...

Regular savings plans

Regular Saving and Offshore Savings Plans for expats

If you’re an expat looking to save money regularly and consistently, an offshore savings plan could be a suitable option for you. Below we’ll explore the benefits of offshore savings plans and how they compare to investing directly on a platform. We’ll also guide how to evaluate your options and work with a financial adviser to make informed decisions.

For more information, download our free informative guide: An expats’ guide to regular saving and offshore savings plans.

The information contained herein has been prepared solely for informational purposes. 

Contents

Regular savings plan

Tax Efficiency

One of the most significant benefits of offshore savings plans is their tax efficiency. Depending on the jurisdiction, investors may be able to take advantage of lower taxes or even tax-free growth and withdrawals. Clients can grow their wealth over time by keeping more of their savings.

Asset Protection

Offshore savings plans can provide additional layers of asset protection, shielding investments from creditors, litigants, and other potential threats. This benefit can be particularly appealing to clients with high net worth, those who own a business, or those in a high-liability profession.

Diversification

Diversification is essential for any investment portfolio, and offshore savings plans can help investors achieve it by providing access to a wide range of investment options. These options may not be available in their home country, which can potentially help to reduce overall investment risk and maximise returns.

Currency Diversification

Offshore savings plans can also diversify currency, allowing investors to hold assets in various currencies. This benefit can help to protect against fluctuations in the value of any one currency, potentially reducing overall portfolio risk.

Unit-Cost Averaging

Investors can use a strategy called unit-cost averaging by investing a fixed amount of money at regular intervals over a long period. Over time, this strategy can help to reduce the impact of market volatility on the investor’s portfolio, as the investor buys more units when prices are low and fewer units when prices are high.

International Access

Investors can benefit from an offshore savings plan by accessing global investment opportunities and a wider range of financial products and services. This feature allows investors to take advantage of investment trends and opportunities in different regions worldwide.

Regular savings

Savings Plans vs Investment Platforms: What’s the Difference?

When it comes to investing, there are two main approaches: investing in a savings plan product or investing directly on a platform. Here’s what you need to know about each approach:

Savings Plans

  • A savings plan product is an investment vehicle that allows investors to save money regularly and consistently by making periodic contributions to the plan. These plans are structured as a life insurance policy or annuity contract and typically offer a limited range of investment options, such as mutual funds or exchange-traded funds (ETFs).
  • One key advantage of a savings plan is tax efficiency. In an offshore regular savings plan, for example, investment returns grow tax-free through a process known as “gross roll-up.” This means that returns are not subject to taxation until withdrawn from the plan, allowing them to compound over time and potentially generate significant growth.
  • However, savings plans may have higher fees than investing directly on a platform due to the additional costs associated with the insurance or annuity component of the plan. They may also have restrictions on when investors can withdraw their funds and may charge penalties or fees for early withdrawals.

Investment Platforms

Investing directly on a platform involves buying and selling securities (such as stocks, bonds, or ETFs) through an online investment platform or brokerage account. With this approach, investors have more direct control over their investment choices and can typically choose from a wider range of investment options than those offered by a savings plan product.

  • One advantage of investing on a platform is lower fees.
  • Many online investment platforms offer low or zero commissions on trades, making it more cost-effective for investors to invest directly.
  • Additionally, investors have more flexibility regarding when they can buy or sell their securities and can typically access their funds more easily.

However, investing on a platform may require more knowledge and expertise than a savings plan product, and investors may need to manage their own tax reporting and compliance.
Choosing between a savings plan product and investing directly on a platform will depend on an investor’s individual goals, risk tolerance, and preferences. Before deciding, investors should carefully consider each approach’s costs, investment options, liquidity, and tax implications. A financial adviser can provide guidance and help investors evaluate their options.

Regular savings

Tax Efficiency of Offshore Savings Plans: Gross Roll-Up

In an offshore regular savings plan, investment returns grow tax-free through a process known as “gross roll-up.” Here’s how it works:

  • When an investor contributes money to an offshore regular savings plan, the funds are typically invested in a range of investment products, such as mutual funds or ETFs. As these investments generate returns, such as dividends, interest, or capital gains, the returns are reinvested back into the plan.
  • Because the plan is based on an offshore authority with favourable tax laws, the returns are not subject to taxation in the investor’s home country, allowing them to grow tax-free. Over time, the investment returns are compounded, meaning that they are reinvested and generate additional returns. This can result in significant growth over the long term.
    When the investor eventually withdraws funds from the plan, they will be subject to taxation according to the tax laws of their home country at the time of withdrawal.

It’s important to note that gross roll-up is a tax-efficient strategy that can help investors maximise their long-term returns. However, investors should also be aware of the risks associated with offshore investing, including potential regulatory and compliance issues and currency and market risks. As with any investment strategy, working with a trusted financial adviser and carefully evaluating the risks and benefits before making any investment decisions is important.

Overall

Overall, an offshore savings plan can provide several benefits that appeal to clients looking to save money regularly and consistently, especially those seeking tax-efficient, diverse, and internationally oriented-investments. However, it’s crucial to note that offshore savings plans can come with risks. Therefore, investors need to work with a trusted financial adviser to assess their situation and determine if an offshore savings plan is the right choice.

For more information, download our free informative guide: An expats’ guide to regular saving and offshore savings plans.

Regular savings guide

How can we help you?

If you would like to speak to one of our advisers, please get in touch today.

Let's talk about regular savings


    Get a free review of your finances

    Seraphinite AcceleratorBannerText_Seraphinite Accelerator
    Turns on site high speed to be attractive for people and search engines.