Moving to Italy can be an exciting new chapter, but managing your investments as an expat can be more complicated than it first appears. Your financial situation may involve UK pensions, investments held overseas, multiple currencies and different tax rules, all of which need to be considered when building a long-term investment strategy.

For expats living in Italy, the right investment strategy is not simply about finding the investment with the highest potential return. It is about creating a portfolio that reflects your goals, time horizon, risk tolerance, currency needs and Italian tax position.

In this guide, we look at some of the key investment strategies for expats in Italy and the areas worth considering when building a long-term financial plan.

Before choosing investments, it is important to establish what you are investing for.

An expat living in Italy may have very different objectives depending on their circumstances. You might be investing to:

• Build long-term wealth
• Generate an income in retirement
• Supplement an existing UK pension
• Fund future education costs
• Maintain financial flexibility in case you move country again
• Build savings for a future property purchase
• Create a portfolio that can eventually provide retirement income

Your investment strategy should be built around these objectives rather than around individual funds or products.

For internationally mobile individuals, it is also worth considering what may happen if you eventually leave Italy. An investment structure that works well for an Italian resident may not be appropriate if you later become a resident in another country.

Our Expat Investment Guide looks at some of the wider issues international investors should consider when building a portfolio.

The Italian securities regulator, CONSOB, explains that diversification can help reduce the impact of a poor performance from any one investment, sector or market, although it cannot eliminate investment risk altogether.

For an expat, global diversification can be particularly relevant because your financial life may already span several countries.

Currency is an important consideration for anyone investing internationally.

For example, an UK expat living in Italy may have:

• Income in euros
• A UK pension denominated in pounds
• Existing investments in sterling
• Future spending requirements in euros
• Family or financial commitments in another country

This creates currency exposure that should be considered alongside the investment strategy.

If most of your future spending will be in euros, having a portfolio that is entirely exposed to sterling may create additional currency risk. Equally, converting everything into euros may not necessarily be appropriate if you expect to return to the UK or have significant future sterling requirements.

A well-structured investment strategy can therefore consider both investment risk and currency risk.

Our Global Investment Accounts and Platforms page explains how internationally mobile investors can use multi-currency investment arrangements and access investments across global markets.

Many expats move to Italy with investments they accumulated while living in other countries.

These might include:

• ISAs
• Investment portfolios
• UK shares and funds
• Savings accounts
• Personal pensions
• Workplace pensions
• SIPPs

It is important not to assume that an investment that was tax-efficient in your previous home country will receive the same treatment in Italy.

For example, an existing UK ISA can generally be retained after moving abroad, but Italian tax treatment needs to be considered separately.

Before making major changes, it can therefore be useful to review your existing investments as part of your wider cross-border financial plan rather than looking at each investment in isolation.

The tax treatment can depend on factors including:

• Your Italian tax residency
• The type of investment
• Where the investment is held
• The source of income or gains
• Whether a tax treaty applies
• Whether the investment is held personally or through another structure

For this reason, investment planning for expats in Italy should be coordinated with appropriate tax advice where necessary.

You can also read our Italy Expat Guide for more information about UK pensions, investments, residency and other financial considerations when living in Italy.

The right asset allocation depends heavily on when you expect to need the money.

Money that may be required within the next few years should generally be approached differently from money being invested for retirement 15 or 20 years away.

For example, a long-term investor may be able to accept greater exposure to growth assets such as equities, while someone approaching retirement may place greater emphasis on capital preservation, income generation and reducing portfolio volatility.

Your investment strategy should therefore consider different time horizons rather than treating all of your savings in the same way.

A useful approach can be to divide your financial plan into different objectives, such as:

• Short term: Emergency funds and money required for known expenditure.
• Medium term: Property purchases, education costs or other planned expenditure.
• Long term: Retirement and long-term wealth creation.

This can help prevent short-term financial requirements from becoming mixed up with long-term investments.

For many British expats in Italy, pensions are one of the most important assets to consider.

A UK pension may represent a significant proportion of your eventual retirement income, so it should form part of the wider investment strategy.

Depending on your circumstances, you may need to consider whether to:

• Leave the pension in the UK
• Review the underlying investments
• Consider an International SIPP
• Investigate whether a pension transfer is appropriate
• Plan how retirement income will be taken
• Consider GBP/EUR currency requirements

There is no universal answer to whether a UK pension should be transferred overseas. Defined benefit and defined contribution pensions also require very different considerations.

Galileo Wealth provides UK Pension Transfer advice and International SIPP advice for expatriates, including clients living elsewhere in Europe.

For expats who want flexibility, a Global Investment Account (GIA) can be worth considering.

A GIA can provide access to investments across different markets and currencies while allowing an internationally mobile investor to manage their portfolio from overseas.

Depending on the platform and the investor’s circumstances, investments can include funds, ETFs, equities and bonds.

The important point is that the account itself is only part of the solution. The underlying investments, charges, currency exposure, tax treatment and suitability for your country of residence all need to be considered.

Investment charges can have a significant impact on long-term returns.

When comparing investment options, look beyond the headline investment performance and consider the total cost of investing.

This may include:

• Fund charges
• Platform fees
• Adviser fees
• Transaction costs
• Currency conversion costs
• Account administration charges

A seemingly small difference in annual costs can become more significant over a long investment period.

However, the lowest-cost investment is not automatically the most suitable. Costs should be considered alongside diversification, investment choice, service, tax treatment and the overall suitability of the strategy.

One of the biggest differences between a traditional investor and an expat is that an expat’s circumstances can change.

You may eventually move from Italy to another European country, return to the UK or relocate elsewhere in the world.

That means flexibility can be an important consideration when choosing an investment structure.

A good expat investment strategy should be reviewed when there is a significant change in circumstances, such as:

• Moving to another country
• Returning to the UK
• Approaching retirement
• Receiving an inheritance
• Selling a property
• Starting to draw pension income
• Changes to your family circumstances
• Significant changes to your investment objectives

Regular reviews can help ensure that your investments continue to match your circumstances and country of residence.

There is no single investment strategy that is suitable for every expat in Italy.

The right approach will depend on your age, financial objectives, existing investments, pension arrangements, risk tolerance, income, expected retirement date and how long you intend to remain in Italy.

For many expats, however, the starting point is the same: build a diversified portfolio, understand your Italian tax position, manage currency exposure and make sure your investment structure is appropriate for someone living internationally.

This is particularly important for British expats who may have accumulated pensions and investments in the UK before moving to Italy.

Managing investments across borders can be more complicated than investing while living in your home country. Italian tax rules, foreign investment reporting, currency movements and UK pensions can all form part of the picture.

At Galileo Wealth, we provide bespoke financial planning and wealth management advice for expatriates across Europe, helping clients review their investments, pensions and wider financial position.

If you are living in Italy and have UK pensions, investments or savings that you would like to review, you can contact Galileo Wealth for a free consultation.

This article is for general information only and does not constitute personal financial or tax advice. Tax treatment depends on individual circumstances and can change. Expats living in Italy should obtain appropriate professional tax advice regarding their own situation.