As we wait for developments, what do we know about Brexit’s possible impact on expatriates’ investments and pensions?
Savings and investments
If, like many expatriates, you mainly hold UK assets in your portfolio, you will be more vulnerable to the fortunes of sterling and the British economy in these uncertain times. Following the Brexit vote, the pound dropped significantly against the euro and remains volatile. For expatriates receiving income in pounds, this means their money may not go as far as it once did.
Now is a good time to review your portfolio to see if you are overexposed to UK assets and consider how to improve diversification over asset classes, countries, companies, sectors and currencies to reduce risk. Your adviser can recommend options to help you make the most of your finances in this difficult climate. For example, you could limit currency exchange risk with investment structures that allow flexibility to invest in different currencies and convert when it suits you.
These volatile times can also offer opportunities. In this historically low interest rate climate, if you want higher returns you need to look further than bank savings and fixed interest options. Share markets, for instance, have been boosted recently as the weaker pound gives UK exporting companies a competitive advantage.
Although volatile markets can be unsettling, those invested for the medium to long-term in a well-diversified portfolio should be able to weather any turbulence. Your financial adviser should undertake an objective assessment of your risk appetite to ensure your portfolio offers the right balance of risk and return for your peace of mind.
Pensions
Once Brexit happens, it should still be possible to take money from your UK pension as you can today, or transfer it to a Qualifying Recognised Overseas Pension Scheme (QROPS).
However, the UK media has speculated that withdrawals by non-UK residents could start being taxed once Britain leaves the EU. While this has not been confirmed, if this is a concern for you it may be worth considering transferring into a QROPS. Doing so could also provide flexible currency options to protect your pension income from fluctuating exchange rates. However, it is crucial to take advice when it comes to your pension, as there is no ‘one size fits all’ solution.
With Brexit likely to disrupt currencies and markets for a while, there has never been a better time to review how you structure your finances and consider alternative options for investing. An adviser who lives here and is experienced in supporting expatriates in Portugal will understand cross-border implications and help you plan how to respond as Brexit unfolds.
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By Gavin Scott, Senior Partner, Blevins Franks