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German equivalents of a UK ISA

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Is there a tax efficient way of saving in Germany that is comparable to an ISA?

 

I would prefer to open an ISA in the UK but since I am no longer a resident I am refused.

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Vermögenswirskamerleistung (VWL) through your employer.

"Riester Rente" avoid like the plague.

 

This may get merged with the recent thread from some North Americans asking a similar question (401(k) equivalents) and if i recall, the general answer was no, no really.

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I would prefer to open an ISA in the UK but since I am no longer a resident I am refused.

Did you keep your UK bank account going? If so, you can open an ISA with them. Keeping my UK bank account was one of the best things I did when moving (permanently) to Germany. I get good interest on my e savings account, without having to pay savings tax (I'm classed as not ordinarily resident for tax purposes).

 

cruiser :)

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It's best to keep all your savings in the UK as the rates are higher. Tax-free on 3% interest (Germany) is still less than paying 20% tax on 5.3% interest (UK, Nationwide e-Savings). If you haven't deregistered as a UK resident with the Inland Revenue and have a UK address that you can provide (your parent's address, for example), then you should be able to open an ISA (and do so soon because the tax year ends on April 5th). Technically, as non-residents, we're not entitled to an ISA, but I still invest in mine.

 

@cruiser: do you declare your interest payments to the Finanzamt? You're technically supposed to but I'm wondering if one can get away with not doing so.

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ISAs are ONLY available if you live in the UK.

HSBC communicates with me through my parents address but they know I am non resident so they would not sell me an ISA.

 

Mmmm, is it worth putting savings in the UK for better interest?

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The interest is a little better (say 2% better), although I see no reason why you cannot get an offshore savings account in Sterling. At the end of the day you have to pay German tax on your income anyway - they are not interested (excuse pun) in savings you might make with an ISA. So for the German tax authorities a UK ISA is the same as an offshore savings account...if tax is due in Germany then you pay tax in Germany. Germany taxes you on your worldwide income.

 

To compare offshore savings rates go here:

 

http://www.moneysupermarket.com/

 

As they are OFFSHORE accounts I do not envisage a problem that you are in Germany!!

 

**** HOWEVER *****

 

The big issue is that you are taking a foreign exchange risk. If we assume you are later gonna want your money in €uros then if things go against you (the pound gets weaker against the €uro) then this could easily wipe out the extra 2% interest you are earning. However the foreign exchange could actually go in your favour, and personally I like to have some money in €uros and some in Sterling for this reason.

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@Monkstown

If you convert your euros to pounds to get a better interest rate in the UK, then you run the risk of losing the profit and more if the currency rate changes. If it was that easy, you could go get $1 mil worth of Yen from a bank in Japan for about 1% interest per year, and convert it to Rupee's on which you could get 10% per year and you'd make a fortune! Of course, its not that easy.

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Turkish Lira - 17.5% Interest - go for it!!

When the interest rate for a particular currency is much higher than those usually given for EUR/GBP/USD accounts, there's usually a very, VERY good reason.

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After reading this thread and a couple of similar ones, it is clear that the best thing to have done would have been to have cashed out my wife's ISA prior to moving. That didn't happen. 

As we have no intention of going back to England (famous last words of course), she is now looking to close the ISA account and move the sum over here (about GBP 50k, so not a fortune, but not small beer either). I can already tell I'm going to have to spend even more time with my German accountant dealing with the capital gain etc (as well as explain quite how we completely forgot about the ISA), but what I'd really like to know is what other folk from the UK have done with any ISA pots they had accumulated / how did you move it etc? 

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I did it aeons ago, before the crash, things were completely different, including the tax regime here.   I think you are right to assume logically you have to dispose of any shares and close and accounts.  You could perhaps ask your ISA provider(s) what they could potentially offer or suggest in respect of your situ in - you won't be the first.   When I closed my UK affairs, where my money went while I was making decisions and setting up was offshore (IoM).  Very 2005 -  not something you hear much talk of these days, but it is though possibly the one option that mean no immediate commitment either UK or Germany (for financial management, tax obviously here).   Thinking of going back the other way now, offshore did come to mind again.

 

Timing options are also less of a thing now but of course there's a small tax-free allowance each year and so - in isolation - it might be worth considering part disposals but then of course all the discussion today has been of the pound tanking and so leaving UK holdings might cost more.

 

This is also the sort of thing personal finance pages like to consider:

 

https://www.telegraph.co.uk/investing/isas/ask-expert-can-still-have-isa-move-abroad/

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Thanks @swimmer. I was wondering whether we can just close the account, transfer the money to Germany (albeit taking a tax and exchange rate hit) and say to Volksbank - here's some money for a savings account...possibly too simple? I've heard lots of talk about ETFs, which I think it probably the most similar to the stocks/share funds in which her ISA was invested. Does anyone know a particular provider of ETFs, or is the bank the simplest way to go? I appreciate these are pretty basic questions, but as you said, we're unlikely to be the first or last people to move here from the UK with ISAs, so I'll give an update once it's all done (including what the German accountant reckons we need to do from a tax perspective).

  

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7 minutes ago, dstanners said:

Thanks @swimmer. I was wondering whether we can just close the account, transfer the money to Germany (albeit taking a tax and exchange rate hit) and say to Volksbank - here's some money for a savings account...possibly too simple? I've heard lots of talk about ETFs, which I think it probably the most similar to the stocks/share funds in which her ISA was invested. Does anyone know a particular provider of ETFs, or is the bank the simplest way to go? I appreciate these are pretty basic questions, but as you said, we're unlikely to be the first or last people to move here from the UK with ISAs, so I'll give an update once it's all done (including what the German accountant reckons we need to do from a tax perspective).

  

 

You have a Tax Free allowance of over 1600 Euros per year (married couples). If the interest you make per year is less than that then I guess that is ok.

 

For ETF`s you should open a broker account.

 

Also look at the running costs for the particular ETF. Some ETF costs 0.5% running costs per year while some ETF`s only charge 0.1% per year.

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Of course German banks will take your savings.  No worries there.   Of course, you will get little interest right now.

 

A first step might be to make an appointment with your bank's financial / asset management side, or one of the advisors here.   I've always had an advisor and to me it works very well.   I've never felt any "hard sell" and often feels helpful.   Indeed I see now I often go away thinking "hmm, why did they suggest this, no need for it...:.." and only much later understand I should have it, like I am currently implementing parts of a plan I was given in 2014 :lol:.  Also collect any magazines etc they have. 

 

You could ask your bank if it had some sort of depot. I always used mine (Sparkasse / Deka), it felt easiest, and it sells a wide range of products not just its own.   However, there are separate ones including some many of us were familiar with, such as Fidelity (but of course it is just for German residents, no links to UK one).     It's also worth bearing in mind that some other products are pretty widely used here such as certificates (Wertpapier).

 

I can still see the money I left the UK with.   It's still here, almost 15 years on, it's been a good underpinning of my life :).

 

Edit - I would also say though that I think you can leave them in the UK, just not add.   There is a relationship between transaction turnover and gains (i.e. negative one) and many people say leaving funds for a long time is best.  I mainly sold to exit an obvious bubble market that was on the point of crashing and had to do something - bring it here.  My driver was not really "exit UK" as such, rather panic!

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8 minutes ago, swimmer said:

Of course German banks will take your savings.  No worries there.   Of course, you will get little interest right now.

 

 

 

Not if it is less that 1600 per Tax year (married couples). 

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On 29/11/2018, 10:54:24, RenegadeFurther said:

 

Not if it is less that 1600 per Tax year (married couples). 

 

Germany recently introduced a requirement to pay tax on the perceived gains on funds. Most ISAs allow shares, funds or cash. Funds are things like the FTSE-100, FSTE-250 etc. Basically this requirement, IMHO, was to force German residents to have funds in Germany. It caused a huge amount of paperwork and any non german broker will no nothing of this requirement. Thus you (or the tax advisor) have to calculate it, so far more cost and effort than it's worth.

 

Anyone know if this is also a requirement on ownership of shares?

 

Renegade is correct in saying there is a 800 euro (x2 for couples) tax free element where you pay zero tax on savings.

However, finding anything which pays 800 Euros interest on a savings account these days, you'd be lucky.

 

So interest from the UK need to be declared on the German tax return, ISA or no ISA, but unless you have >800 euros in interest, it's rather a pointless requirement.

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