I have had an influx of daily emails about what are my options as a U.K expat wanting to invest overseas as the U.K platforms are not letting you invest due to you not having a U.K address.
This is a problem that has flooded my email inbox for a while. So, thought I will address this issue today.
In this article, I will write about what options you have offshore and how they compare to the U.K platforms for cost, funds, and tax, aiming to give you an overview of some of the options.
History of U.K Expats Account
It was once possible to invest in the U.K. accounts if you were a U.K citizen (passport holder) living outside the U.K. But, with tighter regulations and Brexit it is now the case which many Investment companies will not accept you if you do not give a legitimate address.
https://www.moneysavingexpert.com/news/2020/09/thousands-of-british-expats-face-uk-account-closures/
With articles like the above. I do not see this changing and in fact, see it getting hard. Possibly seeing an American-style expat tax being enforced to facilitate the present government spending.
ISA Accounts or Offshore Accounts
ISA accounts are government saving schemes that allow you to save a certain amount in a tax-efficient manner. For a full list read my article on ISAs this will explain what ISAs are available and what options you have for ISAs.
In short, the government set it up with the aim of tax efficient option(s) to aim to promote saving.
This has been by all accounts a popular scheme. But for expats living outside the U.K, you don’t need to be invested in an ISA to have tax efficient savings. And offshore investing can just as easily mitigate your tax.
ISAs
The government has introduced other saving schemes but non as successful as this when Gordon Brown introduced them in 1999. I bet he couldn’t imagine how successful they would have become with a 2020 report by The Times saying they have saved 30 Billion of Income-tax.
An ISA only lets you save 20,000 GBP a year tax-free, with offshore you have the option to save more tax-free. Furthermore, if you are saving into an ISA the options and liquidity can be somewhat restrictive. What I mean by this if you invest in a Lifetime ISA and want to access your cash before 50 or to buy a first-time house you will be hit with fees and lose the governments 25% up to 4000 GBP they offer as a bonus.
The funds, although you have a range of funds and I’m personally in favour of the fund range and can make effectively a portfolio for each risk level, effectively the funds are not geared for expats, the funds are all domiciled in GBP. If you are living in Europe or the U.S you might want a different fund option.
Further more the FCA restrict what can be invested in.
I do believe this to be beneficial for most investors as offer protection of what is regulated. But, I have had clients in the past want to go into specific Investment trusts, EM funds, or sector-specific funds to make use of market conditions that can not be bought in ISAs.
Protection
ISA themselves are pretty stable but the funds really drive the ISAs if you have in a stocks and share ISA account.
FSCS U.K protection limit is at 85,000 GBP. This is the point I would like to make many go over and see this as an important factor. But, in reality, it only comes into play if one of a few situations happens.
- The banking system collapses or
- You have been ill advised.
The likelihood that you will get ill-advised in the U.K is few and far between with the present regulations the funds and the portfolio will be stable. I also don’t think the banking system collapsing is regular but it can happen.
Offshore, you do have investor protection as well, most jurisdictions such as the Isle of Man, Luxembourg, and Singapore not only have investor protection schemes but also a more stable banking system than the U.K.
https://bbcincorp.com/resources/countries-with-best-offshore-bank-accounts
I would be careful with two things if you are looking for offshore advisors, they have had a reputation of being sales like and this is true, make sure they are well regulated and have a good understanding of your situation.
The Funds and Platforms
The platforms, if in the offshore bonds such as RL360 or FPI can be highly expensive and offer a commission to the advisor, so ensure you are going into them for the right reasons and not just to pay the advisor. The funds, if you want to be sure, make sure they are listed on HL SIPPs platform, this will ensure that at least they are available in the U.K. If you want to double-check go to Morningstar or Trustnet for non bias rating agency. I would stay clear of low-risk profiles or anything that is below 3 stars. Do your research before you are invested in any funds.
The reality is if you are sticking with solid funds you will most likely never have to use any of these protection schemes.
How Do U.K Options Compare to Offshore Investments
I have written a number of articles on offshore options and U.K options. The ISA options in the U.K. are pretty competitive. Here is a summary of some of the most used U.K platforms.
| Platform Name | Charge One off (GBP) | Fund range | Account closure fee (GBP) | Dealing fee (GBP) | Transfer out fee |
| Iweb | 25 | 2300+ | 0 | 5 | 125 |
| Interactive Investor | 9.99 per month | 3000+ | N/A | 7.99 | 0 |
| AJ Bell | 0.25 % under 250,000 + fund management fee 0.35% | 3000 | N/A | 1.25 | N/A |
| Vanguard | 0.15%+ Fund manger charge 0.22% | 73 | N/A | 0 | 0 |
| Nutmeg | Managed portfolio 0.75% +Fund management charge 0.22% | N/A | N/A | N/A | N/A |
- Note with the fund management charges it is done based on an average, some funds such as ethical investing will charge more.
- A.J bell does reduce their fees for accounts over 250,000 – 1 Million
Analysis, of these platforms the U.K has done well in getting competitive fees with platforms. If you are looking for DIY platforms these are not bad options.
For managed funds, it is harder to gauge fees, the FT did an article on this with experienced financial professional spending hours looking for fees for managed platforms the average was 1.2% with advisor fees and initial charges of 1%. This should be in the average for advisor fees
The FT has done an article on the Fees of SIPPs and I have included the link below.
Robo vs Actively managed funds
I have had a Nutmeg account and have come on some other Robo-advisors Wisdom tree. I believe for the novice investors these are great in theory, the problem I have is that they just don’t perform. I had a Nutmeg at level 10 risk to try it out, it overall performance over that time was 2% (not a loss). My other funds and portfolio were up 22% over the same time frame (mostly in global large-cap equities). I have also spoken to friends that have money invested at a lower level that has had less. It hasn’t been negative but is far behind a good portfolio. This can be the same for other Robo advisors, they have failed to live up to their fund portfolio.
Offshore Platforms
At a glance, tax-efficient saving seems a good option, and would agree as I will cover the tax saving options later. But platforms I would be inclined to look out for are the offshore bonds as they do have a place for security and can be wrapped in trust, these are highly expensive options.
In this table I will do a brief guide on the charges of some of the funds and the platforms this will vary significantly on the amount of coms the advisor takes the term, and fund charges. Also, note that the advisors can also add a management fee for this.
| Platform Name | Charges P.A (these depend on the term of the plan the amount and the structure figuring out the fees can be challenging to say the least) | Hidden Charges |
| Friends Providence International reserve bond | 1.2-2% | Mirror Fund, initial advisor coms 5-7% admin charge. |
| Friends Providence International Summit bonds | 1.5%-2.5% | Dealing charges admin charges and initial fees advisor fee 5-7%. |
| Friends Providence International Zenith | 1.3%2.2% | Dealing mirror fund charges 2% admin fees advisor fee 5-7%. |
| Generali Vision professional portfolio bond | 1.2%-2% | Dealing charges 2% admin fees advisor fee 5-7.5%. |
| Hansard International Capital Bond | 1.6%-2.1% | Dealing charges 2% admin fees advisor fee 5-7.5% |
| Investor Trust Evolution plan | 1.2%-1.9% | 5-7% fees, admin charges. |
| Investment trust platinum fund | 1%-1.5% | 5-7% advisor fees admin charges. |
| OMI collective Investment bond | 1.2%-2.4% | Dealing mirror fund charges 2% admin fees advisor fee 5-7% |
| OMI executive Investment bond | 1.7%-2.4% | Dealing mirror fund charges 2% admin fees advisor fee 5-7 |
| Prudentantal International Bond | 1.5%-1.9% | Dealing mirror fund charges 2% admin fees advisor fee 5-7 |
| Royal London Pimms | 1.6%-1.8% | Dealing mirror fund charges 2% admin fees advisor fee 5-7 |
| Royal London Orical | 1.8%-2.1% | Dealing mirror fund charges 2% admin fees advisor fee 5-7 |
- Note that this is just a brief guide for more in-depth analysis please read some of my article or full investments offshore guide.
My Thoughts on Offshore Bonds
I believe they do still have a place for a small minority of people, more so looking for estate planning if for example wanting a trust or over the NRB of 325,000 GBP in the U.K.
But, if you read my article on SIPPs and IHT planning you have better options.
If you have one of these or have been proposed one gets in touch on the form below and will review the charges and performance.
Offshore Platforms
More modern advisor platforms are for me a much better option for fees and give investors in the offshore market real options to the U.K advisors.
These have the option to move a SIPPs into if in the U.K or a QROPs or International SIPPs if outside. As well as this you can invest as a platform, these are portable for expats.
All of these are advisor platforms, so will have to speak to an advisor which might have an attached fee for management. However, if the advisor is good, the fee shouldn’t make a blind bit of difference providing it is around the average stated above of 1.2%
Here are a few of my top advised ones and the fees this is not an in-depth review, please read more on my blogs on U.K SIPPs international platforms with ratings or get in touch to see which is the best step for you.
| Platform Name | Fees | Dealing charges | Currency Options | Funds |
| Capital Platform | 0.4% | 0.2% | Yes | 2500+ |
| Ardan International | 0.4% | 45 USD | Yes | 2000+ |
| Custodian | 0.7% | 45 USD | Yes | 5000+ |
| Investor Trust Select | 1% | None | Yes | 2000+ |
Thoughts are that for U.K expats now they do offer good options offshore that you can take advantage of or attempt to keep an ISA in the UK. Personally, I favour the offshore market because taxes are lower with more investment options, such as Trusts and bonds etc.
The U.K Tax Levels
If you are to invest outside of an ISA or tax wrapper the current levels are 12,500 GBP for U.K income tax, Capital Gains tax on anything over 12,300 GBP, and dividend tax on anything over 2000 GBP. So, it is worth keeping an eye on or seeing an advisor about your options on this.
Final thoughts, for those that are living abroad I would be more inclined to look at international SIPPs, ISA limits may be put on the radar and see the amount reduced due to a money-strapped government. ISA’s are very popular with many UK citizens and does have a use, however, as an expat they can be hard to get and are likely to lose some of its tax freedoms. Furthermore, if you are living abroad, you do now have feasible offshore funds and stocks and platforms.
If you have any questions please feel free to get in touch below.
