Moving around the world, it’s common to end up with a collection of different financial accounts.
This can leave expats wondering if it’s easier to keep things in one place, and which accounts they really need.
Bank accounts in your new country, might seem similar to those back home, but there are often big differences.
The right solution for your long-term savings and investments as an expat, could actually be neither your UK bank or local bank!
Let’s take a look at the pros and cons.
Foreign Bank Accounts
✔︎ Are ideal for day to day living expenses, and receiving your salary.
✔︎ Lower cost for small value purchases and regular transactions.
✔︎ No international card charges when used in-country.
✔︎ Useful for arranging credit cards and car finance.
✘ Often have little or no depositor protection if the bank fails.
✘ Usually have high charges, for foreign exchange and international payments.
✘ Joint accounts are often frozen if one account holder dies, funds can take months to go through probate.
✘ May not be regulated to the same standard as the UK.
✘ Investment options are usually limited, and very expensive compared to the alternatives.
✘ Likely to recommend investment products not allowed under UK legislation.
✘ Likely to recommend savings and investment products that tie you in for a number of years.
There’s a lot of important benefits from holding a local bank account where you live. But it’s probably not where you want hold large amounts of cash and long-term savings.
Local banks are better suited for your day to day needs.
Your UK Bank Accounts
✔︎ Are covered up to £85,000 by the FSCS.
✔︎ Well regulated.
✔︎ Joint accounts usually pass to the surviving account holder on death (without going through probate).
✘ Your account might be closed once you no longer live in the UK.
✘ Can be difficult to deal with from overseas.
✘ Usually have high charges, for foreign exchange and international payments.
✘ Are unlikely to allow you to open new products or accounts (like fixed deposits or loans) whilst living abroad.
✘ Savings interest is subject to UK taxation – a big concern for those with UK income already (like landlords).
✘ Investment options are usually limited, and may be expensive compared to the alternatives.
Your UK bank is likely more secure than your local bank, but there can also be tax consequences to keeping funds in it.
Whilst it’s a safe place for storing cash, it might not be right place for long-term savings and investments.
And a lot of expats face issues with their UK bank closing their account once living overseas, with little notice. This can leave you scrambling to find somewhere else to store your savings.
If you don’t need your old bank account anymore, it might be better to close it to avoid any unnecessary charges. Never assume your charges will stop, or your account will close, if you simply withdraw all your money.
What are the alternatives for your long-term savings and investments?
It’s rare that one account, or individual provider, is the best at everything. So the right answer, really depends on your specific needs.
Keeping your cash savings safe → Offshore Banks
✔︎ Tax friendly for expats.
✔︎ Based in well regulated jurisdictions like Jersey, the Isle of Man.
✔︎ Depositor compensation schemes (often up to £50,000).
✔︎ Joint accounts can automatically pass to the surviving account holder (no probate).
✔︎ Low minimum balances from £5,000.
✔︎ Used to expats moving country.
✘ Can be expensive for investments.
Transferring money across currencies → Foreign exchange specialists
✔︎ Better exchange rates and lower costs than using your bank.
✔︎ Can offer a personalised service for high value transactions (like property purchases).
✔︎ Well regulated.
✔︎ Able to deal with a broad range of currencies.
Growing your funds for the future → Offshore investment accounts
✔︎ Based in well regulated jurisdictions like Jersey, the Isle of Man, or Luxembourg.
✔︎ Tax friendly for expats.
✔︎ Access to over 10,000 different investments.
✔︎ Low cost.
✔︎ No tie-ins or penalties if you change your mind.
✔︎ Joint accounts can automatically pass to the surviving account holder (no probate).
✔︎ Are used to expats moving country.
So most expats usually have different accounts for different purposes.
The right structuring, could save you money, increase the security of your wealth, and open up your investment options.
It relies on using the right tools for the right job, and your local bank account, or old UK bank account, is unlikely to be optimal.
In the example above, your local bank account simply becomes a holding account, for you salary and day to day needs.
And your offshore bank account and offshore investment accounts are where you should keep the majority of your funds, in a well regulated and tax-friendly jurisdiction.
Looking for help to tax-efficiently structure your investments?
Are you an expat with over £150,000 to invest? Arrange your complimentary initial consultation today.
