UK investment tips for expats in UAE
Multiple options are available for British residents and expats alike
With investing, you’re often told that you not only make your money work for you, you also build retirement wealth in the process. However, it’s easier said than done when investing overseas.
When it comes to expat investors, fluctuating exchange rates, interest rates and cost of living are just a few of the several challenges affecting their decision to invest overseas. For investing in Britain, for instance, while there are a vast variety of options that are typically available for UK residents and expats alike, having a clear understanding of your financial goals is essential.
For example, by investing in a UK property, not only can you create a steady income stream, you will also have a place to live.
What are your investment options in the UK?
“While an Individual Savings Account (ISA) is an ideal fix for people looking to invest in the UK, these are only available to UK residents,” said Andrew Bailey, an independent real estate consultant working in the UK property sector, currently based out of Dubai.
“Moreover, most expats, especially those who have been abroad for an extended period, won’t be classed as UK residents. However, like an ISA, a pension scheme is a tax-efficient way of saving and a crucial component of your overall retirement planning strategy.”
However, the term ‘pension’ is quite far-reaching, and while there are numerous products currently available to choose from currently, the two that expats can really take advantage of are QROPS and SIPPs.
How do overseas pension schemes work?
‘Qualifying Recognised Overseas Pension Schemes’ (QROPS) and ‘Self-Invested Personal Pensions’ (SIPPs) are what is referred to as pension ‘wrappers’, which allows you to save, invest and build up a pot of money for when you retire.
“While QROPS is essentially a label for a foreign pension scheme that meet the government’s revenue and customs rules to receive transfers from UK-registered pension, SIPPs is a type of personal pension and works in a similar way to a standard pension plan,” added Bailey. “QROPS plans offer more flexibility and financial benefits. However, for those who want a more hands-on approach, SIPPs allow you to make investment decisions yourself. Ultimately, you control where to invest your money.”
Is it worth investing in UKbased stocks and shares?
Overall, it’s a personal preference. However, diversifying your assets can provide some security if one or more instruments fall in value.
“Higher-than-expected interest rate hikes from the US and the Bank of England, persistently high inflation, lower consumer spending, a recession, are just some of the factors that could result in further market weakness going forward. So buying shares now is not guaranteed to pay off,” said Brody Dunn, an investment manager at a UAEbased asset advisory firm. Generally, mutual funds can help you easily build a diverse investment portfolio, allowing you to spread and lower the risk.
What about expats investing in offshore bonds?
With an offshore bond, you can invest a lump sum or regular payments. Investing your money means it could potentially grow tax efficiently over time because you won’t normally pay tax on investment growth, which could give you more savings for the future.
“Offshore bonds are a tax-efficient option for expats as they typically avoid capital gains tax and deferred income tax. As long as the correct bonds are in place, the investment will remain tax-free, even if you return to the UK,” added Dunn.