Moving abroad opens up new financial opportunities and might require better banking planning. It’s all about your banking, savings and investments options abroad.
Banking, saving & investments for expats
For those of us who live a global lifestyle, international banking is a must-have tool crucial for the effective management of our money and wealth.
An international bank account is a brilliant way to organise and control your finance, can be suitable for a wide range of earners and helps better financial planning. In the case of overseas retirees, it is also a simple matter of convenience.
Do I need an international bank account?
An international bank account might be a good option for you if at least one of the following statements is correct:
- you are retired or planning to retire abroad,
- you have a property, business or other interests and assets overseas,
- you are saving for overseas retirement or planning to move abroad soon,
- you often have to transfer money across the globe or in different currencies at a moment’s notice, or just want to have more control over your own money.
If any of the above relates to you, it is very possible that you can benefit greatly from having an international bank account.
The following guide to international banking can hopefully help you decide whether an international bank account can be of great benefit to you. You can use the lists below and compare them to your own personal circumstances to identify the best way forward based on your individual situation.
If in doubt, always seek the advice of a qualified financial advisor when it comes to decisions affecting your wealth status.
How you can benefit from an international bank account
An international bank account allows you the following advantages:
1. Keep multiple currencies in a single account
This is the most substantial advantage of international banking for expats with financial commitments in more than one nation or currency.
International bank accounts allow you to bank in different currencies and even multi-currencies. It means you can hold the euro, sterling and US dollar within the same account, withdraw money from your account in a currency of your choice and even move your cash between currencies to take advantage of currency fluctuations.
It also allows you to be paid in one currency while paying your day-to-day bills and expenses in the currency of your current country of residence.
2. Keep money transfer charges low
There is a huge reason why international accounts are becoming more popular among expats and global individuals. It is mainly because they dramatically reduce the charges and punitive exchange rates incurred when moving money worldwide.
Certain banks can offer you Foreign Exchange services, which could minimise the risks of currency fluctuations and allow you to wait for a specific rate before making the transfer.
Some banks offer no-fee services but pay attention to the conditions they set out.
There are banks that let you send money free to anyone who holds an account with the same bank overseas, and there are banks that may require both the UK and the foreign account to be in your name.
It is worth, therefore, shopping around for an international bank account that is right for you and suits your needs.
3. Safeguard your money from political and economic upheaval
If you live and work in economically and politically volatile countries (which in the present state of the world’s economy can be applied to almost any country), it makes a lot of sense to have an international bank account.
This way you can avoid the risks in your country of residence such as high inflation, currency devaluation, a coup or war.
Moreover, it’s not a rare occurrence nowadays when your own government tries to make a grab for your savings by means of a bank haircut, bank deposit taxes, capital controls and anything else they can come up with when they are desperate for extra cash.
Keeping at least part of your wealth offshore in an international bank account can ensure you won’t fall a victim to governments’ political and economic failures.
4. Protect your money from income tax
If your country of residence only imposes taxes on the money you remit into the country, there is an obvious tax benefit to keeping your money in an international bank account.
Depositing your money offshore will allow you to bring in your country of residence only as much money as you need for your day-to-day expenses and leave all the rest untaxed in your international savings account.
5. Have more control over inheritance tax
An international bank account can be of great help if you are seeking to protect your estate from inheritance taxes in the future.
Accounts tied to trusts or companies can sometimes be beneficial for the legitimate optimisation of estate taxes upon death.
It is important to consult a specialist in estate planning to make sure you can benefit from such an advantage.
6. Make your savings work harder
Some international bank accounts can pay more interest on your savings.
This is becoming less and less the case nowadays, but it’s worth looking closely at what’s available when seeking to establish a new international bank account. It is still possible to find banks that pay higher interest rates than what you’d find with your home banks.
However, the main advantage comes with the fact that with an international saving account interest is paid gross, rather than being automatically taxed monthly as it is in the UK when your interest exceeds £1,000 for basic tax-payers and £500 for higher-rate taxpayers.
It means that if you are paid interest on your international account in February, you will have until January 31 to declare it to the HMRC, thus allowing your interest to earn even more interest. Timing is the key here and it is especially beneficial for savers with large sums of money.
7. No fuss, you can stay with your current bank
Many of the high street banks such as Barclays, HSBC, Lloyds and others have their own international branches.
It means that if you bank with any of them, you can potentially remain with your current banking provider when you expatriate, and simply swap to having an international account.
8. Access more versatile services and products
As there is less government intervention in international financial centres, international banks can very often offer more interesting investment services and solutions to their clients. It is, for example, possible to invest with all kinds of Collective Investment Vehicles: mutual funds, hedge funds, unit trusts and so on.
Since these funds are domiciled in low tax jurisdictions, investors only have to consider the tax implications when they want to bring money over to their own domicile or residency.
So, if you are looking for financial planning options that aren’t available locally, then an international account can be the perfect solution for you.
9. Enjoy a more personal customer service
You may benefit from having a relationship manager or private bank account manager if you choose a premier or private international bank account. Such a service is of benefit to those who desire a more hands-on approach to their account’s management from their bank.
10. Bank flexibly
International accounts are usually designed to offer customers maximum flexibility in terms of account usage.
Expats can benefit from this no matter where they are in the world as it can mean they can access their funds from ATMs or online or over the phone at any time of the day or night, no matter what the time zone.
11. Have more privacy
You can potentially enjoy greater account privacy. Some jurisdictions – e.g., Switzerland – place great emphasis on maintaining client confidentiality at all times.
For anyone wishing to protect their assets from unfair or speculative litigious behaviour, an international bank account can be an added deterrent.
12. Access international mortgages
When you move abroad and decide to invest in property in your new country of residence, you will find that it is next to impossible to get a local mortgage without a credit history. That’s when your international bank might be of great use to you, for most international branches can offer international mortgages for their clients subject to certain rules and conditions.
What to look out for when opening an international bank account
There are not many disadvantages to international banking as the whole concept of it aims to improve and optimise financial planning and money transfer across the globe.
So, if you are in need of either, there will be more advantages for you in international banking, than possible disadvantages. However, when considering opening an international bank account it is really important to remember the following:
Check exchange rates
The lack of fees on a multi-currency account will be appealing, but you must still look at the exchange rate you are getting to ensure you are being given a good deal.
It may not be as beneficial as the exchange rate you can get elsewhere, so be sure you check what you will receive on the exchange, especially if you are transferring a large amount of money.
Check how your money will be protected
You have to choose your offshore jurisdiction carefully. You may well be aware of how the banking industry operates in your own home nation and how it is regulated, but when it comes to the rules and regulations abroad, they might differ massively.
When you save in the UK, your money is protected by the Financial Services Compensation Scheme (FSCS), which covers up to £85,000 of your money in each bank you chose to deposit it with.
With an offshore savings account, it’s not as simple. That’s why it is essential to check with the offshore bank of your choice what compensation scheme will protect your money.
Before opening an account, you should, therefore, check with your provider to see whether your money will be protected by a different compensation scheme.
Banks in Guernsey will cover your first £50,000 per bank. The same goes for the Isle of Man’s Depositors’ Compensation Scheme.
Read the small print
It’s also important to look at the terms and conditions of an international bank account.
Will you be charged higher fees if you fail to maintain a minimum balance? What are the fees and charges for the account and the services you may wish to use?
It is true that some international accounts can be opened with just £1, however, check for operating charges: sometimes withdrawal fees can be up to £25. On the whole, if you are a smaller saver, an international savings account might not be the best option.
Make sure you can resolve issues with your chosen bank online
In some cases, it might be more difficult to resolve any issues that may arise with your international account. This is because you cannot physically visit your branch and speak to someone in person.
However, you might find to your great surprise that many international banks are now offering a much more efficient way of communication and resolving problems than your local branch on a high street.
Keeping your UK account open
It might be a good idea not to completely sever your financial ties with Britain. You might want to return one day if your overseas life hasn’t gone the way you expected or when your work assignment abroad comes to an end.
To make your return home less stressful, you would probably want to consider keeping your UK bank account alive and working. It might come especially useful if you have financial obligations in the UK – paying certain bills, for example, or having domestic investments that you would like to keep (like renting out a property).
Although it is not as easy nowadays as it used to be, it is nevertheless possible to keep your UK account open while you are living abroad.
Some banks will allow you to maintain your UK bank account alongside your international account, you just need to shop around for such a possibility.
Savings and investments abroad
If you are one of more than 200 million expats who have left their home country to seek better fortunes abroad, there is a big chance that at some point you will be asking a question about how to make the most of your hard-earned money.
For many expats, financial planning and managing the accumulated wealth is one of the cornerstones of their future well-being, and there is no easy and quick solution to it.
Just by becoming an expat it is possible to gain more financial freedom, but with this comes more responsibility – there are choices to make as to how you look after, preserve and grow your money in a safe and efficient way.
No matter whether you’re building your career abroad or enjoying your retirement in the sun when it comes to the management of your money, one of the options you should consider is investing internationally.
The choice in terms of how and where to invest is really broad, and the matters can be quite complex. On the other hand, with the right approach and careful planning, the rewards can be very satisfying, indeed.
If you are not sure how exactly you can benefit from investing internationally, our guide will clarify this for you.
The purpose of the guide is to enable you to make informed decisions about whether investing internationally is the right thing to do for your personal circumstances.
Reasons to invest internationally
International investment is another name for investing offshore. Basically, it means that you invest your money outside of your country of residence.
While some individuals might use offshore investments for tax evasion purposes, stashing their cash in a fund somewhere in the Caribbean with zero income tax, the assumption that offshore activities are purely criminal and immoral is simply not right.
The majority of people investing offshore do it for quite different reasons and in a perfectly legal way.
The main motivation behind international investments is that it may offer you many advantages. Well-regulated offshore centres allow investors to legally benefit from higher rates of return or/and lower rates of tax on that return imposed by those centres.
So how exactly can you do better by investing offshore? Here are the most important points:
1. Diversify your investment portfolio
Quite a few countries in the world, the UK included, have regulations in place that restrict investment opportunities of their residents when it comes to international investments.
Some investors feel that such restrictions considerably hinder their investment potential. If you are one of those investors, now, that you are a UK non-resident, you have an opportunity to rectify the situation.
When you become a UK non-resident, some more traditional UK based investment options (such as ISAs) are not available for you any longer. However, as an expat you have access to offshore investments that are much more flexible, giving you unlimited access to international markets.
You also get access to wider investment opportunities including the growing fund sector, for example. There are specialist funds that are often not available ‘onshore’, such as certain collective investment schemes and fixed-term deposits.
Choosing to invest internationally you are opting for an opportunity to diversify your portfolio. You can diversify across nations, markets, sectors, assets, currencies…when you think internationally the opportunities for diversification are vast.
- Offshore Portfolio Bonds – benefits and advantages and whether they are right for you.
2. Optimise your tax
When you are a UK resident for tax purposes, you are obliged to pay taxes on your worldwide income. However, when you become an expat and acquire a UK non-resident status, your tax obligations change. From now on you are subject to the tax rules of your new country of residence.
A lot of countries popular with expats whether for job opportunities or retirement have a softer taxation regime compared to the UK.
Some don’t tax your income at all, some tax only the income you bring into the country. There are countries that don’t tax capital gains and dividends.
Depending on your country of residence and personal tax status, it can be possible to structure your offshore investments in a tax-efficient manner by using the right offshore jurisdictions and products.
There is also an opportunity for expats to invest internationally through corporations.
Some countries offer tax incentives to foreign investors in an attempt to attract more outside capital and increase economic activity within the country.
Usually, such incentives are offered to corporations. The corporations act as a shell for the investors’ accounts. Since they aren’t involved in local operations, there is little or no tax levied on their profits.
It’s not just little countries that give tax incentives to foreign corporations. Some foreign companies, for example, enjoy tax-exempt status when they invest in U.S. markets. As such, making investments through foreign corporations can hold a distinct advantage over making investments as an individual.
There are other ways you can reduce your tax burden when you invest internationally. However, it cannot be achieved all the time. Detailed research and understanding of your tax position is needed for the tax-efficient investment of your money.
3. Enjoy greater confidentiality and asset protection
You might not think you need confidentiality when it comes to your invested assets, but as an additional advantage often achievable through international investment products and jurisdictions it can prove to be of benefit to many.
Many offshore centres have laws and rules in place to establishing strict corporate and banking confidentiality. A breach of confidentiality can lead to serious consequences for the offending party.
Hence, international banks in such jurisdictions will not divulge customer identities, and offshore corporations won’t disclose shareholders.
However, it only works for legitimate law-abiding investors. If it comes to crime such as money laundering, drug trafficking or other illegal activities, well-regulated and reputable offshore centres have laws in place to allow identity disclosure.
In most cases when it comes to legitimate investors, the government of their home country cannot assert jurisdiction over any assets that are located in an offshore centre. Moreover, the information about your assets or your identity won’t be disclosed.
In these increasingly litigious times, it certainly can’t hurt to put a legitimate layer of confidentiality between your investments and your personal details.
4. Manage your risk
Anything that has the potential of generating a loss on an investment can be considered a risk. Naturally, you would want to protect your investments from loss. One of the ways to do it is through diversification.
As explained above, offshore investing by its very nature opens you up to extensive opportunities for diversification. It gives you the chance to combine various investments to make sure that whatever the circumstances, if one of your investments goes down, there is another one that would go up, thus compensating the loss.
Also, offshore investments can help safeguard against currency devaluation. If your local currency isn’t quite trustworthy and you would like to protect yourself against its decline, it makes a lot of sense to invest your money in a stable offshore jurisdiction.
Additionally, it may be the case that it is safer for you personally to keep your money out of your current country of tax residence. If the political environment isn’t as stable as you wish it to be, or there are some clear economic risks in your new nation, it is much safer to manage those risks by keeping your money offshore.
Are international investments costly?
As we have already mentioned above, diversification, tax optimisation, asset protection and confidentiality, and risk offsetting opportunities are the main reasons for expats to invest internationally if they want better ways to grow their wealth.
However, there are possible downsides to offshore investments and one needs to be aware what is at stake when taking a decision on whether investing internationally is the right thing to do.
One of the disadvantages is that potential investors are required to put down significantly higher minimum investments than their onshore equivalents.
Offshore accounts are not cheap to set up. Depending on your investment goals and the jurisdiction of choice, it might be necessary to set up an offshore corporation which may involve legal fees, corporate or account registration fees, etc.
In some cases, investors may be required to own property in the country in which they have an offshore account or operate a holding company.
However, you can’t plan for the expenses before you know what your expenses are. So, the first step to understand whether you personally can afford to invest internationally is to research suitable jurisdictions and see what your options are.
It is worth noting that the cost associated with international investment has dropped over the years, however, it is still more expensive to set up an offshore investment scheme. This is often to compensate for the additional complexity of this type of business.
Is investing internationally a safer option for me?
Every investment, no matter whether it is located onshore or offshore, carries a risk. Risk is an intrinsic feature of an investment: however great your confidence is in the product you are investing in, there is always a chance that something can go wrong.
Therefore, no international investment is entirely safe, but neither is any domestic investment. In many ways, however, investing internationally can offer the same level of safety as domestic options, and in some cases investing offshore will actually be the safer, more stable choice.
The biggest part of defining what investment options are safer and better for you is understanding your personal goals, circumstances, your appetite for risk and your prospects.
In addition, your current country of residence, your tax status and your future plans as to where to live in 5 or 10 years or where you want to retire, can also have a big influence on the investment solutions.
Can I invest internationally if I am planning to repatriate?
If you are planning on repatriation, you can still invest internationally if you wish to. Depending on your circumstances, it might still be appropriate for you to retain currently invested assets offshore.
When you repatriate, your tax reporting requirements will likely change, and the tax efficiency of any international investment plans you have in place may change.
Furthermore, depending on your personal position, taxation may only apply on growth made after the date you repatriate, unless you are from a country that taxes you on your worldwide income. Tax liability may only arise when you cash in your investment.
Ultimately when it comes to complex tax matters, the safest course of action is to consult a tax specialist.
How do I choose where to invest?
Investing internationally involves choosing a jurisdiction where you wish to keep your money.
Offshore jurisdictions are usually small, low-tax countries specialising in providing corporate and commercial services to non-resident offshore companies, and for the investment of offshore funds.
When it comes to protecting your international investments, location is important, so while choosing the best location for offshore investments, make sure you consider the following:
Firstly, it’s important to understand whether being non-resident in your chosen jurisdiction brings its own financial benefits.
Secondly, it is worth looking closely at the tax and legal system for the jurisdiction to ensure that your investment will be protected and that the financial firm is properly regulated.
Besides being tax-friendly, each nation to choose from has its own unique legal system, reporting requirements, regulations and investor protection policies.
For example, an insurance company issuing a bond outside the UK is unlikely to benefit from the UK policyholder protection. However, some jurisdictions have their own schemes to protect you. Therefore, it is important to ensure the jurisdiction that is chosen has sufficient layers of protection.
You should check to see whether there are any investor protection schemes in place, and whether you as a non-resident are eligible for their benefits.
Which international investment products should I choose?
As we said before, for expats the choice of investment products is truly broad. Examples of international investment solutions include investment funds, portfolio bonds, QROPS and QNUPS, etc.
Many elements such as your financial goals, risk profile, tax status, age and wealth status will guide an advisor’s recommendations about the products you might like to consider for your own money’s investment.
For example, you could choose to invest via funds or bonds or pension schemes, you may choose to bundle your investments within a tax-efficient wrapper, or you might choose to invest utilising a company or trust structure.
Is international investment right for me?
When planning your financial affairs abroad, it is crucial to think everything through thoroughly before committing to big decisions.
Do you have the essential insurances in place – health, life, critical illness etc.? If not, these might be a better place to start, rather than rushing in and committing everything you have to investment solutions.
Do you clearly understand your own appetite for risk? Are you comfortable committing the majority of your funds to an investment that is not guaranteed? Are you prepared to expose only a small or significant part of your wealth to such a scheme?
How much do you need to have close at hand in an emergency fund to cover outgoings in the event of illness or loss of employment?
You might wish to consider your short, medium and long-term plans and goals including your retirement.
In short, the better you understand your financial situation, targets and goals, the easier it will be for you to map your international investment path.
Getting financial advice
Making the right financial decisions as an expat is critical for success in a new country. However, there are so many different options to take, that it’s easy to make mistakes and miss out on “local” knowledge.
If you have questions or need more information about pension and investment options abroad, contact us via our Advice page, we will be happy to help.
You might find interesting:
- Offshore Portfolio Bonds Explained – a simple guide to understanding if you can benefit from offshore portfolio bonds.
- The Expat Guide to UK Pensions Abroad: Understand Your Options – what you can do with your UK workplace, private and state pensions when retiring abroad.
- Expat Financial Questions Answered By A Professional Wealth Manager – FAQs about moving to Europe after Brexit: your tax obligations, currency concerns, pension options, will, estate planning, savings and investments, and, more.
- Visit our homepage for a comprehensive range of Living Abroad guides.