Expatriate Financial Planning

Expatriate financial planning centres on the special financial demands that an expat faces. It means getting a plan together that – in complex international circumstances – put the right money, in the right place, at the right time.

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What is Expatriate Financial Planning?

Expat financial planning centres on the special financial demands that an expat faces. It means getting a plan together that – in complex international circumstances – puts the right money in the right place at the right time.

If you leave your country of birth to live abroad, it is very likely that you will end up with assets spread around the world. This has implications. These assets need looking after. To provide security for your family, you will want to arrange your assets so they work together as an effective financial whole. You will also need to address a number of complex tax issues that stem from having money, property and family in different countries.

Expat financial planning means getting your financial ducks in a row in foreign as well as domestic waters. But there’s more to it: you must never lose sight of the goals that your expat financial plan supports – your life goals.

For most expats, a prosperous retirement is a key life goal. Paying for grandchildren’s education is another. Enjoying life as an expat is also a key life goal for many.

Your practical financial planning should begin by writing your life goals down. Give your plan a focus that is clear and realistic – get down to the nitty-gritty of what you actually need your financial plan to support.

A big part of your plan will then be investment planning. Investing means making your money grow by putting it aside for a time in what is known as an "investment vehicle", and this usually involves some level of risk.

Bear in mind too that, if you are in any form of debt, reducing your liabilities is as important as developing what assets you do have through investing. Financial planning means looking at all areas of your finances.

An expat financial plan will also include looking at your cross-border tax situation as well as incorporating a range of products from mortgages to insurance. So there’s a lot to plan. That’s why the help of a professional adviser is so often sought: with expat financial planning, experience really helps.

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The importance of financial planning as an expat

Many expats set out with the simple financial plan of making as much money as possible somewhere sunny – and then retiring at home on the proceeds.

Unfortunately, it rarely happens like that. Rather, expats lose track of their original plan and end up living for the moment, enjoying large amounts of disposable income in exotic locations from which they travel the world with a growing family. But the original financial plan of returning home with a retirement nest egg goes out the window.

For example, 76% of UAE residents polled in 2018 for the HSBC’s Future of Retirement: Bridging the Gap were confirmed not to be putting money aside for their retirement. An optimistic four in five were hoping their kids would cover their costs in retirement.

And the UAE is just one expat destination. Seizing the day and hoping that tomorrow never comes is a global expat phenomenon.

However, there’s plenty of expats who are looking beyond tomorrow. Canny expats opt for a long-term plan that serves their life goals as well as delivers financial opportunities only available to an expat.

And the result? The benefits of robust financial planning for an expat are many. But they all boil down to one thing: peace of mind. It’s what you want for your family. And it’s what professional financial planning delivers.

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Thinking of retiring abroad?

You are not alone. The Financial Times reports that, "There were 204,074 Brits aged 65 and over living in the EU at the beginning of 2017 and 41 per cent of the British population in Spain and 39 per cent in Portugal were retired, according to data from the Office for National Statistics."

And that’s just the EU. There’s plenty of great expat destinations around the world. So for all sorts of Brits, spending their retirement years somewhere sunny is a very reachable dream. But there’s a lot to consider – which is why moneyadviceservice.org.uk say: "We recommend you get financial advice from a tax and pensions specialist before making any decisions."

Chief among your long-term concerns should be your pensions. As a UK citizen, you are eligible for a state pension, and you may have private and workplace pensions too. The UK Government plans to offer a Pensions Dashboard for all Brits to see their complete pensions picture on one screen.

You can still receive your UK state pension abroad. But, depending on where you have settled, you may not be eligible for any increases.

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Tax benefits for expats

Transferring their pension is one way that expats seek to gain tax benefits.

Otherwise, the major tax benefit for most expats is that the money they earn abroad from working is not taxed by their native country. This is not the case for a few countries, notably the United States. And numerous complications apply.

Even if an expat’s income is not taxed by their country of origin, it may well be taxed in their country of residence. This often depends on whether the two countries have a dual taxation agreement.

Also important to bear in mind is that an expat’s country of origin may well tax overseas assets in different ways from income tax – the UK, for example, involves overseas assets in the determination of inheritance tax (IHT). So, living and working as an expat, you may be enjoying tax benefits regarding your monthly income, but you are unlikely to get off scot free in the long term when it comes to your assets.

With expats and tax, so many exceptions and complications exist. Cross-border taxation issues are really best left to the experts – and that means either an IFA or a specialist tax consultant. Ask your IFA to make cross-border taxation support your life goals as an expat.

Financial planning for living abroad

Many expats find themselves with more disposable income when they work abroad. Financial planning is essential if you want to make the most of your money.

That’s certainly true over the long-term. If you are planning to be an expat, you need to start thinking twenty or thirty years into the future. A sound expat financial plan should centre on the most distant life goal of all; which is to pass on your financial legacy to your loved ones.

Your legacy planning (cantering on your Last Will and Testament) should be the focus of your entire expat financial plan.

But what about the short-term? If you are planning to move abroad to work – and maybe even retire – you are going to need to build up an emergency fund.

This money is to get you out of trouble if disaster of any kind strikes whilst you and your family go through the process of emigrating. Make this your short-term priority. You need a good lump of £5k-£10k stashed away in a separate account which hopefully you will never use! This is aside from amassing enough funds to pay for your move abroad, and your immediate outgoings.

When it comes to financial planning for living abroad, you need to get started as soon as possible with cash saving – as well as putting together a robust expat financial plan for you and your family.

Holborn Assets Ltd can offer advice to expats on UK based financial matters. For questions relating to expatriate financial planning overseas we can refer you to local experts who are qualified and regulated in these areas.

Tax rates, allowances and reliefs are as at May 2019 and are subject to change in the future. The benefit of any allowances and reliefs depends upon your personal situation and may also change over time.

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