Many British expatriates close their UK bank accounts and open new ones in offshore centres once they leave the country. They may not have a choice if their bank does not allow non-UK residents to hold accounts. Nationwide International in the Isle of Man is a popular choice for expatriates in Portugal and elsewhere, but it has announced that it is closing its doors in summer 2017.
The bank will start closing customer accounts from early 2017. It has sent out an initial letter to clients advising them of the news, but will be writing again with important information and dates regarding the closure of their specific accounts. It assures clients that their money remains in safe hands.
In the meantime, it suggested that since looking for a new home for their savings can take time, clients should start looking now.
If you have accounts with Nationwide International, you can choose to close them right away or wait until you have the closure dates. The bank has removed any notice requirement on its accounts, and fixed rate bonds can also be closed before the scheduled maturity date, with no penalty.
The bank’s decision to close came following a strategic review of its operations and was based on a number of factors including falling customer demand, running costs and changing market conditions.
This only affects Nationwide International in the Isle of Man. Accounts held with the Nationwide Building Society in the UK are not affected and the business continues as usual.
Looking for a new home for your savings
This is a good opportunity to review your savings and consider if a bank is the best place for your money.
The Bank of England interest rate has been at historic lows since March 2009 and was cut to an even lower 0.25% following the Brexit referendum. If you need your savings to provide an income, preferably without withdrawing much capital, or are looking for capital growth to keep pace with inflation over your retirement years, seek advice on how you may be able to generate better returns from your savings.
How long do you need your money to last?
This is a sobering question and not one most people can answer with certainty. Underestimate this, however, and your money could run out too soon, leaving you unable to live the lifestyle you want. Life expectancy has been increasing and you need to make sure that your savings will provide the income you need right to the end of your and your spouse’s retirement years. No-one wants to be forced to reduce their quality of life in their later years.
You, therefore, need to establish a strategic savings and investment strategy to preserve the value of your wealth and income.
Remember to factor in the effect of inflation on reducing your spending power each year. Say, for example, you typically spend €5,000 a month. Assuming an inflation rate of 3% a year, in 10 years’ time you could need about €6,720 a month to maintain the same spending, and €9,030 in 20 years.
Protecting your savings
Another issue to consider when deciding what is the best home for your savings is the level of protection you would get should the financial institution fail. For example, the Isle of Man Depositors’ Compensation Scheme provides individuals with protection of up to £50,000. We will look at this in a later article.
Time not timing
The uncertainty over Brexit has been making some people cautious about investing. However, trying to time when to buy and sell investments has plenty of risks – but the biggest one may be the risk of missing out.
To illustrate this point, a hypothetical £10,000 investment in the FTSE All-Share index for the 10-year period to December 31, 2015 would have earned a profit of £7,197 if invested the whole time. If the five best days were missed, the profit would be considerably lower at £1,831. Missing the 10 and 30 best days would have resulted in losses of £607 and £5,269 respectively. (Source: Russell Investments)
It is important to ensure that your portfolio is built around your risk profile, and with strategic asset allocation and diversification to reduce risk and meet your objectives. You want to ensure that your portfolio is suitable for you. Take specialist, personalised advice and build a good relationship with your financial adviser so they understand your needs and guide you through the Brexit years and into the future.
These views are put forward for consideration purposes only as the suitability of any investment is dependent on individual circumstances; take individual personalised advice. The value of investments can fall as well as rise. Past performance should not be seen as an indication of future performance.
By Adrian Hook
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Adrian Hook is a Partner of Blevins Franks and has been providing holistic financial planning advice to UK nationals in the Algarve since 2007. Adrian is professionally qualified, holding the Diploma for Financial Advisers.
www.blevinsfranks.com
