Viewing posts from: November 2000

To QROPS or Not?

By Chris Burke
This article is published on: 25th February 2016

The rapidly changing landscape of pension schemes in the UK has led to a great deal of confusion, and it’s not just UK pensioners who are affected. The rule changes also impact expats living outside the UK, especially those considering the benefits of a Qualifying Recognised Overseas Pension Scheme (QROPS).

As an expat, it’s hard to know which route to take. Should you transfer to a QROPS or leave your pension in the UK? What are the benefits and drawbacks? What impact have recent changes had on your options?

Let’s look at the QROPS facts…

Up to 100% of the pension pot is available, depending on the jurisdiction. 25% could be tax-free if you are UK resident but could be taxable if resident outside of the UK.
Uncertainty of more UK tax changes, with several ideas being muted which all in essence make you liable to pay more tax or have less allowances on your pension.
No pension death tax, regardless of age, in Gibraltar and Malta.
Greater investment freedom, including a choice of currencies and investments which could make a difference to the amount of money you receive.
Retirement from age from 55.
Income paid gross from Malta (with an effective DTT), and only 2.5% withholding tax in Gibraltar.
Removal of assets from the UK may help in establishing a Domicile outside of the UK (influences UK inheritance tax liability).

What will happen if you leave your personal pension in the UK?

On death over the age of 75, a tax of 45% on a lump sum pay-out.
Income tax to be paid when receiving the pension, with up to 45% tax due, likely deducted at source.
Registration with HMRC and the assignment of a tax code which could start as a higher emergency tax code.
Proposed removal of personal income pension allowance for non-residents. Although this is still on the agenda, it has been confirmed that there will be no change to non-residents’ entitlement to personal allowance until at least April 2017.
Any amounts withdrawn will be moved into the client’s estate for IHT purposes, if this is retained and not spent.
As the client will be able to have access to the funds as a lump sum, these could potentially be included as an asset for care home fees/bankruptcy etc.

What Does All This Mean?

Regardless of the proposed legislation amendments, transferring to a QROPS still provides certain benefits that the UK equivalent would not be able to offer, although it’s fair to say that both still hold a valid place in expatriate financial planning. The answer to which pension is more suitable for you will ultimately depend on your individual circumstances and long term intentions. It is vital you talk to a Financial Adviser who can advise you correctly on this.

Financial seminar for expats in Catalonia

By Chris Burke
This article is published on: 25th February 2015

25.02.15

The Spectrum IFA Group’s Chris Burke spoke at a recent financial seminar alongside Spanish Lawyer, Nuria Clavera Plana, in Llafranc. The event was attended by 30 people and was followed by a Q&A session and a chance to meet the speakers over coffee.

Chris’s presentation covered:

Currency forecast, thoughts and ideas to implement for 2015.
UK Government Pensioner Bonds – 2.8%-4% per annum for anyone holding a UK bank account and debit card.
UK Pension & QROPS changes – Is your pension being managed effectively and is it in the right place?
Spanish Life Assurance Bonds/Investment – potentially Tax efficient, historically good returns (Prudential) and potentially succession planning friendly.

Chris ran through the concept of ‘the magic bank account’ for over 65’s in the UK, and many people were surprised to find out that you do not have to live in the UK to benefit from these – you just need a UK bank account and debit card and can achieve between 2.8% to 4% per annum with the savings also government backed. He discussed predictions and thoughts on currency, which highlighted last year’s most successful currency forecaster, stating that the Euro/Dollar will be at parity at 1-1 by the end of 2015. Still just as unnerving for those living in Spain, was the prediction that the Euro would reach 1.42 by the end of 2015 against the pound, particularly if the EU have to keep printing money to solve the crisis.

The new rules on UK pensions and QROPS were also highlighted. QROPS is a UK pension that has been moved overseas to benefit from EU rules (please note your pension should be evaluated by a qualified pension evaluator before you consider doing this) and although the new UK rules give much more flexibility, everyone acknowledged that hefty tax could have to be paid to access these. Qrops still has benefits over and above leaving your pension in the UK depending upon your situation, and from April 2015 should have nearly all of the benefits a UK pension will be entitled to, and potentially more.

Tax efficiency was perhaps the most popular subject Chris presented on, with most people interested in saving money on taxes both on their savings and with succession planning. In fact, passing on their money tax efficiently was the main interest over coffee after the presentations.

Presentation From Nuria Clavera Plana (Lawyer):

New income tax for Catalonia 2015 and what are the exemptions.
New Capital gains Tax for 2015 in Catalonia.
What assets need reporting.
Pension income from sources outside of Spain Amnesty.

Nuria as ever gave a very interesting presentation on what you now have to pay in taxes throughout Catalonia, the reasons why and how this works. By far the most popular conversation was the changes to Inheritance tax rules now in Catalonia, which in essence are the same now for Spanish Nationals and Foreigners residing here. This incorporates a big reduction in tax compared to before. It was also surprisingly good news for those leaving behind assets up to €1,000,000 with potentially limited tax to pay.

There were many questions surrounding what does and doesn’t need reporting for the Modelo 720 overseas asset declaration, ranging from classic cars to items not reported before. This topic always throws up major questions as always!

This year in Spain it is now a requirement to report any overseas pension income you are receiving up until the 30^th June 2015. This generally would not have been taxed in most cases in the respective overseas countries due to the amount in question. However this should be reported in Spain and could therefore be subject to Spanish tax laws. It was discussed that this new law has been brought in mainly to find those Spanish Nationals who have been receiving pensions from working abroad previously and have not been declaring them or paying the relevant tax.

Nuria as ever gave everyone detailed analysis on these changes, so everyone left the event with a better knowledge of their own personal situation.

If you would like more information on this or any other questions you may have regarding Tax advice, please do not hesitate to contact Nuria on nuriaclavera@icab.cat or Telephone 972305454.

Chris and Nuria would like to thank all the attendees for asking such pertinent questions and joining in, making the event such a success.

Chris will also be presenting at future seminars in the coming months. Please feel free to contact him on chris.burke@spectrum-ifa.com or telephone him on 936652828 if you would like to know more about these, or wish to discuss any of the above details.

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Smart Ways to Make the Most of Your Finances

By Chris Burke
This article is published on: 10th February 2015

10.02.15

The year 2015 is picking up speed, and now is the perfect time to stop and re-evaluate our finances before we slip back into our old comfortable routines. A time to review the past year and determine those areas with potential for improvement, to make sure we are getting the most out of our investments and reaching all our financial goals.

Do you know where your money goes each month? Could you be making more if you invested elsewhere? Is your credit rating a true reflection of your financial situation, and are there things you could be doing to improve your standing?

Follow these smart ways to make the most of your finances and put you and your family on the right track for a wealthier future.

Study your Credit Report
Have you ever seen a copy of your credit report? Most people haven’t and it may surprise you to hear that they very often contain errors. Research online and get access to your report and make sure there aren’t any mistakes which could be having a negative impact on your rating. If you don’t, you could be at risk from undiscovered inaccuracies.

Study your Cash Flow
Set some time aside to study your cash flow. Go over all your statements from the past year and crunch those numbers to gain a true understanding of where your money goes each month. How much are you spending? Where is it all going? Where can you make cuts to your monthly outgoings?

Credit Cards & Banks
Check the Terms and Conditions of all your credit cards and compare terms, rates and fees with those of other cards. Are you getting the best deal or are you just renewing cards out of habit? Get rid of credit cards which don’t give anything back, and compare rewards and cash back with other offers. If your current bank is letting you down and not providing the service you need, change.

Understand Investments
Most of us don’t fully understand investments. Be the minority. Do your research and find out as much as you can about viable investment options. Use the Internet and its many free tools, and study the market to assess how to make the most of your finances.

Seek Professional Advice
Ultimately, the best advice is professional advice. The Spectrum IFA Group can assist you in reviewing your financial situation and advise you on smart ways to make the most of your finances. For more information or to contact one of our Financial Advisers please use the contact form below.

The Financial Implications of Moving Abroad

By Chris Burke
This article is published on: 30th January 2015

Moving abroad can be a stressful and confusing experience and starting from scratch in a new location can often be overwhelming.

If you have recently decided to up sticks and move to Barcelona, or if you’re a recent arrival in the sunny Catalan capital, then you will have many choices to make. Aside from the immediate practicalities of moving to a new country, such as choosing schools, buying or renting property, and setting up residency for you and your family, there are many other (often overlooked) factors to take into consideration:

Pensions:
Unlike the UK, most companies in Spain don’t provide a private pension scheme or private health insurance. However, as an Expat, you may have unique opportunities available to you. An adviser will be able to discuss each of the options enabling you to make a decision.

Banking:
Having the right banking arrangements is a key part of life overseas. It’s best to sort your finances out before you go, as local banks usually require a credit history and proof of address to set up an account – which you won’t have when you arrive.

Tax:
Dual-Country financial arrangements are complex and should not be taken lightly, as even the most innocent transaction can be costly if not well planned.

Savings and Investments:
There are many factors that go into determining the best country in which to locate your investments. Bear in mind that you may have access to, and potentially benefit from, onshore and offshore savings and investment assets.

ISAs:
If you currently have an ISA and are planning to move abroad, they are not tax efficient in Spain. You also need to be fiscally resident in the UK to pay into one.

Will & Testimony:
Your Will (and those of your family members) will need to be updated so that it is compliant in Spain

Financial Advice:
The complexities in managing currency risk, an investment portfolio, and dual-nation tax reporting are many. It is important for expats to have a trusted adviser who understands the financial nuances of living an international lifestyle.

Saving for Retirement in Spain

By Chris Burke
This article is published on: 28th December 2014

How do you save for retirement in Spain and what are the best options for expats?

These days there are quite a few choices on how to receive your pension as a British expat and, if you qualify for a UK state pension, you can claim it no matter where you live. The money can be paid into a UK bank or directly into an overseas account in the local currency. If you move to Spain before retirement and work there for a number of years, it may also be possible to receive a state pension from more than one country.

If you’ve qualified for a state pension from the UK, it will be paid (and taxed) in Spain but uprated every year in the same way as the UK. The personal tax allowance in Spain is €6,069 (£4,923) compared with £10,000 in the UK. The basic rate of tax is also higher, at around 24% compared to 20% in the UK. And in Spain there is no 25% tax free lump sum available when retiring, and any Isa’s you have in the UK will be liable for tax if you become resident in Spain.

A lot to consider…

Saving for Retirement: Tips

Plan Ahead: Pay off debts and take advantage of tax free personal allowances.

Do Your Homework: Before sitting down with an independent financial adviser, make sure you have a clear picture of your current finances and what you need to consider in order to achieve the lifestyle you want over the years ahead.

Consider Your Saving Options: The recent Budget announced radical changes to pension schemes – good news for savers. From April 2015, individuals may withdraw as much or as little from their pension fund in any year with 25 per cent being withdrawn free of tax.

Regularly Review Investment and Retirement Plans: Review your investment and retirement plans every six months to ensure any advice received is up to date and relevant.

Prudential: Flexible Savings for Retirement

The Prudential Flexible Retirement Plan gives access to a range of flexible retirement and investment solutions to suit your changing needs and priorities. Whether you are approaching retirement or some way off, the flexibility provides an easy transition from saving for retirement, through to approaching retirement and then taking an income.

Professional Advice for Expats

The earlier you get your financial planning in order, the better. Make a mistake with your pension, and you could end up paying for it for the rest of your life.

A pensions expert will be able to point you in the right direction. You will need to take Spanish rules into consideration, so taking advice from an adviser conversant with both UK and Spanish pension and tax rules is essential.

Finding a Financial Adviser in Barcelona

By Chris Burke
This article is published on: 27th December 2014

The number of British people moving abroad is rising, with about one in 10 British people now living overseas.

Despite its obvious economic difficulties, Spain continues to be one of the most popular destinations for British expatriates, as the laid-back lifestyle and improved transport links with the UK gives it an allure that is hard to resist.

However, setting up residence in a Spanish city, such as Barcelona, involves a great deal of upheaval, both on a personal and practical level, and it’s a sad reality that expats can be particularly vulnerable to poor financial advice.

How to Choose a Financial Adviser

In practical terms, one of the most important things to get right as an expat is your finances, and having the right banking arrangements is a fundamental part of life overseas. Banking services should ideally meet at least two main criteria: flexibility (money should be easy to access and transfer between countries); and financial security (in a reputable bank that complies with international financial regulations and has a solid capital base).

But what other factors should you take into consideration when searching for a Financial Adviser in Barcelona?

Are they regulated? Do your research, visit websites, and confirm registration with the IFA before choosing an adviser.
Qualifications: Every nation has different rules relating to how qualified a financial adviser needs to be to gain authorisation, but the UK is a world leader in terms of required qualifications. So if you’re speaking to a British adviser abroad, you can gauge their industry education based on the British qualifications they have.
Experience: You can ask your adviser how long they’ve been qualified and giving advice, and you can research the brokerage to see how long they’ve been in business.
Are they independent? Ensure that your adviser is independent rather than tied to one financial institution, so that they are able to advise you on suitable products from the entire financial market place.
Testimonials: If your IFA is good at their job, they are highly likely to have a list of satisfied clients, from whom you can request a testimonial.

The Spectrum IFA Group

At The Spectrum IFA Group, we provide financial advice to expats on all aspects of living, moving and working in Spain. From calculating the cost of living to choosing a good school for your children, our guides to money management and family finances will help you prepare for the challenges of living and working abroad – so you can make the most of your expat experience.

We provide Insurance Intermediation advice and assist clients in their choice of Investment Management Institution. Mutual respect is earned by working together, looking after your best interests and by adding value to your financial planning through qualifications, experience and enthusiasm.

UK Pension Transfers – Update for Expats

By Chris Burke
This article is published on: 24th December 2014

The rapidly changing landscape of pension schemes in the UK has led to a great deal of confusion, and it’s not just UK pensioners who are affected: the rule changes also impact expats living outside the UK, especially those considering the benefits of a Qualifying Recognised Overseas Pension Scheme.

Let’s look at the facts…

Reasons to transfer

● Pension Commencement Lump Sum of 30% of the fund. This is tax-free if UK resident but could be taxable if resident outside of the UK.

● No pension death tax, regardless of age, in Gibraltar and Malta

● Greater investment freedom, including a choice of currencies

● Retirement from age 50 (Malta), and 55 in Gibraltar and Isle of Man

● Income paid gross from Malta (with an effective DTT), and only 2.5% withholding tax in Gibraltar

● Removal of assets from the UK may help in establishing a Domicile outside of the UK (influences UK inheritance tax liability)

What will happen if you leave your personal pension in the UK

● On death over the age of 75, a tax of 45% on a lump sum pay-out.

● Income tax to be paid when receiving the pension, with up to 45% tax due, likely deducted at source,

● Registration with HMRC and the assignment of a tax code.

● Proposed removal of personal income pension allowance for non-residents. Although this is still on the agenda, it has been confirmed that there will be no change to non-residents’ entitlement to personal allowance until at least April 2017.

● Any amounts withdrawn will be moved into the client’s estate for IHT purposes, if this is retained and not spent.

● As the client will be able to have access to the funds as a lump sum, these could potentially be included as an asset for care home fees/bankruptcy etc.

● No opportunity to transfer from many Civil Service pension schemes from April 2015 (Only five months remain for public sector workers to review their pension and then make their own informed decision)

What Does All This Mean?

Final Salary Pension changes: The Budget 2014

By Chris Burke
This article is published on: 5th July 2014

Further to the UK budget announcement earlier this year regarding UK Final Salary pensions, many are asking what their options are and how best to manage their final salary UK pension. The key concerns people have regarding final salary pensions are as follows:

Security of Final Salary Pensions

90% of UK company pension schemes are underfunded; that is to say the scheme no longer has sufficient funds to pay the full pension entitlement in retirement to all of its members. Due to improved healthcare and quality of life, people are living longer; this creates a greater burden on final salary pension schemes. The retirement age has risen over the years from 55 to 65; life expectancy in Europe has also risen from 67 to 84. Companies used to provide on average 12 years of pension income, now it is more likely to be 19 years.The figures no longer add up and so the ‘pension gap’ continues to widen. For these reasons final salary pension schemes are now mainly closed to new entrants. With no new scheme members, and thus no more contributions, there is no new capital covering the retired member’s incomes. There is a rising concern for how will this deficit be covered in future.

Should I leave my Finals Salary pension in the UK or transfer it out?

If you have a final salary pension in the UK you have three options. You can start receiving your pension before the normal retirement date, usually with a penalty, wait until the normal retirement age and receive an income, which usually rises with inflation, or you can obtain a Cash Equivalent Transfer Value (CETV). In the latter scenario you can exchange the promise of a retirement income for a pot of money you can manage and invest yourself, without the liability of the company scheme’s increasing deficit. Before considering this process, your CETV needs to be carefully evaluated against the benefits of a ‘guaranteed’ income (guaranteed so long as the company and pension scheme remains solvent). This evaluation depends on the return you could expect to obtain from your transferred pot against the currently ‘promised’ income from your current final salary scheme. It is very important to evaluate your options with a qualified financial pension planner to work out the risk, reward and suitability of a pension transfer for your individual scenario. Every personal pension situation needs to take into account your age, company scheme, your family, location and many other factors which are different for everyone.

How do the changes affecting the UK budget this year affect my Final Salary pension?

Perhaps the biggest change in the UK pension budget is that, from the age of 55, you can ‘cash in’ your UK pension while paying the marginal tax rate i.e. the income tax band that applies to you, based on your earnings in addition to the amount of your pension you are withdrawing as a lump sum. (This change is still going through consultation and we will know at the end of July if and when this new rule will be allowed to commence). However, this change applies only to defined contribution pension schemes, so how does this effect final salary pension schemes? Further to the increasing final salary funding gap, the UK government intend to prevent members transferring their final salary pensions into a personal pension cash pot. The main reason is that as scheme members leave, there is less capital and more strain on the scheme to recuperate the deficit for its remaining member’s retirement income. It could decimate the company pension scheme industry if members left at an alarming rate; many jobs would be lost. Therefore, if you want the option of transferring your final salary pension into a personal cash pot pension (defined contribution) your time to do this could be increasingly limited. Some analysts and institutions are forecasting that from late July 2014 transfers will be either blocked or have significant restrictions on who can transfer and where to.

What does all this mean?

If you want the choice of cashing in or transferring your final salary pension after a qualified evaluation of the benefits and drawbacks, you may have limited time to do so. Exiting from a final salary scheme could have a significant impact on your retirement income for better or for worse. The advice given must be founded on a close analysis of your financial needs and residential situation – therefore if you would like to know your options before they may be taken away, we recommend an evaluation as soon as possible.

Other Thoughts

A final salary pension, so long as the scheme is solvent, adheres to the rules of the administrator that created it i.e. an income for life linked to inflation, can be a good scheme. However, a final salary pension transferred into a cash equivalent value could allow much greater flexible benefits, which include, no early retirement penalty, no more currency risk, larger Pension Commencement Lump Sum, higher initial income and security your pension is now fully under your control. Of course, none of this even takes into account the fact that moving your pension outside of the UK means any money left after your death would go to who you choose as dependants, rather than currently a spouse and then predominantly the other company pension scheme members of which you were in.

Pilot Loss of License and Loss of Training Expenses Insurance

By Chris Burke
This article is published on: 26th June 2014

Aircrew undergo many years of hard work at substantial expense to attain their aviation license. However, a commercial pilot’s career and income are always at risk should they suffer serious injury or deterioration in health.

Pilots Loss of License Insurance provides financial support should your aviation career end abruptly; it provides stability while you retrain for a new career. Policies are available on an individual basis should your employer not provide it; similarly members can ‘top up’ their coverage in addition to their company’s existing group policy.

Loss of license insurance is specifically designed for pilots. As such, it negates many of the associated limitations of traditional group insurance products. For instance permanent health and critical illness insurance policies may provide limited cover and significantly reduced benefits in the instance of losing your license.

Who can we insure?

We can cover any individual commercial, fixed rotary or wing pilots including flight instructors, who hold a current license and who are gainfully employed, and actively at work.

Alternatively, if you’re interested in a group policy, please email us directly at chris.burke@spectrum-ifa.com

Key benefits

Lump sum payment
Monthly temporary benefit option
Continuous coverage
Full psychological illness cover option available
Market leading cover for alcohol and drug related illnesses
No extra charge for rotor-wing pilots
Worldwide cover

I have worked extensively with aviation companies and individuals alike, please do not hesitate to contact me with any questions.

Click here for a quote on Pilots Loss of License Insurance

Spanish Mortgage News

By Chris Burke
This article is published on: 17th May 2014

In the last two months, we have seen some incredibly positive things happening in respect of mortgage lending for non-residents. This affects not only product conditions (see below), but also service standards.

In March, two of the main lenders contacted one of our mortgage brokers us to ask us if they could meet decision makers in their banks to understand how they can compete for and win more non-resident mortgage business. They met with two members of the Board of Directors of one of the largest banks in Spain and last week we met two senior officials from another of the largest banks.

At these meetings we advised that to compete effectively banks need to offer at least 70% of purchase price, with no compulsory life assurance, without a minimum rate (“suelo”), for all nationalities, and to improve the efficiency and turnaround times for approvals.

We have also advised that debt-to-income ratios could be increased to gain more business from rivals, but this seems to be something that is harder to get banks to change. Many banks are currently using a 30% debt-to-income ratio, so monthly debts (including the new Spanish mortgage) must not exceed 30% of overall net monthly income. Some banks are using 40%, but these banks are not offering the best conditions. It is worth noting that the 30% rule is often relaxed slightly for high-earners.

We anticipate that changes will be made one step at a time, but have been very encouraged by the results of these meetings. Here are some new conditions we have been involved in negotiating:

70% now available for most other nationalities (case-by-case basis for non-Europeans)
Low interest rates from annual Euribor + 2%
Products without compulsory life assurance
30-year terms available
Fast-track approval with decisions in 1-2 weeks from submitting all requested documents

For Scandinavian clients, as most agents are already aware, Nykredit has often been the preferred bank to use because they offer attractive conditions and 70% for Scandinavian nationals (up until recently they offered up to 80%, but this is now very difficult to achieve with them). We are getting more and more Scandinavian clients coming to us telling us that Nykredit has declined their mortgage, is taking an eternity to approve it or requires them to invest large sums to get approval for 80%. What is clear is that Nykredit is purposefully slowing down its lending for Spanish property purchases. This now appears to be in contrast to the leading Spanish banks. Nykredit has also made clear that it is not keen on self-employed applicants, cheaper properties, non-touristic areas and even some very popular holiday destinations such as Ibiza.

MAXIMUM LTV

Fiscal Residents – 80%

Non-residents – 70%

EURIBOR*

12 month (annual) – 0.549%

EXCHANGE RATES

1 GBP = 1,1952 EUR

1 EURO = 0.8367 GBP

Data correct at the time of writing
* Based on purchase price or bank valuation (lowest of the two)
** All non-resident mortgages are now based on the annual Euribor with a loading of 2 – 4%. The margins now vary considerably depending on the bank in question and the customer profile and some banks have minimum rates