Money Management when I'm not there to manage it
May 3, 2016 8:48 AM Subscribe
What should I do with a not insignificant amount of money that is sitting in an account in a different country?
I live in Canada, from England originally.
I own a house in Canada, I have investments here, most of my money is here. I do still have a nest-egg back in a UK account and I'm not sure what to do with it to make the most of the money.
At the moment, it's sitting in a high interest savings account which was perfect for me because I needed to be able to access some of the funds from Canada.
Now that I don't need to access the funds so readily, I think I need to leave the money alone and put it somewhere it will grow over the course of several years.
I'm 34 - let's say I can safely leave it alone for the next 30 years - what should I do with it? (I've lived in Canada for many years now and I'm not up to date with the best kind of accounts to put my UK money in) I'm going home in May, so I will be able to visit banks etc in person, if that makes a difference!
I live in Canada, from England originally.
I own a house in Canada, I have investments here, most of my money is here. I do still have a nest-egg back in a UK account and I'm not sure what to do with it to make the most of the money.
At the moment, it's sitting in a high interest savings account which was perfect for me because I needed to be able to access some of the funds from Canada.
Now that I don't need to access the funds so readily, I think I need to leave the money alone and put it somewhere it will grow over the course of several years.
I'm 34 - let's say I can safely leave it alone for the next 30 years - what should I do with it? (I've lived in Canada for many years now and I'm not up to date with the best kind of accounts to put my UK money in) I'm going home in May, so I will be able to visit banks etc in person, if that makes a difference!
If you want to set it aside for retirement, can you move it into a low fee, highly diversified investment that qualifies as a retirement account so it can grow tax-free? In the US, companies like Vanguard offer total market index and total bond index funds that are low fee and highly diversified and it does look like Vanguard operates in the UK as well. If you want something more conservative, perhaps you can invest in Treasury Inflation-Protected Securities (TIPS) in the US, or something equivalent in the UK.
posted by OCDan at 8:58 AM on May 3, 2016
posted by OCDan at 8:58 AM on May 3, 2016
This is actually not an easy question because you are a UK citizen resident in Canada. I wrote and erased a really long answer because I'm just not sure enough of the puts and takes of the tax code. But basically its simple if you plan on staying in Canada - take the money out of the UK and bring it into Canada into a tax-benefitted savings account of some kind and then buy a broad market index fund with it - because regardless of what kind of structure it is held in in the UK as a Canadian citizen that is taxable income.
If you plan on going back consult a professional. I think your best option is a canadian TFSA but I'm not sure.
But tax planning this is way more important than which index fund to buy or which provider to use.
posted by JPD at 10:54 AM on May 3, 2016 [3 favorites]
If you plan on going back consult a professional. I think your best option is a canadian TFSA but I'm not sure.
But tax planning this is way more important than which index fund to buy or which provider to use.
posted by JPD at 10:54 AM on May 3, 2016 [3 favorites]
should read
regardless of what kind of structure it is held in in the UK as a Canadiancitizen resident that is taxable income.
posted by JPD at 11:07 AM on May 3, 2016
regardless of what kind of structure it is held in in the UK as a Canadian
posted by JPD at 11:07 AM on May 3, 2016
As a Financial Planner, more and more I'm finding that the most important question is not, "What to invest in?" (Some combination of index funds, both bonds and stocks, diversified across the world. Also, the initial choice of investment has very little to do with your long term success in investing. Rather, it is your resistance to making changes when markets are volatile or you're tempted by a new investing trend.) The more important question is about tax planning.
One question is, what sort of account is it in? Is there a tax benefit to leaving it there? Or is there a burden to leaving it there, in the form of higher taxes for nonresident ownership, tax filing in 2 countries etc. It may be best to consolidate it with your Canadian holdings. It'll simplify things. (Also: Don't die with assets stuck in another country, it's a nightmare to go through the estate process with those. If you are going to leave the funds over there, use your next trip to get some legal advice and see if a UK will is a good idea.)
Don't worry about converting currencies. For a large amount, the cost of that might be 1-2% up front. The tax burden of leaving it there, in the form of filing in the U.K., and more expensive tax filing at home to properly report foreign holdings and income could greatly exceed that over time. If you want exposure to UK markets and currency, you can get that from Canada using a fund/ETF that tracks those assets, even if it's priced in Canadian Dollars. (You're looking for something that's unhedged). Though, where you earned it, or where you intend to spend it, it shouldn't have much to do with how it's invested.
These tax questions require the expertise of someone who deals with these issues. It also depends on your intention to return at some point, citizenship, residency, etc.
Get the tax planning stuff sorted out first. Then invest.
posted by thenormshow at 11:07 AM on May 3, 2016 [1 favorite]
One question is, what sort of account is it in? Is there a tax benefit to leaving it there? Or is there a burden to leaving it there, in the form of higher taxes for nonresident ownership, tax filing in 2 countries etc. It may be best to consolidate it with your Canadian holdings. It'll simplify things. (Also: Don't die with assets stuck in another country, it's a nightmare to go through the estate process with those. If you are going to leave the funds over there, use your next trip to get some legal advice and see if a UK will is a good idea.)
Don't worry about converting currencies. For a large amount, the cost of that might be 1-2% up front. The tax burden of leaving it there, in the form of filing in the U.K., and more expensive tax filing at home to properly report foreign holdings and income could greatly exceed that over time. If you want exposure to UK markets and currency, you can get that from Canada using a fund/ETF that tracks those assets, even if it's priced in Canadian Dollars. (You're looking for something that's unhedged). Though, where you earned it, or where you intend to spend it, it shouldn't have much to do with how it's invested.
These tax questions require the expertise of someone who deals with these issues. It also depends on your intention to return at some point, citizenship, residency, etc.
Get the tax planning stuff sorted out first. Then invest.
posted by thenormshow at 11:07 AM on May 3, 2016 [1 favorite]
This thread is closed to new comments.
posted by eas98 at 8:57 AM on May 3, 2016