Willem asks: I have substantial savings in my United Arab Emirates bank account in Al Ain where I work for some time. I will be moving back to South Africa end of 2012 to retire.
Should I leave the money in the UAE at 5% tax-free interest or should I transfer to South Africa now that the Rand has weakened against the United States dollar (the UAE dirham is packed against the dollar), or should I wait for better exchange rates.
I have a pension in SA and save my UAE money to supplement my pension if there is a crisis and to offset inflation
Maya replies: One should never make investment decisions based on currencies as these are very difficult to predict. You need to rather look at your financial plan holistically.
Income
If you need your UAE savings for income in retirement then it should be held in South African rands because you will be spending in rands. If you leave it in UAE dirham you will be introducing unnecessary currency risk. Your emergency savings should also be held locally for the same reason — you may find the currency against you just when you need it most.
You need to calculate what your income requirements are and how much of your UAE savings you need to bring back to ensure a regular income that increases with inflation.
Timing
In terms of when to bring money back given the Rand’s movements, is a difficult to say, however analysts believe the rand could weaken further over the next year. That said if the situation in North Africa is resolved and investors return to emerging markets, the rand would benefit. As I said, a very difficult one to predict!
Growth
If you are able to leave some of the savings to grow, then having a portion offshore could fit into a diversified investment portfolio.
However it would be worth investing in a balanced portfolio which includes some equities in order for the investment to deliver above inflation returns.
Relying on the depreciation of the rand is not a wise investment strategy.
I would recommend that you sit down with a South African-based financial advisor who can calculate your retirement needs and from there you will be able to make a more informed decision about your offshore savings.
Read more news, blogs, tips and Q&As in our Smart Money section. Post questions on the site for independent and researched information.