Is offshore banking the best expat strategy

Published:  1 Aug at 6 PM
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In spite of rumours about tax avoidance, offshore banking gives a number of advantages for expat professionals.

The vast majority of expat professionals working overseas are paid in their local currency, with many having financial liabilities such as mortgages in the home country. Most are planning to either move elsewhere for work or retirement or even return home at some stage in their professional lives. For those concerned about banking security and ease of transferring money in various currencies, offshore banks are the sensible answer. Although there may also be tax advantages, this isn’t the main motivation for banking offshore.

Working in a number of overseas locations has its own risks, as economic stability can easily be turned upside down by election or sudden, less legal changes in government. Especially in Asian and Middle Eastern destinations, falls in economic performances as well as political unrest can result in outflows of capital affecting the value of local currencies. For expats with savings in such countries, an ultra-fast transfer to another more stable country’s currency is the only way to avoid losses caused by financial crises.

Expats working in the Gulf States have other issues, even although the region’s currencies are mostly pegged to the US dollar as well as being backed by central bank-held capital. Even so, expats’ banking relationships are tied to their employment status and losing a job, having an outstanding credit card balance or loan can result in a freeze on your savings. Older expats should also remember money in the Gulf States is subject to Sharia law, meaning in the case of your death, all monies will go to your nearest male relative rather than to your widow and children.

One major benefit of banking offshore is security, with the safest locations the highly-regulated Isle of Man, the Channel Islands, Switzerland, Hong Kong and Singapore. Guernsey and the Isle of Man both have deposit compensation schemes which protect deposits of £50,000 or less. Banking offshore gives you a choice of currencies, the flexibility to deal with unstable fluctuations plus the chance to hold your savings in the reserve currencies of pounds sterling, US dollars or euros. For expats regularly moving between countries, the option of leaving investments and savings in one secure location is an attractive option, with accounts easy to open and run.
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