As a long term expatriate myself and having had 26 years of financial services experience both onshore and offshore, I have managed to learn a few things over the years. Certainly I make a living from this business and I also manage to invest my own money successfully, so if you'll indulge me with a few minutes of your time, I will endeavour to pass on below a few words from the experiences I have had. This is a huge subject and I cannot pas on 26 years of experience here, but these words just might help you not to make some of the many mistakes I have both made and seen others encounter over the years.

The greatest concern for expatriates is usually pension planning. Many of us go offshore in the first place because we want a better life, perhaps to retire earlier, but even if not, most of us hope to retire wealthier. Many Expats have a golden opportunity and then squander it by making insufficient savings and bad decisions, often predicated upon poor advice. This is where I may perhaps help.

I cannot tell you specifically how much of your income to save as that obviously is based upon individual circumstances. However if you no longer have a company pension scheme to benefit from, and to be honest even if you do, it really is not a bad thing to be saving at least a third of your income into some medium or another

In my experience, Expat life tends to be uncertain in what the future holds employment wise. Many are on contracts and generally we are at least if not more affected by the global economy than our countrymen. Projects get cancelled or delayed and suddenly we are no longer required. Also we can be affected by geopolitical situations such as some Saudi based Expats have found recently. What I am leading up to here is that it is not necessary to save for your retirement into some long-term savings plan which carries the label "pension" on it.

In the UK market our pension scheme carries tax relief at our highest marginal rate. This is the single biggest incentive to use one. As this money then accrues, it keeps your money inaccessible until you retire as you are not to be trusted with your own future as far as the state is concerned, and it basically saves up a lump sum, hopefully a large one and then you are forced to buy an annuity with it, or most of it sometime between your 65th and 75th birthdays. Much of this will be shaken up in 2006 by what has become known as "Pensions A Day" and this might once again be important to you if repatriating later so remember this fact. From 2006, the whole system is changing and it is worth bearing this in mind as contribution limits will change from an annual limit to a lifetime limit of the size of your pension pot. It will be possible to put in an entire year's salary in one go if able. Not many could, but if you could live on your savings when you went back perhaps you could. Imagine putting a whole year's gross income into your pension!

I would and do say to all my clients, do not get suckered into any of the offshore life company products marketed as "Pensions". These are not pensions at all but simply whole of life insurance policies with a fixed termination date for the premium payments and set up with more investment content than life cover. In my opinion these are inflexible and poor value. Sure they offer you a facility to save monthly but they also carry some heavy charges that are usually well hidden from obvious view. They are expensive in that you usually pay a life company to collect and administer the money and then pay again a fund manager. Why not invest directly into the funds?

These pension plans are inflexible in that if your circumstances change and you want your money then you will pay penalties to access it. Some of your money is usually available under these schemes once the initial period is passed, but you can be pretty sure that you are still being charged exactly the same as you would originally have been charged had you kept the plan to maturity and paid every premium as originally signed up for.

These plans will allow you to reduce the contribution level but they will charge you just as if you had not. If you wish to take money back out, you will be allowed some but you will normally keep paying charges just as if you had not. If you wish to stop paying in, they will normally continue to charge you pretty much as if you were still paying in, and if you want all of your money back then they usually add up everything that you would have paid had you kept the plan going to maturity, and then take that as one lump sum and send you the change. In my experience long-term regular savings plans are the single most common source of investment dissatisfaction among Expats.

Because these plans don't actually pay you any pension, simply allowing you to accrue a lump sum with which to use as pension if you wish, you can find much more flexible and better ways to save.

A unit trust or investment trust type vehicle is much more flexible. You would generally expect to pay less to buy it and you will almost certainly lose less each year in the manager's fees for running it. If you wish to not add any more to it, then there is no penalty for not. If you wish to access all of your money, then you may do so without any penalty. At any time.

Most of the best products are not available to regular savers and require single lump sums of Euros/US$ 5,10 20 or even 25K. I usually tell my clients to save up in the bank until they have enough and come back to me and buy something good then. It is better to do this than buy an inferior product simply because it will accept less money into it. Also by saving regularly into your bank until you build enough surplus to invest, you can easily cope with month to month variations in your savings capacity caused by the likes of Christmas and summer holidays, and of course bonuses too.

Many Expats with savings to invest are encouraged to invest via life assurance bonds. It is true there can be some tax efficiencies here but on smaller investments the cost of the product will probably drag the performance of the investment by at least as much as the potential tax liability, and with larger sums a trust or offshore company will usually offer the same advantages with more flexibility and lower fees.

Never pay full price for your investments. If you buy from someone who cold calls you then you will almost certainly be offered a life product and will pay heavily for this. These are where the industry earns most of its commission, so as sure as night follows day…

If you go direct to a specialist investment product provider, you will find in almost all cases that any money that would have been paid in commission to an adviser had you used one, will be kept by the company. This is because like all businesses, if the wholesalers started undercutting their retailers then they very soon wouldn't have a retail distribution supporting them, and most wholesalers are not set up for retail sales or customer servicing. Therefore, though they might take your business, you should expect to pay full price and receive no ongoing advice.

Based upon what is a particular investment being recommended to you? Last year's hot performance or what? Many products are far more likely ever to make money for the company launching it than the person buying it. This is not always true but a big name like a bank doesn't always mean it's products are much good. The best fund managers don't work for insurance companies or banks.

That if the deal looks too good to be true, it is too good to be true.

Always check that the product provider is regulated somewhere respectable. A stock exchange listing somewhere can lend a lot of credence, and never - ever pay any money direct to your adviser or his account. All monies should be transferred, preferably electronically, direct to the account of the fund itself, and back to your account upon encashment.

Also consider is the adviser you are dealing with going to be there when you need advice in the future? Many expatriated advisers are very transient, only really interested in their next sale, and though they might promise a lot don't tend to stay around long. What sort of roots do (s)he and the company (s)he works for have in the community? (women are not automatically more honest than men!)

Use a discount broker and hopefully one who you can judge to be honest and have your best interests at heart. If he is offering you any of the above you might now better judge for yourself. However if he is offering you direct investment into products you can have confidence in, at discount prices, then you probably have a head start on your fellow expat.

I hope my advice might be of value and wish you successful investing.

Geoff Birch
Managing Director
Authorised by the Central Bank of Cyprus
Posted 24Mar05