You’re thinking of making the momentous step to move abroad. There will be many
issues to consider, particularly regarding your finances. In Part One of this article,
‘Financial Planning for Expats’, we’ll be focusing on location and currency risk
mitigation. Keep a look out for Part Two on wrappers such as pensions, bonds and ISAs
and also estate planning and wills. (NB the value of investments may go up as well as
First of all, you obviously need to decide where you’re going to move or retire to. This
may depend on whether you’ve had a lifelong dream to emigrate to Australia and live
the ‘Great Outdoor Life’. Of course, you may be moving with your work. Or you may be
planning to join relatives. On the other hand, you may be tempted by the States, keen
to live the American dream, or fancy somewhere a little closer to home in Europe,
despite having concerns about how Brexit might affect things.
Whichever country you’re moving to, there are some things worth taking into account.
For example, if you’re retiring and want to take your tax free lump sum from a UK
pension, this can be taxable in certain countries abroad. There are different issues to
consider depending on the country you are going to. If you move to Australia
permanently, for instance, it will mean your UK state pension will stop being ‘up-rated’,
meaning it will no longer rise in line with inflation or any other increases. As for the
States, you do need to be aware of the Foreign Account Tax Compliance ACT or FATCA
as it is known. Although FATCA was originally designed to recoup tax from US
connected individuals with foreign investments, British expatriates based in the US are
also finding themselves affected by it and in danger of paying additional taxes and
penalties on their investments back home.
How to make the most of your currency
Once you know where you’re going, you’re obviously going to need some money to live
off when you’re there. You’re likely to have some liquid assets – maybe from the sale of
a house and/or car. This is your nest egg so you don’t want it to be eroded by a poor
exchange rate. Major events like the Brexit process are likely to cause volatility and may
affect the value of your investments and pension.
Mitigating currency risk is therefore crucial. If the pension is in GBP but you are
spending it in a different currency when you retire, the pension solutions need
to allow enough flexibility to mitigate against this. For example, if you are living in the
USA and will be spending US Dollars in retirement, a UK pension scheme can offer
investment strategies where you can move from GBP to US Dollars within the pension
at the most advantageous time for you. Pension investment solutions in other
currencies are also available.
At Cross Border Financial Planning, we specialise in helping people who are looking to
or have already made the move overseas so if you have any queries, do get in touch.