Over the last few weeks thousands of savers have been written to by Barclays informing them that they need to hold a balance of at least £100,000 or their bank accounts will be closed. Unfortunately this is part of a growing trend with banks undergoing ‘strategic reviews’, the effect of which is that expats are being forced to close down their bank accounts
Bearing in mind that Barclays, it has to be said along with most banks, are paying minimal rates of interest, it is simply unfair to expect someone to happily deposit £100,000 just for the privilege of holding a bank account when they receive next to no interest in return. What is most upsetting is that no attention has been paid to the length of time someone has held an account with the bank – many have been loyal customers for more than 20 years – it appears that this loyalty now counts for nothing.
One of the many reasons that Malta is attractive for expats is that tax is payable on what is called a remittance basis. This means that expats only pay tax on income that is paid into Malta. Therefore it makes sense for most expats living in Malta to open offshore bank and investment accounts in a jurisdiction such as Jersey or Isle of Man as no tax is payable at source in these countries. In this scenario you simply inform the Maltese Revenue how much income you have remitted to Malta during the year and your tax is calculated accordingly. This favourable tax basis attracts many wealthy individuals to become residents of Malta and in turn generates a huge amount of additional tax revenue that Malta would not otherwise receive.
With interest rates close to zero, it makes sense that savers should look to hold larger balances, that they don’t require for short term needs, in investments rather than bank accounts. In this way banks imposing these onerous minimum balances has created a headache for many. For day to day banking you still require a bank and expats should look to move their deposits to one of the few offshore banks that still require lower minimum balances. With these banks if you deposit in the region of £5,000 you should avoid bank maintenance fees. Thereafter, visa debit cards and online transactions are normally ‘free transactions’. The second part of the solution is then where do you hold the balance of your savings that you don’t require access to in the short term? For this money your goal should be to at least earn a reasonable return to combat the effects of inflation.
Firstly there is no such thing as the ‘ideal investment’. High returns for little or no risk to your capital is a myth so don’t be caught out by attractive headline rates without fully understanding the risks involved. Secondly, having a spread of different investments is essential to ensure diversification. Not all asset classes for example property, equities and bonds can be expected to perform well at the same time. Spreading your capital across different asset classes is important to increase your likelihood of positive returns over the medium and long term. Thirdly, who is going to make the decisions of what to invest in? Approaching a financial adviser is the first step. Like in any industry, you will get a mixture of ‘good and bad’ and it is advisable to speak to friends regarding their own experiences.
At Hollingsworth International, we have been trusted advisers to many expats in Malta over a period of more than 10 years. One of the reasons our clients appreciate our advice is that we have no ties to any bank or investment company, so our advice is completely impartial and always represents their best interests. We happily engage with new clients who have either been recommended by existing clients or who have followed our articles in the publications and newspapers we contribute to. Over time, you can expect us foster a close business relationship where you can discuss not only your investment returns but other aspects of financial planning such as income tax, wills, residency, and inheritance tax issues. Having someone that you can trust to discuss your financial concerns and plans with is important to most of us. If you like many receive a letter from your bank saying that you may have to close your account, we may just be able to help you find a positive solution.
For details of our Product Range and Services please visit us at www.hollingsworth.eu.com
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