This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, it is subject to change and we are not responsible for any errors or omissions.
How do you create long-lasting wealth as a British person living overseas? Having assets and/or income in different countries can add extra considerations to wealth management. For instance, you might need to account for the impact of exchange rates – and different countries’ inflation rates – on the “real” value of your assets.
Fortunately, a well-conceived financial plan can help expats build and preserve wealth over the long term, moving them towards their goals. Below, our Murcia financial advisers at Scottsdale offer a short guide on wealth management for expats in 2024.
We hope these insights are useful. If you want to discuss your financial plan with a member of our team in Murcia, please get in touch to arrange a no-obligation financial consultation, at our expense:
+34 966 460 407
info@scottsdale.eu
Set clear goals
Many expats drift through life with their money, not seriously considering what they want to achieve in the future and how they will get there. A strong financial plan specifies your goals as an expat over the short, medium and long term – with strategies explaining how to meet them.
For instance, do you want to save money to fund your long-term care? Here, a dedicated savings plan (or “low risk” investment portfolio) could be appropriate if there is a high chance you may need to access the money soon. For maximum effect, consider how you can mitigate fees, taxes and currency exchange (e.g. will you need to convert British pounds to Euros?).
Another goal might be to retire comfortably whilst ensuring that your pension pot is used as effectively as possible (to ensure no income shortfall later in retirement). Here, a financial adviser can help you explore different options for using your pension funds, such as income drawdown and/or buying an annuity, to provide a sustainable income in later life.
Manage debt and risks
Wealth management is not just about building assets such as cash savings, shares and property. It also requires identifying threats and obstacles which could undermine your progress and building a strategy to address them.
Debt is an obvious example. Currently, the average representative APR for UK credit cards stands at 36.3%. This means that an unsettled UK credit card bill of £1,000 could lead to £363 of interest charged over a year. Addressing debts like these, as a priority, will help to free up more income to contribute towards savings and investments.
Other threats to your wealth plan include possible “disaster scenarios” such as losing paid work or dying prematurely (leaving dependents vulnerable while you are overseas). Here, a financial plan can provide a vital safety net by including an easy-access emergency fund (e.g. 3-6 months’ worth of living costs) as well as financial protection policies, such as income protection and/or critical illness cover.
Navigate taxes properly
Taxes have the potential to seriously undermine your wealth growth. Yet expats often struggle to navigate taxes confidently to avoid needless liability. Perhaps you need to grapple with both the UK tax system and that of Spain, for instance. If so, which taxes do you pay, when and where?
Failure to plan effectively can result in painful penalties if taxes are not paid correctly. By working with a financial adviser who is experienced with British expats, you can avoid this scenario and possibly improve your “after-tax finances” by navigating the various rules more prudently.
For British expats moving to retire in Spain, pensions are a good example. In 2023-24, an individual can withdraw up to 25% from their pension pot(s) at the age of 55 without a tax charge. In Spain, there is no similar mechanism for tax residents. As such, if an individual plans to take their 25% tax-free lump sum, it may be a good idea to do so before moving to Spain and becoming a tax resident there.
Give back
Life is not just about accumulating wealth for its own sake. Numerous studies – and the testimony of many age-old religions and philosophies – show that it is more fulfilling to give rather than merely receive.
As a British expat, you are in a unique position to make a positive difference to the world around you. This might include volunteering or making charitable donations. Perhaps you could lend support or expertise to causes that you care about.
In short, wealth management involves asking yourself what kind of legacy you want to leave. What kind of mark do you want to make on the world, and how can your financial plan help you to achieve this?
A key part of this process is establishing a prudent estate plan, ensuring that more of your wealth is passed to loved ones – rather than the tax man – when you die. For more information on this, please see our recent article on inheritance tax (IHT) planning for expats.
Invitation
If you are interested in discussing your own financial plan or inheritance tax strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
+34 966 460 407
info@scottsdale.eu