Over the last few weeks, Barclays has been writing to thousands of its savers informing them that they need to hold a balance of at least £100,000 or their bank accounts will be closed. This is part of a growing trend as banks undergo ‘strategic reviews’, resulting in many expats being forced to close their offshore accounts.
Bearing in mind that Barclays, along with most banks, is paying minimal rates of interest, it is simply unfair to expect someone to deposit £100,000 just for the privilege of holding a bank account when they receive next to no interest in return. More disturbing is that no attention is being paid to the time someone has held an account. Even long-standing customer loyalty appears now to count 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 pay tax only 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.
Where now with Expat Banking in Malta?
Certainly, banks imposing these onerous minimum balances have created a headache for many expats. With interest rates close to zero, it makes sense for those with expat offshore accounts to hold larger balances – that they don’t require for short term needs – in investments rather than bank accounts. For day-to-day banking, expats should see about moving their deposits to one of the few offshore banks that still require only lower minimum balances. With these banks, if you deposit in the region of £5,000, you should avoid bank maintenance fees. After that, visa debit cards and online transactions are normally ‘free transactions’.
And what of investment deposits?
The second part of the solution addresses the matter of where you should 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 earn at least 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 are 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.
Whom to guide you in making wise investment decisions?
Approaching a financial adviser is the first step. As in any industry, you will get a mixture of ‘good and bad’ and it is advisable to speak to friends to glean information and advice drawn from their experiences.
For over a decade, Hollingsworth has acted as trusted advisers to many expats in Malta. 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.
New clients frequently engage us after word-of-mouth referral, and contact us after following our advisory and topical articles online and in various Maltese publications. You can expect us foster a close business relationship and be proactive in discussing and assisting you with not only your investment returns and options for expat offshore accounts, but also other aspects of financial planning such as income tax, wills, residency, and inheritance tax issues.
Having someone we trust with whom we can discuss our financial concerns and plans 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 be able to help you find a positive, win-win solution.
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