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How should I approach investing and is there a way to invest internationally that will benefit me here in Australia and when I return to the UK?

22 June 2022

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Question by Amy

I have just moved to Australia for 4 years but will be returning to the UK after. How should I approach investing and is there a way to invest internationally that will benefit me here and when I return to the UK?


Answered by Paul Bradley

Hi Amy,

How exciting!

4 years in Australia will give you an opportunity to experience a very different life...

As you plan to return to the UK there are a few specific considerations (from a tax and allocation perspective) and some general, but crucial things to consider!

The crucial general consideration

  • The crucial general consideration is linked with planning… you ideally want to get as clear as you can regarding ‘why’ you are investing.

  • Are you investing for something specific? And are you clear around the most likely timescales?
    Eg: Is the money for your retirement?

  • Do you have other responsibilities which may call upon the money (younger or older relatives)

  • Might you have emerging opportunities which would cause you to want to access the money (eg. Property, business)

  • If you want more flexibility as you might need to access the money sooner this should influence both your tax-wrapper choice and also investment strategy…

Some Specific considerations: Tax-wrapper

  • When it comes to investing, often a good place to start is looking at ISAs (within your ISA allowance).

  • You cannot put money into ISAs after the tax year you move… so depending on how much you want to invest, and when you moved there may be a small window to use your 22/23 allowance (£20k).

  • Off-shore bonds might sound appealing. They have a feature called ‘time apportionment relief’ which means if you were in Australia for 4 years and you held the investment for 10: you would only pay tax on 6/10 of the gain. This is still more tax than zero (ISA)! Depending on how much you wanted to invest and your circumstances these could be worth considering…

  • You should be open to options in Australia: in particular the Australian work-place pension has higher matching % rates than the UK. So, whilst the provisions you would be building would be in AUD and your intent is to return to the UK there could be a generous possible ‘payrise’ from your Australian employer to consider…

Specific consideration: Mix of assets

  • Your choice of underlying investments should be made from primarily considering ‘why’ you are investing and its most likely timescale. Shorter timescales (or more flexibility) should be aligned with more stable investment classes, such as money market / cash.

  • Most countries have a ‘home bias’ when it comes to investments… if you participate in an Australian pension for example you should make sure it isn’t invested disproportionately in Australian shares – especially as you plan to return to the UK.

  • As you intend to return to the UK (and depending on your level of confidence here) you should consider investments which are GBP denominated and hedged back to GBP as these will as least reduce one of the investment risks you would otherwise face: currency risk.

  • You should only have high proportion in shares to the extent you believe the investments will be kept for the longer-term (decades not days)

I hope you savour the moments and have a wonderful experience!

Paul

Answered by

Paul Bradley

Founder and Financial Adviser

Lifestyle Financial Planner who is very interested in people and relationships. Father of 2 young children!