposure while ensuring your investments and savings work for you.

*Information correct as at May 2024