By BBG Member Jason Porter, Blevins Franks Financial Management
As a Gulf-based British expat you may be considering a move to the EU rather than back to the UK. Reviewing your currency, investment, tax planning and pension options now can help you secure financial security for 2021 and beyond.
Now that the extension deadline for the Brexit transition period has passed, it is certain that the UK will be leaving the EU in the new year. Reassuringly – deal or no-deal – UK nationals lawfully settled in their chosen EU country before 2021 will have locked in the right to remain and enjoy uninterrupted citizens’ rights. But there are still many unknowns.
Other than establishing your residence, what steps can you take to make your financial position as secure as possible?
Review the best currency mix for you
It is common for UK expatriates to retain financial connections with the UK, such as property or bank accounts, with many preferring to keep their savings and investments in British pounds.
While there is comfort in the familiar, this does expose you to exchange rate risk. Once you are living in Europe and spending euros in your daily life, it can become more expensive to take your income in sterling. Explore investment structures that offer the flexibility to invest and make withdrawals in different currencies.
Avoid overexposure to UK investments
Likewise, many expatriates favour British investments, such as UK corporate bonds or FTSE-listed shares. This could especially be the case if you are still using a UK-based adviser. If so, your financial planning may actually be better suited to a UK resident than to someone in your situation. Note also that UK advisers may not be authorised to continue advising you as an EU resident after the transition period, so check with yours.
A local adviser with in-depth knowledge can help you avoid costly mistakes and take advantage of tax-efficient opportunities in your country of residency that could work more favourably for your circumstances.
Diversify, diversify, diversify
Achieving higher returns in today’s difficult conditions and low interest rate climate means looking further than bank savings and fixed interest investment options. While market movements can be unsettling, those invested for the medium to long-term in a well-diversified portfolio are best placed to see their wealth grow over time. Your financial adviser should undertake an objective assessment of your risk appetite to ensure your portfolio offers the right balance of risk and return for your peace of mind.
Amid today’s economic uncertainty, it is more important than ever to make sure your portfolio is not overweight in UK assets and is suitably diversified. You can reduce risk – Brexit-related or otherwise – by spreading investments across regions, asset types and market sectors to limit your exposure in any one area.
Get your tax planning in order
When it comes to the taxes you pay in your country of residency, there is no reason for anything to change post-Brexit. Your tax treatment is decided by the government of your local jurisdiction, and as an expat by the relevant double tax treaty that exists, which are completely independent of the EU.
There are, however, some circumstances where taxation may be affected.
For example, once the UK leaves the EU/EEA, expats selling a home in Spain or Portugal to buy a British property will no longer be eligible for capital gains tax relief.
Or if you are living in France and hold UK bonds, you may lose beneficial tax treatment once the UK leaves the EU. An adviser can recommend more tax-efficient ways to structure your investments, such as a suitable EU-issued assurance-vie that can also offer additional benefits such as wealth tax and estate tax savings, and currency flexibility.
Wherever you live, it is a good idea to take personalised advice to establish if there are any potential implications of Brexit – and solutions – for your family’s circumstances.
Review your pension options
The UK leaving the EU is likely to mean that a transfer to a Qualifying Recognised Overseas Pension Scheme (QROPS) is no longer an option.
But there are other pension transfer opportunities if a UK national is moving overseas. Consult a qualified financial adviser who also has the required pension qualifications and experience.