Wealth management is a term which covers many different facets, including pensions, investments, estate planning and tax management.
In the excitement (and stress) of planning a move abroad, the longer term consequences of moving can sometimes be overlooked or put on the back-burner.For emigrants and expats, the immediate focus tends to be on the short-term financial consequences of moving abroad, such as ensuring you have enough cash to provide for unexpected expenses in those critical first few months of your move abroad.
The last few years have seen a concerted move by authorities worldwide to crack down on individuals moving assets offshore to avoid taxes. The United States has lead the way with this as US law requires all US citizens and permanent residents to pay US tax on the worldwide income.
The Foreign Account Tax Compliance Act (FATCA) passed in 2010 (implemented in January 2013) requires individuals who live outside the US to report the financial accounts held outside the US and requires foreign financial institutions to report to the Internal Revenue Service about any US clients they may have.
It has already helped change the traditional private Swiss Banking model, which was based on client secrecy, and should cause everyone, whatever their nationality, to seek advice about their tax status both in the old country and the new.
Financial planning is a rather broad term which covers a number of different areas. In essence, it should be a holistic approach that looks across a range of issues and provides a series of solutions geared towards trying to ensure that your long-term financial security is assured.
You can never be sure what the future will bring but the Emigration Store will help you understand some of the critical areas where you may need advice.
Some countries and regions may have a deserved reputation for political, economic and financial instability. Having your assets secure with a partner that can provide confidence and safety is a vital consideration.
Death and taxes – the only things you can’t avoid! Tax can have a pervasive impact across almost every aspect of your financial situation. With governments now proactively assessing how best to claw back tax from citizens offshore, ensuring compliance with your native and new local tax authorities is vital.
Tax planning across your estate, taking into account tax-efficient savings structures, inheritance and succession issues, retirement income, pensions and tax residency is important as, done efficiently, there are opportunities to reduce your tax liability compared to that from your previous country of residence.
Thinking about what will happen to your estate when you die is never the most cheerful of subjects! This is especially true as it’s not something that you will directly benefit from. However, ensuring that your family and loved ones benefit, and not the tax authorities, is surely an outcome well worth careful planning and consideration.
Things to consider including making sure your Will reflects your new financial situation to ensure that the disposal of your assets, probably in multiple tax jurisdictions, is made as tax-efficient as possible. This will also need to factor in the mitigation, or at least minimisation, of Inheritance Tax.
Don’t forget – this is a tax on assets upon which you have already paid tax and, with some careful thought and planning, can be arranged so that your family and loved ones have no inheritance tax liability. Depending on your circumstances, advice about Trusts may need to be considered.
Retirement may seem like a long way off but the sooner you start planning for your retirement, the greater flexibility you have over exactly when you can give up work and concentrate on improving your golf handicap!
Pension planning is all about options and freedom. It is also important to consider where you will wish to retire. Do you want to move back to the UK, to be surrounded by things you know and, perhaps, family or does a leisurely retirement in the sun appeal?
With legislation introduced in 2006, a new scheme called a ‘Qualifying Recognised Overseas Pension Scheme’ (QROPS) was set up, allowing the transfer of your UK pension plan into an overseas plan. This was modified in 2010 into a ‘Qualifying Non-UK Pension Scheme’ (QNUPS) in recognition of the need to shelter any money transferred into the scheme from UK inheritance tax.
There are a number of other attractive benefits of this, such as the benefits of being free of UK tax and the minimisation of currency risk between a Sterling-based pension and your living costs in another country (by way of example, many pensioners who retired to Spain have seen their living standards dramatically squeezed as the Euro-equivalent value of their Sterling pension has fallen significantly).
Just when things seemed relatively straightforward, the UK Budget in 2014 contained provisions, put out to consultation, allowing easier access to pensions as the savings industry as a whole hadn’t really addressed issues surrounding the mandatory taking out of annuities upon retirement. This has introduced uncertainty to the whole QROPS/QNUPS industry now.
As a result, the Emigration Store strongly recommends taking professional advice, based upon your own financial situation, where a comprehensive analysis of your current savings, pension pots and tax status can optimise solutions that work best for you and your family in the long run.
If you are in the position to be able to save and build an investment portfolio for your future, there are a myriad of investment products that need to be considered both in terms of the appropriate risk-profile you wish to have, the tax regime in which you are now living and the currency of the investment versus the currency of your new home.
You may want to delegate management of your portfolio to a professional firm, using a Discretionary Investment Management agreement or you may wish to be more hands-on and invest using a Brokerage agreement where you are more actively involved in the investment decisions.
You may want advice on Structured Products, which can help preserve your capital and you will certainly want to choose a provider with access to a good range of low cost products and is of sufficient size and experience to be able to maintain relationships with the world’s best investment managers.
Offshore banking has come in for a lot of scrutiny in the last few years as financial authorities have focused on individuals who seek to hide substantial taxable assets offshore.
For most expats, especially those moving to more volatile and uncertain regions, having a secure, established banking partner is vital to ensure the security of your money. In addition, depending on the tax regime in your new destination and your status as a UK tax payer, investing in off-shore accounts may prove to be a highly efficient and secure way of investing.
To help you navigate your way through the legal, tax and investment issues surrounding your new tax-resident status, it is advisable to seek advice from a banking partner with a global reach and experience of different jurisdictions.