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By: Simon Danaher

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October 30th, 2015

Expats! Five terrifying facts about your finances

Recommended | Financial Education

[Estimated time to read: 4 minutes]

Sweet dreams...

I know, another cheesy spin on Halloween, sorry. I promise though, no ghosts, pumpkins, witches or “sugar candy” – just the one, very real, vampire.

Click to find out why we should be worried about the “OMG” generation…

1) Most people will run out of money in retirement

In the UK, around 1.8 million pensioners live in poverty. Now, while you may not be destined for destitution in retirement – have you worked out how much you will actually need? Really?5 terrifying financial facts

While it is actually quite complicated working out how much an individual needs to save in order to achieve a certain income for a defined length of time, we can make some generalisations. Such as – if you wanted an income of £50,000 for 20 years (and were happy not to leave a penny to your children) you’d need at least £600,000 and for that to remain invested, generating at least 6% per year. Pretty high risk and scary if you ask us!

Unless of course you never plan to retire…like the undead? (Sorry).

2) Most active funds DON'T make money for investors

Active funds have taken a proverbial bashing over the last decade or so as investors have wised up to the fact they are often better off using passives.

So, in May this year, many fund managers, analysts, advisers and general active management hangers on, were pleased to see research from Japanese bank Nomura that showed that fund managers can in fact successfully pick stocks!

Researchers at the bank looked at an 11 year period and found that active fund managers had outperformed the Russell 1000 by an average of 2.1% per year. So why’s this scary?

Well… that was excluding fees.

Jack Bogle, the founder of Vanguard, the world’s second-largest asset manager, recently estimated that the average active equity fund has all-in costs (including fees, transaction costs and a drag from cash holdings) of 2.27% a year.

That leaves a return of minus 0.17%.

Chillingly bad, perhaps.

3) Taking bad financial advice could see you shell out tens, of even hundreds, of thousands of pounds in fees and charges over time

The most terrifying thing for us, isn’t ghosts (OK, one mention), witches (likewise…) or any other phantom beasts – it’s the very real danger of the money sucking, unqualified financial salespeople who prey on unsuspecting expatriates.

We have warned frequently about the tricks they’ll use to lull their victims into a false sense of security and plunder their assets, but it’s always worth saying again. One recent victim lost more than £800,000 to one of these financial vampires. As Bram Stoker may have written “his finances were sadly completely drained by the time we got to him”.

4) There is currently six billion dollars of investors’ money trapped in gated or suspended funds

Money invested into high risk esoteric funds is often money kissed goodbye.

Investors are currently out of pocket to the tune of least $6billion – money most of them can ill afford to be without.

If you can afford to take risks with some of your money, that’s fine and is your choice. But most of the time, most of us just want it to grow at a steady pace and to be there when we need it.

Don’t let greed cloud your vision – see past the salesperson’s silver tongue – question everything and ask yourself “if this is such a great investment, why isn’t everyone doing it?” The old adage – “if it sounds too good to be true, it probably is” rings very true here.

5) Most people are more likely to know what LOL means than PAYE 

This is quite terrifying in many, many ways… At the risk of sounding old, “what is happening to the youth of today?” they may drink and smoke less than us, but at least we could talk properly… I jest of course.

The worry is this survey wasn’t just of “da yoof”, it was in fact a Nationwide survey of British ADULTS. It found four in five (79%) knew that LOL means 'laugh out loud' in so-called “text speak”, while three in five (60%) knew that ISA stands for Individual Savings Account.

More than three-quarters (77%) of consumers knew that OMG translated as 'oh my God' in “text speak”, while just under two-thirds (65%) knew that ATM stands for Automated Teller Machine.

A similar proportion (66%) of people correctly said that PAYE means Pay As You Earn.

The survey also found that more people knew what WTF (if you don’t know, Google it) means in text shorthand, with 63% getting the answer correct, than those who knew what abbreviations such as HMRC (Her Majesty's Revenue and Customs) and CTF (Child Trust Fund) stand for.

Scary, scary times indeed.

If any of the above has scared you, why not download our guide below.

About Simon Danaher

Simon Danaher previously worked for AES International, in marketing and communications.