With increasing concern over the stability of the Euro, people have been pulling their savings out of banks to keep them safe. Greek savers have withdrawn their money from local banks amid concerns the European Central Bank won’t provide support to undercapitalized Greek banks. This has also been seen, to a lesser extent, in Spain.

Many expats have their savings in Euro accounts and with the current economic uncertainty you need to know how to protect your funds. First off, remember there are several layers of protection afforded to savings accounts. UK based banks offer a protection up to £85,000 per person per banking institution. So, if you have a joint account in a UK based bank, you are covered up to £170,000. However, if you have four bank accounts in one bank you are still only covered until £85,000 as it is per institution, not account.

Foreign owned banks like Santander, Yorkshire Bank and Egg Banking are still UK regulated and will protect your savings up to £85,000. Other banks, ING-Direct and Anglo-Irish for example, are not regulated by the UK, therefore you are only protected by the regulations in the bank’s home country.

Popular offshore banking destinations, the Channel Islands and the Isle of Man, have a protection limit of £50,000. These repayment schemes will come into effect should your bank collapse. The scheme is funded by levying other banks and money from the government.

People with savings in Irish owned banks will be happy to know that the Eligible Liabilities Guarantee Scheme guarantees their savings over €100,000 and this includes Irish offshore accounts. This scheme started in 2009 and is due to end next month, though it may be extended as it has been in the past.

Spread your savings around

To help give you peace of mind, it’s best to spread your savings over several institutions and accounts. Bear in mind the amount to which you are covered and leave less than that in the account. For example, for an offshore account in Jersey, keep a maximum of £48,000, with the extra £2,000 for interest. Spreading the money around also means you might be able to access some of it if one institution does collapse. While you might have to wait to get hold of your funds after the bank has collapsed, you will still have access to money in other banks.

Of the five million British expats around the world many continue to earn their income or pensions in sterling. This money, paid into sterling accounts, often needs to be transferred to other currencies.

These expatriates need to move money regularly and safely to their current home. Large currency brokers usually offer deals for regular payments and small installments can be transferred cheaply and easily. The advantages of using a broker over a bank is that it is often cheaper, especially for regular payments.

Pensioners have been especially affected by fluctuating exchange rates and the depreciation of sterling. “Worst-hit are pensioners in South Africa, New Zealand and Australia, who have seen the domestic value of their state pension in their new countries of residence slashed by market volatility,” Mark Bodega, marketing director at HiFX said to the Telegraph.

He calculated that a British pensioner on a monthly pension of £628 received an income of AUD$1,700 four years ago, but today he would receive only AUD$968 a month. With this in mind, pensioners who can’t afford to see any further reductions in the income need to consider one of the regular payment services offered by the many currency exchange brokers in the UK.

While using a broker is potentially cheaper than a bank, clients can also take advantage of the fluctuating currency rates. If you believe the current exchange rate is as favourable as it gets, then you can fix your transfer at this rate and ensure the same rate for months to come.

What can the banks offer?

High street banks are counteracting the idea that brokers represent the best value for money.  Lloyds TSB International’s Director Nicholas Boys-Smith told the Telegraph, “For people with banking requirements in two different countries, it’s generally easiest and cheapest to use multi-currency accounts. This means expats can have a sterling current account to receive and make payments in the UK, as well as an account in the currency of their country of residence.”

Customers using multi-currency accounts can transfer money between currencies free of charge and transfers are made on the same day. “We’re now also seeing some people switching from foreign exchange brokers to use our services.”

However you do it, take precautions

Moving your money between countries can be worrying, especially in this digital age when it just seems to disappear into cyberspace. To help give yourself peace of mind, make sure your broker is, at the very least, authorized and regulated by the Financial Services Authority (FSA). Companies should safeguard clients’ money by using segregated accounts that are separate from the day-to-day accounts of the company.

When arriving in a new country, whether for a long period or just a short vacation, expats are most likely to check out the local shopping areas. Once you are ready to buy, you work out the price in your own currency, pay with your credit card and pat yourself on the back for finding a bargain. However, when your next bank statement arrives, you may find out it wasn’t such a good deal after all.

This kind of mistake happens quite often. Your bank probably uses a different exchange rate to the one you based your calculations upon, charges are also often levied by credit and debit card companies. Most companies add a fee of up to 3% for every transaction made abroad. For example, on purchases of $1000, you could end up paying an extra fee of $24.

Credit card fees vary depending on the bank. The fees may appear on your monthly statement in various forms: “foreign exchange fee”, “non local transaction charge”, “handling fee” and “point of sale fee”. However, they all have the same meaning – You’re being charged extra just for using your card away from home.

If you still prefer to use credit card rather than cash when going abroad, it’s worth searching for card issuers who do not levy extra fees. For example, in the UK, neither the Post Office nor Nationwide Select Credit issue transaction fees for using your credit card abroad. According to moneysavingexpert.com Santander Debit is one of the worst cards when used abroad as it charges £1.25 per purchase.

Credit or Debit: What’s cheaper?

Many expats wonder if using a debit card is cheaper than using a credit card. There is not much in it, but credit cards turn out to be slightly cheaper when it comes to purchases. While both credit and debit cards include a “foreign exchange rate transaction fee”, purchases made by debit card may incur a “flat customer charge”. This is a charge levied for processing fees and other costs.

Despite a credit card being cheaper than a debit card when it comes to purchases, the most cost effective way to get foreign currency abroad is through a local ATM using a debit card. You will have to pay both fees, foreign transaction fee and an ATM fee. The ATM fee is slightly higher if you use a credit card. With this given, it makes sense to use your debit card and withdraw large amounts in one go, rather than little amounts often, in order to avoid high service fees.

People often associate offshore banking with shady activity and tax evasion. Many U.S residents believe it is illegal to have an offshore bank account, however, if you follow the rules it is completely permissible.

Offshore banking is a complex procedure and if you don’t follow the regulations it can lead to you being investigated by the Internal revenue Service (IRS). If you have an offshore account you will still have to report your savings to the IRS by filing a TD F 90-22.1, Report of a Foreign Bank and Financial Accounts.

The Foreign Account Tax Compliance Act (FATCA) requires all banks, everywhere, to disclose information on their American customers. Balances, receipts and withdrawals related to these accounts need to be released to the IRS. If banks do not comply they face a 30% withholding tax on income sourced through the U.S.

In response many banks are refusing to deal with U.S customers altogether. Preferring not to deal with the IRS. Many small, privately run offshore banks avoid publicity and customers value their discretion.

However, in today’s world of financial uncertainty many people and businesses are opting for an offshore account. Though associated with tax evasion, tax breaks aren’t necessarily the main driving force behind offshore banking these days. More people are worried about the collapse of the dollar. Offshore banks provide banking options in many currencies, thus decreasing the risk associated with a currency collapse.

If you are thinking of opening an offshore account remember, if you are a US citizen you will be required to sign papers allowing the bank to report your account to the U.S authorities. To avoid any problems, you should always disclose your offshore savings to the IRS fully.

According to financial experts, for many expats opening an offshore account is something left until after they move. However, once expats have arrived in their new country they find themselves busy with settling in and opening an offshore account falls down the “to-do” list.

This means savings stay in low return accounts, often with unnecessary tax being deducted, further eroding their value. As financial reasons are the driving force behind moving abroad, protecting the value of savings is vitally important.

Savings can take many forms, from simple offshore deposit accounts to more complex equity based funds and plans. At the core of everybody’s portfolio, however big or small, should be a simple deposit account for rainy days and emergencies. What many do not realise, is once you live abroad, the vast majority of you can open your own offshore savings account with as little as £10,000.

What is an offshore account?

An offshore account is simply a savings account, but it is located outside of the country where you are living. Offshore accounts located in specifically designated overseas territories have a key advantage – they are able to offer interest on savings which is paid before tax has been deducted.

The Channel Islands and Isle of Man are highly regarded, well regulated jurisdictions which specialise in offering offshore accounts to UK citizens. To have an offshore account you need to have left the UK to live or retire abroad. These jurisdictions offer many such accounts from high street bank and building society names.

5 reasons offshore accounts are useful for expats

If you have left the UK permanently and are no longer tax resident there, here are five reasons why you might want one of these accounts:

1. Day to day living costs – If you still have ties to the UK, a house you rent out or clubs to which you still belong, it’s a good idea to hold sterling in an offshore account. From this account you can pay bills, make gifts to your family or fund trips back to the UK without having to worry about exchange rates.

2. Boosting your savings – Holding sterling savings accounts offshore can often be beneficial in terms of interest rates. Gross interest means your balance will grow quicker, as all of your interest is added to your capital when it is paid to you.

3. Interest rates – Offshore savers can choose from a wide range of account types. It is common to find an offshore account that is paying considerably more than the rate available on a standard UK high street bank savings account. Some offshore banks even write to their customers to advise of rate changes too, so the customer is in control – something that is almost unheard of with onshore banks.

4. It may be your only option – Once abroad you may find it very hard to open an onshore UK savings account. If you are no longer on the UK Electoral Roll, most banks will decline an application to one of their high street products, as you will fail their basic application test. Offshore banks, however, can accommodate a far wider range of customers from all over the world.

5. Stability and risk reduction – Some people do not want to hold all their savings in the currency of the country they are living, whether this is the Euro or something more exotic. Sterling has always been attractive for UK nationals, but not all banks abroad offer good quality sterling savings accounts – Offshore, in the Channel Islands, there are a wide range of easy access, notice and longer term bond accounts available.

As a British expatriate you have probably heard of QROPS, particularly if you are retired or nearing retirement. QROPS stands for Qualifying Recognised Overseas Pension Schemes. They act as a vehicle into which, UK pensions (private or company) can be transferred.

QROPS are available in many tax jurisdictions around the world. There is a list of recognised schemes on the HMRC (Her Majesty’s Revenue and Customs) website. However, being on this list does not mean the scheme has been approved by HMRC, there is no official approval process.

An extract from HMRC’s website – “Publication on the list should not be seen as confirmation by HMRC that it has verified all the information supplied by the scheme in its application.”

Any pension can be transferred to a QROPS providing the UK pension has not been used to buy an annuity.

Who can have a QROPS?

QROPS are only suitable for people moving to jurisdictions with a lower pension tax than the UK. To check tax rates where you are moving to it is best to seek the advice of a local tax advisor as UK based ones may not be well versed in tax practices in other countries.

QROPS work best for people who are non-resident for Uk tax purposes and who plan to live abroad permanently or for a minimum of five years.

Are there risks with a QROPS?

As with all things financial it is best to seek the advice of an expert before you transfer your pension, this should limit any problems. Make sure you use a registered financial advisor as some unscrupulous ones take a very large commission when transferring your money. The rate should be between 1-5% of the funds transferred.

The flexibility of QROPS and the ability to take out large tax-free lumps seems means you could run the risk of your money running out.

What are the benefits of QROPS?

Pensions in the UK are taxed at the same rate as income. So if you plan on retiring to a country with a low tax rate you can transfer your pension and potentially enjoy more of your retirement income.

With QROPS there is no requirement to buy an annuity at age 75. Therefore, you can leave any residue in your fund to your beneficiaries after you die, inheritance tax free. There is also greater freedom to invest; you can take tax-free lump sums out of your pension and many QROPS have the features of an offshore portfolio bond.

Transferring your pension abroad used to mean you were liable to pay transfer tax, with QROPS you don’t have to pay tax to transfer your pension. Depending on the jurisdiction, taking money out of your pension can also be tax free.

A QROPS pension can be held in many different currencies. Therefore you can deposit money into it in the local currency and not worry about exchange rates.

Expatriates are still buying in Europe with France and Spain being the most popular for Brits.

Despite the ongoing Eurozone crisis expatriates are still intent on buying property in Europe. Spain and France, popular destinations for expat Brits, are the top spots for people looking for property. These results, reported by Rightmove Overseas, showed that 21.7% of all searches in February were carried out in Spain and 17.3% in second place France.

For expats, getting a home loan in France is fairly secure, Conti Director, Clare Nessling told Expatriate Healthcare, with high loan-to-value (LTV) rates. Spanish LTVs are usually around 70%. But with property prices in the Canary Islands, Balearics, Madrid and Barcelona remaining quite resilient people can purchase property with small desposits, Nessling went on to explain.

Another place which is seeing renewed foreign property investment is Malta. New, luxury developments are proving particularly popular, according to the director of real estate agents Frank Salt.

“Infrastructure and restoration initiatives are drawing fresh interest from overseas buyers,” Douglas Salt told the Daily Telegraph. “Maltese banks are continuing to offer loans to buyers from overseas,” he added.

Malta hasn’t felt the impact of the economic crisis as keenly as other popular European destinations. Foreign property owners hold 4.5% of all Maltese property and large percentage of those owners are British.

Expatriates have a lot to think about financially both before and after they move. According to Aidan Bailey of The Fry Group, there are three top mistakes expats commonly make.

1. Not being open with the tax authority – In Britain you need to inform the HMRC of your non- UK status. Fill in a form P85 before you leave, else you risk being taxed in the UK and your new country. It’s much easier to tie up loose ends before you leave

2. Making decisions post-move – It’s a different environment abroad. Expats may seek advice from tax advisors who aren’t experts in the tax laws of their home country or experienced in dealing with expats. This can lead to expats being rushed into financial decisions.

3. Importing financial mistakes – If you transfer to another tax jurisdiction or back home and you have made financial mistakes you are only taking them with you. Think before you move anywhere and get your taxes sorted beforehand.

Five steps for financial peace of mind abroad

To avoid making these mistakes Aidan suggests five key steps to ensure financial stability when you move abroad.

Many expats become “obsessed” with investment planning and where to place their money. Instead they would do better to start with these steps and go from there.

1. Look at what debt you have – work out how much you owe in total and then a payment plan so you know how much is going out each month.

2. Make a will – many expat have wills that are valid only in their home countries. For example, if you are moving to a country ruled by Sharia law your will may well not apply. If your husband dies in a Sharia country his estate will pass to his closest male next of kin. You need to make a Sharia approved will to avoid this situation.

3. Consider your insurance – research what health insurance you will need. If you already covered consider if it’s enough both for your own peace of mind and for the laws in your destination.

4. Think about property – if you have property at home, what are you going to do with it? You will have to tell the authorities if you plan on renting it or leaving it empty because the taxes on it may change (council tax will alter in the UK).

5. Don’t forget your pension – Set up a system to continue pension payments while you are abroad. If you wish to move back to the UK later in life and draw a state pension you will have to keep up National Insurance (NI) payments while you’re abroad.

Once you have followed these five steps you can look at what money you have left and invest it – or take a holiday!

Expat Wealth talked to Aidan Bailey of the Fry Group about their recent acquisition of Fulcra. He explained how they have established themselves as a leading financial consulting firm, about their current clients and their plans for the future.

Aidan, why the acquisition of Fulcra?

The Benelux region is a very important market to us. We focus mainly on Europe and Asia – in Europe we are split between the working and retirement markets. However, in the Benelux region we were in and out. We had a satellite office there a few years ago but, to put it nicely, we couldn’t compete with Fulcra. They were very established and it is hard to just turn up in a market and compete – longevity inspires trust in the market. We wanted a fixed presence there so we talked with Fulcra, our business models are very similar – it was a friendly takeover.

How did the Fry Group establish themselves as such a respected financial planning firm?

We have built up trust within our market. The Fry Group was established in 1898, we have been around for a long time – that sends out an important message. We aren’t aggressive or flash and we offer conservative tax advice. Around 60-70% of our clients come to us through word of mouth and referrals. Our individual offices around the world run targeted, local advertising projects rather than national PR campaigns.

How would you say the current economic conditions have affected your clients?

Location and level of income have both played a part. Our Asian clients are still buoyant – you wouldn’t necessarily know there was a global financial problem.

However, in Europe, income is harder to come by. Buying a pension is unattractive, leaving your money in the bank isn’t optimal, seeing as interest rates in most major economies are 0%. There is less job security and more uncertainty. However, you still need executives to run companies. Among middle management, roles are more mobile so we have seen middle managers relocating more frequently.

Have you seen any significant changes over the years, especially in the expat market?

The type of expat has changed. Before it used to be a Brit posted overseas on a hardship posting who couldn’t wait to get home. Now expats are getting younger and much more mobile. It’s also become easier to find work once you are abroad.

We see career expats who, nearing retirement, want to move back to the UK. A lot of British expats still view the UK as “home”. As it turns out some people split their time between 2 or 3 places. Have a holiday home in Spain or France but have a base in the UK.

A lot of people don’t want to move back, they prefer to stay overseas with lower taxes and warmer climates, and who can blame them?

What does the future hold for the Fry Group? Any more acquisitions or changes?

No not at the moment. With the RDR legislation changes in the UK we might be looking at small UK acquisitions in the future. Nothing on the international scale as we are well balanced globally.

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Aidan Bailey is Associate Director of The Fry Group, responsible for all international activities. Aidan managed The Fry Group’s Singapore office from 2001 to 2011,
managing client assets totalling GBP75 million. Aidan joined The Fry Group in 1994 and has an honours degree in Financial Services. He passed the UK Financial
Planning Certificate in 1994 and the Investment Representatives exam on moving to Singapore.