Foreign Perspectives

Archive for the ‘Overseas Investment’ Category

One thing never to neglect when you’re living abroad is the cost of changing money from one currency to another yet virtually nobody considers it.

The costs can be quite substantial too. A friend of mine who was living in Brussels once casually remarked that he just used the Halifax as he did at home, lifting EUR 20 or EUR 30 whenever he needed it. He was more than a little takenaback when I pointed out that by doing that he was paying around 10% of his entire salary in bank charges. Yes, that much.

We’ve had quite a run of Brits living in Spain stopping with us on their way to/from the UK this year and I was very surprised to find that only one of them used the Nationwide credit card. Yet, that’s the only one that offers free exchange from sterling to other currencies (and all of the people concerned were living on a UK based income).

The other alternative for euro-zone countries is the Halifax which operates as Banco Halifax in Spain. They offer free transfers from UK based Halifax (and Bank of Scotland) accounts to Halifax in Spain. Although they don’t currently operate elsewhere in Europe, the Spanish outfit is quite sufficient for those in eurozone countries as you can, of course, use the supplied debit card outside Spain for purchases (it’s a bit expensive for ATM withdrawals outside Spain).

Very handy and the whole thing operates in English.

If you’re used to the wide variation of mortgage offers in the UK, the French marketplace is child’s play: as far as we can tell, all mortgages are either fixed or variable rate and they are all the repayment type.

If you are buying your house “subject to mortgage”, you will need to see the bank before you see the notary as you will need to say “subject to obtaining a mortgage from X bank at Y% over Z years”. If this isn’t added to the “compris” then you will lose your deposit if you can’t get a mortgage.

French investments are incredibly simple too. The only problem with them is that you need to buy them through an advisor which is even more of a pain than trying to do something banking-related through your bank advisor. Due to this and the very limited range available, it’s best to continue to do your investing through the companies that you are already using.

For historic reasons, the various post offices and co-operative banking organisations in Europe maintain loose connections with their opposite numbers in other countries and it’s therefore often useful to open accounts with these organisations before you move.

For instance, the co-operative bank offer a service called Tipanet which offers quite cheap international money transfers: around £8 as compared to the £25 that a normal bank would charge you. In the UK, it’s the Co-Operative Bank that does this, in France it’s Banque Populaire. The co-operative movement is quite frequently used by various unions and in France Banque Populaire offers special deals to public servants.

The post office links are even more widespread and various special arrangements exist between considerable numbers of national post offices for their account holders. However, information on these isn’t widely distributed and it can take a little searching to find out about them. One advantage that almost all give you is that a post office account effectively gives you government issued proof of address once your first statement arrives.

Offshore banks are banks that operate in various tax havens around the world. The most familiar in the UK are the Channel Islands and the Isle of Mann but there are many based in small islands in the Carribbean.

If you’re moving abroad, it can be useful to have an account with one of these banks both to simplify your taxes a little and for the additional services that many of them offer to the expat community. None of the legitimate centres offer taxfree interest on your accounts these days but offer you two options for the interest on your accounts: 1) a withholding tax roughly equivalent to the tax that you would normally pay in your country of residence and 2) no tax but they report your income to the authorities in your country of residence.

Although no longer taxfree, the additional services that many of these banks offer can still make them worthwhile. Even the simplest of them are much more familiar with international bank transfers than a normal high street bank could be expected to be but most go beyond that offering multi-currency accounts, debit cards in a range of currencies and often expat advisory services.

On the whole, the range of services on offer increases in proportion to the increase in the minimum income that the banks ask for. A reasonable compromise with this seems to be Abbey International which offers accounts and debit cards in pounds, euro and dollars for an opening balance of £5000. If your needs are more modest, try the Co-Operative Bank in Guernsey (under Current Accounts, Offshore Banking).

Most people will think of Switzerland in terms of “offshore” banking, but is there anything special about it? The banks there are generally more aware of the needs of international clients but this generally comes at a price. By and large, unless you have fairly sizeable amounts of money (say £25,000 upwards) to deposit or invest, they probably aren’t worth it. Sadly, the Swiss Post Office no longer offers its excellent Yellow Account outside Switzerland (despite what you’ll read on some of the “open a Swiss account” sites).

We’ve included a list of the main banks operating in this arena in the directory which should let you choose the perfect combination of prices and services for you.

Even if you are intending to live the rest of your life in France, you should resist the temptation to close any UK bank accounts or credit cards. The only exception to this is, possibly, for those accounts/cards which have an annual fee.

In addition to the accounts which you already have, you may find it useful to open others as the international dimension changes how you use accounts. For instance, if you have a holiday home in France you’ll obviously be transferring money from pounds into euros much more than you were previously.

The range of accounts in the UK is massive and therefore we can only give an indication of those that you might find useful here.

The Nationwide Building Society Flexaccount (cheque account) is a must. It gives you entirely free transfers from pounds to euro and, at the moment, is the only truly free currency exchange service. Their credit card comes close behind with free exchange on purchases although it has competitors now in the form of Abbey’s Zero card and the Post Office credit card (NOT their “0% commission” deals as they actually cost almost 4%).

Beyond that, if you are going to live in France, it’s useful to open credit cards with a number of card issuers. In general, you will not be able to do this if you are living in France and neither can you easily get credit facilities in France so it’s useful to have a number of UK cards as a fallback should you need it. The main issuers are Capital One, the Co-Operative, GE, Halifax, HSBC, LloydsTSB, MBNA, Nationwide and Royal Bank of Scotland (most other cards are rebranded versions of these eg Sainsbury is really Halifax). It’s worth getting an American Express credit card too as you can transfer the account to France, although as the charges in France are considerably higher you may not want to do that right away.

Cheque accounts are also useful to have. If you qualify for the HSBC Premier service, they’ll open an equivalent account with HSBC France for you which has the additional advantage that you get free transfers between your UK and French accounts with them. Barclays and LloydsTSB offer a similar (but more expensive) service though their branches are largely confined to Paris and the Cote d’Azur. The Barclays account offers withdrawals with no transaction charge at BNP-Paribas machines in France (you are still charged 2.75% on the exchange rate). I used to recommend Citibank a lot but they have increased their charges substantially and it’s not as clearly a useful account for expats as it once was.

The Nationwide account is excellent if you are in France and need to transfer relatively small amounts of money from the UK but the £300 per day (about €400) limit means that it’s not practical for large amounts such as for your house purchase. You can use your own bank for this but the charges are generally quite high and the exchange rate isn’t particularly good either in most cases. To transfer more than a few thousand euros you are best to open an account with one of the specialist companies such as moneybookers; if you are going to be making regular transfers (eg paying for a French mortgage from a UK account) then HIFX offers a facility for this. Slightly more convoluted is by way of a UK Halifax cheque account to the equivalent account with Halifax in Spain which offers free transfers to Spain and from there you can transfer the money very cheaply to France (or any other Euro country).

If you are retaining your house in the UK as we recommend, then you will probably need to change the mortgage to a buy to let one. It’s best to do this before you leave the UK as there are a relatively small number of brokers who deal with overseas clients.

The field of investments in the UK is even wider than the range of banks. However, most seem prepared to change your address to an overseas one. However, if you don’t yet have a UK broker or similar it’s worthwhile opening an account with one before you leave as few will open accounts for overseas clients. We’ll cover it in more detail later but at this point it’s worth mentioning that having a SIPP (Self-invested personal pension) account open is also useful.

If you’ve not yet ventured into this arena, a few useful accounts to have are the Halifax sharebuilder (which lets you buy shares monthly), Fidelity’s Funds Marketplace (which lets you buy numerous unit trusts) and TD Waterhouse brokerage. All are free to open.

As always, you can find links to sites we have mentioned in the Foreign Perspectives directory along with other similar outfits which we haven’t had the space to mention here and the reference version of this entry on our emmigrating to France pages is more complete.

Although you can open offshore bank accounts after you leave, it’s best to open your choice from the above before you leave the UK as it can be difficult or even impossible to do it after you leave.