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Financial planning for expats in Africa

Working as an expat in Africa can yield generous financial rewards, but sound planning and expert advice is needed to protect your assets and plan for a comfortable retirement.

Written on 31 January 2022

The financial benefits of working in Africa as a high-level executive can be considerable, with huge demand for skilled professionals creating a wealth of well-compensated roles across a variety of industries, from engineering to shipping, pharmaceuticals, energy and more.

Naturally, levels of pay can vary depending on the sector and levels of personal risk and safety in the country you want to work in – conflict and instability can vary across the continent and must be taken into account when recruiting expats. However, the financial rewards for those who do take the plunge to work in this dynamic and highly diverse region can be well worth the challenges and represent an exciting opportunity to accrue considerable wealth over the course of their careers.

Safeguard your finances

The financial rewards of working as a senior executive in Africa are manifold, but with that comes a responsibility to ensure your wealth and assets are carefully managed and safeguarded. Perhaps you have a family living overseas or in your home country that you need to provide for, are looking to restructure or protect your wealth with future retirement in mind or want to plan for the safe inheritance of your estate when you pass away.

Grow your wealth

One of the biggest draws of working as an expat in Africa is the generous tax environments that many nations offer. It’s possible to avoid capital gains tax on assets which are held in tax efficient structures if no withdrawals are made. This offers an opportunity for executives to build up funds and assets in anticipation of an early or comfortable retirement. Key to this is careful financial planning for expats in Africa, factoring in when you want to retire, where you plan to retire and how much you require to sustain your lifestyle when you do so.

Prepare for retirement with a cashflow analysis

A cashflow analysis can assess how much money one needs to accrue for retirement based on their income and expenditure requirements. It’s a tool that can offer a lot of useful information, including if you are saving enough; what age you may achieve your financial goal; and how long your savings will last in retirement based on the size of their pension pot versus expenditure.

Factor in location

Different countries have different tax environments, and factoring this in your retirement planning is essential, whether you plan to return to your home country or relocate to an entirely new place. Points you should consider include where you currently work and live, where your family reside (if in a different country to you) and where you intend to retire to.

You may have over the course of your career worked across different regions and countries, accruing a range of different investments, pensions and savings. It’s essential you review this to ensure that all assets are tax efficient and growing in value. It’s also good to check if they are in line with your current and future risk appetite, and whether it’s worth consolidating everything to reduce costs and enhance performance.

Protect yourself

Africa, depending on the region and country you work in, can be less stable and more fraught with personal risk. It’s important that alongside planning for retirement you also ensure you have high-quality insurance in place, including life insurance, accident cover, health insurance and income and critical illness protection.

Inheritance planning

Another priority is to ensure the smooth transfer of your wealth to your heirs after you’ve passed on. Even if you have lived away from the UK for several years or decades, inheritance tax is dependent on domicile, and you may be considered as having a UK domicile if you maintain ties with the country in the form of residential or family properties. Those with a large estate or planning to return to the UK should consider establishing tax efficient wrappers or pension arrangements that can protect against paying inheritance tax on your estate. One example of this is a QNUPS (Qualifying Non-UK Pension Scheme). This is a pension scheme based outside the UK that can qualify for exemption from UK inheritance tax.
It’s a highly effective retirement planning tool that, as long as it’s established as a genuine retirement vehicle, ensures that any funds placed inside the QNUPS are no longer subject to inheritance tax, even if you later permanently retire back to the UK. Withdrawals are subject to income tax in your country of residence, with 25% being tax-free in the UK.

Seek trustworthy advice

It can be a challenge to find the right reputable financial advisor for expats in Africa, with a smaller pool of wealth management firms serving British and English-speaking expat communities across Africa to choose from. It’s therefore essential that you devote time and effort into sourcing ethical, expert and unbiased advice.

It is particularly important that you find someone who can provide cross-border guidance, as many executives will have to factor more than one location – the country they work in, their home country, where their loved ones are living and any future country they plan to retire to, all of which could have different tax implications when it comes to their financial assets.

Key to any plan for your financial future is partnering with a trusted and expert financial adviser who can guide you towards making sound and smart decisions for your finances.

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