private pension overseas

ISAmad

Thanks for your advice.

temagami

As several posters have already said, your best strategy will depend on the local tax laws and how they interact with offshore investments and UK tax. For example, if you are based in Japan but planning to return to the UK, from my very limited knowledge of the Japanese tax system, you might be able to invest in funds through an offshore financial centre such as Singapore or Luxembourg and let your fund income roll up without tax as long as you are not resident in Japan for more than five years. (Unusual quirk of the Japanese system regarding "Non-Permanent Residents" and overseas income that is not brought into Japan.)

You could then possibly sell these investments before you return to the UK and remit the cash to the UK as you return, perhaps avoiding all UK tax because the sale was done when you were non-resident (subject, I think, to doing the sale in the tax year before the one in which you arrive back in the UK - HMRC seems to have deliberately set a trap for unwary returning expats who have been away less than five years).

I am not a financial adviser and this is emphatically not tax advice. I don't know all the rules involved to be sure I'm correct in thinking that this would work. This is intended simply as an example to show how someone who understands the rules specific to where you are living might help you find a tax-efficient solution.

However, as an expat, be very careful when seeking financial advice. There are a lot of financial advisers out there marketing themselves to expats who will try to sell you offshore investment bonds as a the best way to save for your eventual return to the UK. These are occasionally useful tools, but they are expensive and inflexible and seem to be frequently sold to expats who won't benefit from them, simply because they pay the adviser enormous commissions. Offshore bonds superficially have some of the features that someone in your position is looking for, but they also have lots of disadvantages that the advisers aren't always too good about explaining.

Incidentally, another forum you might find useful for queries like this is the Motley Fool UK expat board - there'll often be someone on there that has had similar issues: http://boards.fool.co.uk/international-expat-investors-50919.aspx

Regarding the safety of overseas accounts, both Singapore and Luxembourg have investor compensation schemes on bank deposits and brokerage accounts - although not on foreign currency (eg sterling) deposits from memory (up to €20,000 in Lux and S$50,000 in SG). And in any case, I'd say the odds of DBS, OCBC or UOB getting into trouble and not being supported by the Singapore government in a worst-case scenario are pretty slim.

The rules are not so good in the Isle of Man and the Channel Islands. They have deposit protection brought in after the Kaupthing Singer and Friedlander IoM farce but nothing for brokerage accounts.

ISAmad

I appreciate your advice.

It's a minefield. I have a friend of a friend back home who's an FA so I might give him a call.

seven-day-weekend

ISAmad wrote: »

I see...

So my options are to a) stay local and risk language/legal/cultural misunderstandings, b) stay in the UK but pay tax on gains, or c) put my pension in an offshore provider's hands (which I'm guessing doesn't have any government guarantee of protection?).

What about all the Brits working in poorer and more unstable countries? Are they limited to these options?

Thanks for everyone's replies, really helpful.

If they are classed as resident for tax purposes in those countries then yes, there are those limitations.

atush

The rules are not so good in the Isle of Man and the Channel Islands. They have deposit protection brought in after the Kaupthing Singer and Friedlander IoM farce but nothing for brokerage accounts.

Not strictly true- the IOM had a compensation scheme already in place before the UK govt caused the collapse of KSF- but it was increased After the collapse. I got 100% of my cash back plus 5% interest on top (for the period the acct was open before the closure).

temagami

atush wrote: »

Not strictly true- the IOM had a compensation scheme already in place before the UK govt caused the collapse of KSF- but it was increased After the collapse. I got 100% of my cash back plus 5% interest on top (for the period the acct was open before the closure).

Yes, my mistake - I shouldn't try to remember the details of these things late at night without checking. IOM had a lower limit beforehand that was retrospectively increased. Channel Islands had nothing. Now up to £50,000 per account for all three - although there is a limit on the total payout by the scheme as well (£100 million in five years for each of Jersey and Guernsey, £200 million in 10 years for IOM).

atush

The trick is to invest under the amt insured like in any jurisdiction.

I had invested in a joint acct, but less than the total insured before it was raised therefore gto everything back inlc interest (which was capped at 5% as the accts I was in were just over 7%).