70,000 GBP. How to invest while living abroad?

Oilpainting wrote: »

I have no pension savings but have started investing in mutual funds through a stocks and shares ISA. I would like to start putting more into this

You will find that hard to do as you are living and working outside the UK and are presumably not a UK taxpayer. For most people living and working outside the UK they would become tax resident in the country where they are working, rather than wanting to carry on paying UK income tax on their worldwide income.

Only UK taxpayers are allowed to put more money into their S&S ISA. Unless it is money that's already inside a cash ISA wrapper and isn't going to be a 'new subscription'.

Perhaps you are only outside the UK for a short period and have decided to keep your UK tax residence, but that's relatively uncommon, and you've said you're 'living abroad' rather than 'staying abroad on a job for a bit'.

Would starting a pension be the best way, fixed rate bonds?

Starting a UK pension is only an option if you are tax resident in the UK, which you may not be. Investing in a pension gets you UK tax relief on your salary and you pay no UK tax on the income or gains from the investments until you withdraw them together with the capital value once you reach your late 50s or beyond, paying tax on it then instead.

But that is a drastically different option than buying a fixed rate bond for a couple of years. The tax effect is different but more importantly you can have the money back from a fixed rate bond whenever it matures, whereas you can't have money out of a pension until you're age 55+ (may be later than that, if law changes before you get there).

Is reinvesting annual interest on fixed rate bonds a good idea?

Depends if you want to spend the money or re-invest it again. Over the long term you will not make as much money by continually investing in cash deposit bonds as you would make by investing in investment funds that hold equities and other financial instruments.

But in the short term, unlike investment funds, fixed rate bonds don't carry investment risk. Unless you mean 'bond' in the sense of a loan to a company or business rather than a FSCS-protected deposit with a bank. If you mean a loan to an individual private company then you do have 100% loss potential.

Any advice on how I can stop this money losing value would be very much appreciated.

Inflation will do whatever it wants to do, so you can't stop money losing value, other than trying to make it grow faster by depositing it at a higher-than-inflation rate in a bank (which you won't be able to do on the full £70k) or taking investment risk by buying investment funds (inside or outside a pension or ISA wrapper) or starting up a business (e.g. property rental).

As the options you are considering are radically different (locking money away into a pension until your late 50s, investing in stocks and shares investment funds, starting up a property rentals business in a country in which you don't live, buying a fixed rate bond) and we don't really know your personal situation (age, time you want to be able to acccess the money, your tax residency, your real goals or preferences or objectives other than 'stop money losing value') ; it is pretty much impossible to give you useful guidance.

You live and work outside the UK so presumably your spending is in a foreign currency (unless you are somewhere like Isle of Man, Jersey, Guernsey)? If so it will be impossible to stop the £70,000 'losing value' in comparison to your spending needs because it is not cheap to avoid changes in currency exchange rates which will change your spending power.

If that's the case, you might consider moving a portion of the money to the country you live in to build some savings or investments there. Obviously depends on where you are living as there are risks with moving cash to other countries where it can be harder to later get the money out or the local country might not have the same advanced financial services sector and consumer protection.