The Specific Planning Requirements of Expatriates

Much of the criticism levelled at financial planning for expatriates stems from individual financial plans which have been driven by standard templates and produced generic recommendations geared to domestic UK clients. This approach has potentially serious implications for expatriates, whose circumstances often exist well outside the normal financial planning boundaries. Here are some examples of situations which are specific to expats and need to be considered in any planning exercise.

Taxation

As mentioned elsewhere, financial plans should always consider the taxation implications of any strategy. Ensuring reasonable tax efficiency as an expatriate can involve a much more complicated analysis and should involve expatriates only taking advice from an experienced expatriate tax advisor, working in concert with their domestic advisor, if required. We also expect the issue of tax residency, or more particularly achieving tax non-residency, to become a much more complicated issue as time progresses. Careful planning in relation to capital gains and inheritance tax issues also remain fundamental

Assessing the Remuneration Package

In a traditional expatriate environment, the employer would often provide a range of services within the expat "package" - including education assistance for any children, health care, accommodation and annual travel to the UK or elsewhere. While this still occurs, other employers are increasingly offering local packages or “cash in lieu” of providing benefits. While such a package might appear very attractive from a UK perspective in pure cash terms, even after local taxes, the local cost of paying directly for the benefits mentioned above - particularly education, housing and healthcare - can be very, very significant.

Life Insurance

Part of any financial plan should include a review of how well protected are the family's assets and income in the event of untimely death, or incapacity. While employers in the host country may provide some coverage, often expressed as a multiple of annual earnings, it is often inadequate and expatriates should appreciate that any additional insurance cover would probably be more easily and cost effectively acquired before leaving the UK. Also, there are situations where an expatriate may void their life cover in certain circumstances, such as if they become non-resident for a protracted period.

Pensions

The planner should consider your particular position in relation to your retirement pension(s) and whether, if you are likely to be overseas for a considerable period of time, participation in an international retirement structure would provide greater flexibility and tax effectiveness.