Welcome to the inaugural CREWFO investment newsletter, where we discuss opportunities specifically relevant to Superyacht Crew. As you may be aware, all CREWFO members receive a free financial plan as part of their membership, email firstname.lastname@example.org if you would like to schedule in a call to discuss yours.
This newsletter will focus on a case study which will give an example of how your money could work for you, offshore bonds and offshore banking, as these are two of the areas where we get the most questions.
If you would like anything covered in future newsletters please get in touch. With the current level of volatility in the market, the importance of getting the right advice has never been higher, and if you have been working in the industry for over a year then you should look at starting your financial planning to ensure you grow your assets in a sustainable fashion. Please note; this newsletter is aimed at people who are registered for tax in the UK, but we do have opportunities for all CREWFO members.
Offshore bonds – Also known as life assurance policies, offshore bonds are often seen as attractive investment vehicles for Superyacht Crew due to the choice of investment funds, as well as their tax-efficiency and flexibility. Any gains are assessed to Income Tax rather than Capital Gains Tax, which can be beneficial for 0% income tax payers. Moreover, you can withdraw up to 5% of the original investment annually without an immediate liability to income tax. Offshore bonds can also be an effective way to mitigate your inheritance tax liabilities. However, the cost and performance of offshore bonds vary widely so getting the right financial advice, and regularly reviewing any existing policies, is enormously important.
Offshore banking – The benefits of offshore banking can be questionable when compared with having a UK account. A common misconception is that you need an offshore account to use multiple currencies, but some UK accounts do allow you to use multiple currencies. You may pay more in fees for an offshore account, and if your account goes under a certain level you can be charged. In addition, UK bank accounts protect up-to £85,000 of your money under the Financial Services Compensation Scheme, whereas for offshore accounts the amount can be £50,000 or less. If you have a bank balance which exceeds the maximum protected amount, whether in the UK or offshore, then do get in touch as it is vitally important that your assets are as secure as possible.
CREWFO case study – this example will look at the cost of doing nothing, compared with the growth you can expect with sound, long-term financial planning. Please note, this is an example only and does not in any way constitute advice.
Mr Smith is a homeowner and earns £80,000 a year working on a Superyacht. He saves £40,000 per annum which goes into his savings account. Over 10 years he has saved £400,000, with the average interest over that time being 2.25%. This means he had £499,000 at the end of the 10-year period. However, the average inflation rate (i.e. the amount the costs of goods and services has gone up by) was 2.9%, meaning he needed his assets to grow to £518,000 just to have not lost value.
Mrs Smith is also a homeowner earning £80,000 a year, but she uses £40,000 a year for investments, with the breakdown being:
£2,880 in pension contributions (topped up by £720, with 7% growth each year). Total amount invested £28,800 – value after 10 years is £52,228, with all increases in value being free of tax.
£20k a year in ISAs, with the total amount invested over 10 years being £200,000.
Total value after 10 years based on 7% annual increases – £290,000, with all gains being free of tax.
£10k a year in offshore bonds, with the total amount invested over 10 years being £100,000.
Total value after 10 years based on 7% annual increases = £145,000
2 standalone investments
£35,000 – increased by 125% over 3 years = £78,750 value
£36,200 – increased by 60% over 5 years = £57,920 value
Total value of investments = £623,898
In conclusion, Mr Smith is £124,898 worse off than Mrs Smith due to his lack of financial planning. In addition, Mrs Smith now has a diversified investment portfolio, which can continue to grow in a tax-efficient manner.
Get in touch for some financial advice. Remember, as Superyacht Crew you have one of the best opportunities in the world to make something of your money for the future. You have a high level of disposable income and therefore the opportunities this brings with it are huge.