Q. My wife and I are currently working as teachers in China, and we would like to know how best to invest our surplus cash.
We are both UK citizens by birth but emigrated to New Zealand in 2009 where we placed our teachers’ pensions into Qrops. We both have a KiwiSaver there with approximately NZ$35,000 each invested in them.
We both temporarily returned in 2014 to the UK and worked for seven months in state schools. We restarted a teachers’ pension as we would have lost out on eight months of government contributions if we did not do so. However, we are both classified now as non-tax resident in the UK, although we still have a current account with Barclays in the UK and ANZ in New Zealand.
In one or two months we will be globally free of debt and we will then be able to start saving the vast amount of our salary. We hope eventually to have enough to pay for a house in either the UK or NZ outright in the future.
We think that investing in NZ at the moment is unwise as the NZ dollar is weak against the pound but interest rates there seem to be slightly more attractive.
Our question concerns what should we do with our surplus money which is currently about £5,000 per month. What is the best thing we can do with that money both short and long term? Steven Pass
A. Justin Harris, managing director of Chase Belgrave (chasebelgrave.com) said:
Contributing to a pension plan is one of the best things you can do to save. Because, in most countries, you can contribute from your gross salary, the government is effectively helping you save by adding your marginal tax rate to your contributions. In exchange, you accept various restrictions over when you can access your money and the fact that you’ll usually pay income tax on your pension.
The fact that you live in China means that you won’t get any added value from contributing to a New Zealand or UK pension scheme and you’ll be voluntarily submitting to the various restrictions a local scheme will place on your money.
Therefore, it’s a good idea to set up a savings plan which will invest your money, on a monthly basis, into a variety of mutual funds in order to expose it to potential growth.
Savings plans that are set up in tax-free environments (the Isle of Man is popular) will mean that growth could be potentially tax-free and if the money has been accumulated while outside the country you’ll retire to, you shouldn’t pay income tax on any income either.
It’s imperative such a plan is set up correctly and proper financial advice should always be taken.