Accumulation fund

Also known as a roll-up fund, these are funds where all income is automatically reinvested (rather than distributed to shareholders). This is tax efficient for those investors who wish to minimise investment income and cash in their wealth at a more tax-advantageous moment.

Asset Allocation

A service whereby investment managers allocate investors' funds in different countries - or, in some cases different industries - according to a specified risk profile. Some asset allocation specialists will invest primarily in bonds to provide income. Others will invest primarily in equities, to provide growth.

Banking

Banking offshore can, for the right people, be the cornerstone of expatriate investing. Dozens of the UK 's biggest high street banks are also present in tax havens such as Jersey , Guernsey , the Isle of Man and Gibraltar .

One problem with using offshore banks can be charges. If you need to transfer funds into a domestic account, or if you plan to use the account for everyday transactions, there can be fairly heft charges.

Bid/Offer spread

Is difference between the buying price and the selling price of a fund. In the offshore world, this difference is often extortionate. Always try to find a third party through which to buy funds, as this is a means of reducing the bid/offer spread.

Bond

There are two financial tools called bonds that matter to expatriate investors. One is the straightforward debt issued by a government or a company for which investors will receive a regular interest payment (income) and, hopefully, the return of their initial outlay.

Then there are bonds issued by offshore banks and life assurers. These will often link returns to some underlying index such as the FTSE or the NASDAQ. Your returns will then depend upon the performance of the index. In most cases, initial outlay is guaranteed, but not always - so check.

Capital Gains Tax

Taxation on the growth of your capital. In the UK , there is no CGT on the first £7700 of gain in a tax year. The top rate of tax is 40 per cent. Those who have been resident in the UK will be liable for UK CGT for five years after leaving the country (subject to double taxation agreements). A main UK residence should not be liable to CGT, but any other properties almost certainly will be.

Derivative

There are many variations of derivative, but primarily, these are financial instruments that are derived from an underlying security, but do not entirely represent the underlying security. One kind is the option to buy or sell a security at a pre-agreed price. So if you have a sell option, known as a put, then if the price of the shares goes down, and you buy at the lower price, you are then able to make the other party purchase your option at the higher price (and thus make a healthy profit). The reverse is true if you take an option to buy, called a call. Options per se are risky, but correctly used can help reduce risk in a portfolio.

Domicile

A peculiarity of English law, domicile is broadly defined as where a person thinks they belong and where they think they'll die. The term has created a furor in the UK as many non-nationals have used it to avoid tax. There is a pressure for the UK non-domicile rule to be revised. If you are British and wish to shed your UK domicile (this is difficult) you need to show that you're leaving the UK and will never return. UK domicile means you'll be liable for UK inheritance tax.

Equities

Broadly speaking, equity is the stake someone holds in an asset. More often, though, equities are a phrase that means the shares a person holds in companies.

Gearing

Borrowing money and investing it. Massively increases risk, can increase returns. US term is leverage.

Gilt

Debt issued by the government. You buy the debt and receive fixed annual returns and redemption of your capital some years down the line.

Guernsey

Much like Jersey , only smaller (but bigger in the area of life assurance).

Healthcare

A crucial element to living offshore. In many expatriate paradises, healthcare will either be unavailable or limited. A good policy will offer you every form of cover that you could think of. However, it is becoming increasingly popular to go for a 'menu driven' approach. This allows customers to choose the exact cover they require and stops duplication of cover where it is provided free of charge by the state.

Hedge Fund

Hedge funds are popularly described as a highly speculative, geared asset that takes huge bets on movements in the financial markets. Hedge fund specialists counter that such a description is too sweeping. They counter that hedge funds are market neutral investments that perform steadily regardless of the markets. Often, hedge fund managers look to fill their boots with arbitrage opportunities whereby an asset will be inefficiently priced. So they buy at one price, sell at the other, and pocket the difference.

Income Tax

Tax on income. In the UK , the top rate is 40 per cent.

Inheritance Tax

A big issue for wealthy British ex-pats. If you retain your UK domicile, you will be liable to inheritance tax.

Isle of Man

Tax haven in the Irish Sea . Very popular for life assurance, but is developing an extremely competitive offshore banking sector.

Jersey

Jersey is one of the world’s major international finance centres. Its successful combination of stability and reliability has kept Jersey at the forefront of global finance for almost half a century.

Life Assurance

Luxembourg and the Isle of Man are probably the two main life assurance centres in the European continent. Dublin and Guernsey are also seeking to develop this element of their financial services. Many life assurance products allow investors to buy any number and any sort of assets and hold them in a life assurance 'wrapper' that will pay out upon the death of the policy holder. These can be very tax efficient and administratively easy to use.

Managed Currency Fund

Fund with holdings in more than one currency. Seeks growth by switching between currencies.

Money Fund

Invest in the best possible deposit accounts.

Mortgages

Loan to buy property. Generally, offshore banks offer loans to buy property in the UK but a handful of banks are offering mortgages to ex-pats buying abroad - particularly in Europe .

Non-resident

You become non-resident in the UK if you leave the country to work abroad permanently. If you subsequently spend more than 183 days outside the United Kingdom per year, you will remain non-resident.

Offshore Company

A structure used to hold an investor's assets. Some will allow you to own various securities. However, investors should be warned: if a domestic tax authority suspects you are controlling the offshore company, you may come under some pressure to disclose the full nature of your activities.

Offshore Fund

A fund that is domiciled in a no tax or a low tax haven. Down to the investor to declare any growth or income that the fund achieves. Failure to do so could be construed as tax evasion.

Offshore Trust

A British invention that is used to allow people to pass assets to the people they choose rather than who the state decrees. Countries whose legal systems are based on the Napoleonic code, are often uncomfortable with the concept of the trust.

OEIC

Open ended investment company. Same thing as a unit trust but generally set up as a limited liability company. OEIC's often operate as umbrellas for sub-funds allowing investors to switch between sub funds.

Pension

The savings you build up to pay for your retirement. Generally, tax havens offer life assurance-based products that investors can buy into for tax free growth as long as the investment remains offshore.

Private Banking

A catch-all phrase that means some form of dedicated banking service. Private banks will provide access to every sort of investment and the expertise to set up appropriate financial services. There has never been a better time to become a customer of a private bank because of the brutal competition taking place within the industry. The wealthier you are, the more dedicated and senior your private banker should become.

Roll-up Fund

See 'Accumulation fund'

Term Assurance

Life assurance that lasts for a limited period only.

Traded Endowment Policy (TEP)

An investment policy that someone else owned and planned to use to pay off a mortgage. They then surrender the policy to a 'market maker' who sells it onto expatriates. Can be attractive to expatriates because of various tax advantages and the fact the policies are in sterling.

Umbrella Fund

Fund that houses several sub funds allowing investors to switch holdings when they think it appropriate. Can be expensive in terms off charges though normally very flexible.

Unit Linking

The value of the units an investor holds in a life assurance policy or in a unit trust.

Volatility

The fluctuations of a given investment. High volatility is not necessarily a bad thing, but investors should be aware of it, and understand the consequences it could have.

Warrant

An option issued by a company that allows investors to buy shares at a pre-agreed price. The duration of a warrant will last years, rather than months.

Will

The legal document that will determine how your estate is split when you die. If you plan to spend the rest of your life outside your country of origin, then you should write a legally watertight will in both countries to avoid legal problems.

Withholding Tax

Tax levied at source on investment returns. Withholding tax is unavoidable once you've made the investment.

With-profits Policies

Policies issued by life assurers. You hand over your cash and the life assurer invests it on your behalf. These funds are generally viewed as low risk because in years of good performance, the fund sets aside growth to make up for future bad years.

Yield

A measure of return on an investment. Divide the dividend you receive on your investment by the cost of the investment, then multiply by 100 and you have the yield.

Zero-coupon Bond

A bond that has an issue value of zero, but redeems at a higher value. No dividend is paid until maturity.