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Transferring Irish Pensions Abroad

By Craig Welsh - Topics: Malta, pension transfer, Pensions in Malta, UK Pensions
This article is published on: 7th December 2021


Irish expatriates, or indeed anyone who has previously worked in Ireland, may have accumulated Irish pensions along the way. If it’s unlikely that you will return to the Emerald Isle, it may be worthwhile looking into moving these pension pots.

At Spectrum, we can help you with that.

First, there must be a bona fide reason for wishing to transfer those pensions away from Ireland. It cannot be done just to circumvent Irish taxation. Professional advice from a regulated adviser should be sought.

You may be able to transfer your Irish pension to either a Malta QROPS (Qualifying Recognised Overseas Pension) or a UK SIPP (Self Invested Personal Pension). And no, you don’t have to be living in either Malta or the UK to do so. Moving them can give you far more flexibility by allowing ‘income drawdown’ and avoiding the need to buy an annuity.

Maybe you have more than one pension scheme in Ireland? In that case, you might benefit from consolidating them into one pot. Again, that makes things a bit easier to manage; we can then help you manage the investment side too.

irish pension

So, a bit more detail;

  • Drawdown option; no need to buy an annuity. Withdrawing money from an Irish pension can be complex and inflexible, with some pretty complicated rules. For instance, you will find it difficult to access an Approved Retirement Fund (ARF) or an Approved Minimum Retirement Fund (AMRF) if you are non-resident in Ireland. And without an ARF / AMRF you will most likely have to buy an annuity, with no ‘drawdown’ option. Transferring out means you can access lump sum and drawdown options with no requirement to buy an annuity
  • Pension benefits can be accessible from age 50 upon a transfer, and a lump sum of 30% could be taken. How the lump is assessed for taxation depends on where you are resident, so again, advice is essential
  • Easier to manage when you live abroad. UK SIPPs and Maltese pensions are a bit easier for ‘expats’ to manage. In Ireland you must firstly transfer €63,500 to an AMRF/Annuity, unless you are receiving €12,700 p.a. in lifetime guaranteed pension annuity. On the other hand, UK and Maltese products have no annuity requirements
  • No Irish taxation. Even if you live abroad, income from your Irish pensions will be taxed at source, as income in Ireland. Withdrawing from a UK SIPP or a Malta QROPS instead means that this income can be paid gross, with no tax at source. This depends on where you are resident however and if a double taxation agreement (DTA) is in place. Again, professional advice should be sought
  • Death benefits. Irish pensions, once in payment, are liable to Irish inheritance taxes (CAT) on death, even if you are no longer resident there. With a Malta QROPS there is no Maltese inheritance tax on the remaining pension pot, although tax may be payable in the country of residence of the deceased or beneficiaries

Basically, transferring out could make your life easier. Each situation is different however, and a full review of your circumstances should be carried out.

If you do have an Irish pension and do not intend to return, please feel free to contact us at Spectrum for a no-obligation, initial discussion where we can explore your options.

Tax Efficient Investments Malta

By Craig Welsh - Topics: Malta, Tax Efficient Savings, Tax in Malta
This article is published on: 20th October 2021


This week, Craig Welsh celebrates 15 years as a Spectrum adviser.

Craig started out in the Netherlands, still looks after his clients there, and has now opened a Spectrum branch in Malta.

This short clip tells you a bit more about what you can expect from your Spectrum adviser.

Whether it is Brexit concerns, how to get a better return on your savings, QROPS / SIPP pension advice, or general retirement planning, The Spectrum IFA Group is there to assist expats in Europe.

Moving on from Brexit

Brexit created a number of well-documented issues for expatriates living in the EU.

Financial planning and wealth management were impacted heavily as the Withdrawal Agreement excluded financial services and specifically the passporting of advisory licences between the UK and EU. This means that many UK based advisers and institutions are no longer able to engage with clients living in the EU.

The Spectrum IFA Group is licensed across the entire EEA and can ensure that your finances are ‘Brexit-proof’, through access to secure, locally authorised, tax-efficient investment solutions.

In countries such as Malta, you have access to many flexible investment options backed by some of the UK’s largest and most well known financial institutions.

These products, issued from Dublin or Luxembourg, are both EU regulated and highly tax efficient. Tax efficient products, designed for expatriates, are available to Maltese residents.

As a result, you can still invest with companies whose names you know and trust, whilst ensuring compliance and tax-efficiency in the country you now call home.

The Spectrum IFA opens it’s Malta office

By Craig Welsh - Topics: Malta
This article is published on: 28th September 2021

Craig Welsh

The Spectrum IFA Group recently announced its arrival in Malta, opening a branch in the St. Julian’s business district. It will be managed by Craig Welsh, who is a partner, and who has been with the group since 2006.

Craig will be assisting expats in Malta with their financial planning, particularly around lump sum investment opportunities, UK pension consolidation (where appropriate), Brexit issues, and general retirement planning.

Have a look at this short clip explaining a bit more about Spectrum and how they help their clients.

How Expats Can Consolidate Their UK Pensions

By Craig Welsh - Topics: Malta, QROPS
This article is published on: 8th February 2019


Very often we are contacted by expats who have several different pension schemes, and usually they are scattered around different countries. Of course, in an ideal world pensions would be MUCH easier to keep track of, but unfortunately efforts to ‘harmonise’ pensions across the EU haven’t made much headway. Pensions are inherently linked to the taxation system of that particular country (because you usually get tax relief on the contributions you make) and so it can be very difficult to consolidate them or even move your ex-employer’s scheme to your new company scheme.

The good news is that this CAN be done with UK pensions. So, if you are an expat who has previously worked in the UK, you can consolidate them all into one pot. That ‘pot’ can be either be left in the UK, using what is known as an ‘International SIPP’, or taken out of the UK using a QROPS (Qualifying Recognised Overseas Pension Scheme).

Both the SIPP and the QROPS route can offer excellent flexibility when it comes to taking benefits, as well as very favourable estate planning opportunities (being able to pass on the full value of the ‘pot’ upon death, for example). More on that later.

There’s a but, of course. It’s not suitable for everyone and it depends on a host of different factors. Moving any pension requires regulated advice from suitably qualified and licensed advisers. There is a proper process to go through, a process which is designed to ensure that you only transfer if it is clearly in your best interests to do so. Indeed, if you are considering moving a defined benefit (final salary) pension scheme then extra care should be taken as you will be giving up a guaranteed income, and you may find that you will need advice from two advisory firms. The regulated process is there for your protection!

Everyone’s situation is different of course, and a licensed advisory firm will look at your financial situation as a whole. But here are some general rules of thumb;

A QROPS may be suitable for you if all of the following applies to you;

  • You have UK pension schemes with a total transfer value of over £100,000
  • You have left the UK and do not intend to return
  • You live in the EEA (European Economic Area) and you don’t intend to leave in the next 5 years*

*An OTC (Overseas Tax Charge) was introduced in 2017 which means a 25% tax charge would be applied to a transfer unless both the new pension scheme AND the pension scheme member are based in the EEA (or both are in the same country).

An International SIPP may be suitable for you if all of the following applies to you;

  • You have UK pension schemes with a total transfer value of over £100,000
  • You have left the UK but there is a chance you will return
  • You are unlikely to be affected by the LifeTime Allowance (LTA)** of £1,030,000. If this is likely to be an issue for you, QROPS should be considered

**the LTA is the overall limit of tax-privileged pension funds you can accrue in the UK, before a Lifetime Allowance tax charge applies.

What are the benefits of consolidating?
What next? As I said before, transferring a pension requires regulated advice from suitably qualified and licensed advisers, and a full assessment needs to be carried out. If it is established that a transfer is indeed in your best interests, what can a QROPS or International SIPP offer you?

Well, both can provide you with;

    • Flexi-Access. From the age of 55, a 25% lump sum (in some cases 30%) is available (tax-free in the UK but take care as it may be taxable in your country of residence). Thereafter you have the option of flexible drawdown (taxable income). This means you choose when you start taking your income, and you can vary how much you want to take

For those with defined benefit / final salary pensions, this can mean turning the promise of a fixed income for life into a large pot of capital you can access flexibly.

    • Control of the Investment Pot. You are not giving up your savings for an annuity; the ‘pot’ is invested, and you can control how it is managed, according to your risk profile
    • Currency Choice. Even with the International SIPP option, you can change the currency of your assets from Sterling to Euro. We had clients who took advantage of this a few years ago when the rate was €1.39 to £1, and now they’re pretty glad they did!
    • Estate Planning. The pot can be passed on to your beneficiaries on death. With a QROPS the whole pot can be passed on free of tax, while the SIPP (as it is still a UK product) will be taxed at the recipient’s marginal rate only IF the deceased was aged over 75

This can be a real game-changer if you have a large defined benefit / final salary scheme, which typically offers a spouse’s pension of 50% on the death of the member. For example, I have seen many cases where it meant turning a guaranteed income for the surviving spouse of £10,000 per annum into a potential lump sum of over £500,000. Tough choice!

  • Lifetime Allowance. In the UK, pension savings of over GBP 1,030,000 are taxed at either 25% or 55%. Once a QROPS has been used however, the LTA no longer applies. So, if you are anywhere close to the LTA, a QROPS should be considered

Elephant in the Room
I have deliberately not mentioned the B-word; Brexit! That’s because at the time of writing, with only 50 days until the UK is due to leave the EU, we are still no clearer as to whether the UK will leave with a deal, without a deal, or will leave at all.

The current opportunities for expats to consolidate their UK pensions may well be at risk depending on the outcome of Brexit. The rules could be changed; we just don’t know. So, it’s advisable to act now before any doors are closed.

At Spectrum we offer a free initial analysis of your UK pensions by our highly qualified advisory team, as well as our ongoing advice on portfolio management and the various retirement options. You can read some feedback from existing clients here

Time to Review Your Final Salary Pension

By Craig Welsh - Topics: BREXIT, Malta, Pensions, Uncategorised
This article is published on: 27th October 2016


Final Salary pension schemes, also known as Defined Benefit schemes, have long been viewed as a gold-plated route to a comfortable retirement. In the past, many advisers, including ourselves, would have been sceptical about people transferring out of such a scheme. However, there have been huge changes in UK pensions legislation and there are likely to be further changes ahead. The key question here is; will these schemes be able to provide the benefits they have promised over the next 20+ years?

Why Review Now?

In many cases, it may still be best advice to leave the pension where it is. And a transfer out requires highly specialised and regulated advice. However, there are many compelling reasons why a review makes sense.

Record high transfer values
UK gilt yields are at an all-time low and this has pushed up transfer values to be an all-time high; some transfer values have increased by over 30% in the last 12 months. Many clients are quite surprised to learn their scheme which projects an income of GBP 10,000 per annum in retirement offers a transfer value of over GBP 330,000!

Scheme Deficits
Actuaries Hyman Robertson now calculate the total deficits on remaining final salary pension schemes as £1 trillion.

Recent examples show that very large deficits cause several problems. No one wants to purchase these struggling companies as the pension deficits are too big a burden to take on. Could the Government be forced to change the laws to allow schemes to reduce benefits? A reduction in the benefits will reduce the deficits and make the companies more attractive to purchasers. There is a strong argument that saving thousands of jobs is in the national interest, if that just means trimming down some of these “gold plated benefits”.

Pension Protection Fund (PPF)
This fund has been set up to help pension schemes that do get into financial trouble. Two points are key. Firstly, it is not guaranteed by the Government and secondly, the remaining final salary schemes must pay large premiums (a levy) to the PPF to fund the liabilities of insolvent schemes. As more schemes fall into the PPF there would be fewer remaining schemes that must share the burden of this cost. Their premium costs will increase as there will be fewer remaining schemes to fund the PPF levy.

It is possible that the PPF will end up with the same problems as the final salary schemes; i.e. they won’t have the money to pay the “promises” for pensioners. Additionally, the PPF will most likely have to reduce the benefits they pay out.

Pension Changes Already in Place
Inflationary increases have already been permitted to change from Retail Prices Index (RPI) to Consumer Prices Index (CPI). This change looks reasonably small, but over a lifetime this could
reduce the benefits by between 25% and 30%.

In April 2015, unfunded Public Sector pension schemes have removed the ability to transfer out, so schemes for nurses, firemen, military personnel, civil service workers etc. are no longer transferable. Now these are blocked, it will be easier to make changes to reduce the benefits and no one can respond by transferring out.

When this rule change was being discussed the authorities also wanted to block the transfer of funded non-public sector schemes, i.e. most corporate final salary schemes. There is therefore a risk that transfers from all final salary schemes could be blocked or gated.

Autumn Statement (Budget)
This is expected on 23 November 2016. Could the Government make any further changes to Pension rules? When Public sector pensions were blocked, there was a small time window to transfer. People who review their pensions now may at least have time to consider options.

Could Brexit end the ability to transfer pensions away from the UK? This is still unknown, but pensions are often a soft target of government taxation ‘raids’.

Reasons Why Schemes Are In Difficulty

Ageing population. People now expect to live around 27 years in retirement. When these schemes commenced the average number of years in retirement was 13 years.

Lower Investment Returns. As schemes have become underfunded, they have invested more conservatively. Average exposure to equities (shares) is now around 33%, whereas in 2006 the average equity content was 61%.

Benefits were too generous. In simple terms, many of the final salary schemes were too good. In 2016, if you became a member of a 1/60th scheme then your company would need to add 50% of your salary to make sure the benefits can be paid. Clearly this is unrealistic.

What Could Change?

·       An end to the ability to transfer out of such schemes

·       An increase to the Pension Age, perhaps in line with the increase of the State Pension

·       Reduction of Inflation increases, (already started as many now increase by CPI instead of RPI)

·       Reduction of Spouse’s benefit

·       Increase of contributions from current members

·       Lower starting income

What Are The Alternatives?

QROPS schemes have proven very popular in recent years as they offer expats excellent flexibility. While a QROPS is not the only alternative, and each individual case needs properly reviewed by a suitably qualified adviser, the benefits are clear;

·       The ability to pass the pension fund on to heirs

·       The option to change currency

·       You can access the benefits flexibly via income drawdown (can vary the income you take)

·       Wide investment choice to suit your risk profile.

At The Spectrum IFA Group, your locally-based adviser will work together with our internal Pensions Review team and conduct a full analysis of your current arrangements.

Take control of your UK pension: QROPS

By Craig Welsh - Topics: Pensions, QROPS, Uncategorised
This article is published on: 24th May 2013


Many expatriates remain unaware that British pensions can be transferred out of the UK. Should you be looking at QROPS to take control of your UK pension?

Since April 2006, individuals who have left the UK – and left behind private or company pension benefits – are entitled to a QROPS pension transfer. HMRC introduced the ‘Qualifying Recognised Overseas Pension Schemes’ (QROPS) to allow non-UK residents to transfer their frozen pensions outside of the UK.

This has led to many expats contacting their advisers for further information on how to improve their retirement options. And it’s not limited to the British; there are many foreign nationals who have built up a pension pot while working in the UK that can benefit from a QROPS pension transfer.

Pension transfers under QROPS are a tax efficient way for expats to greatly enhance their pension flexibility. Pensions in the UK are subject to very restrictive tax rules when it comes to succession planning and this can be much improved by moving the pension to another jurisdiction.

In some circumstances it may not be appropriate to transfer your pension, therefore, It is essential that a proper analysis is carried by a licensed and fully qualified adviser. This is a highly specialist type of financial planning and should not be entered into lightly. Should I consider using QROPS?

If you fit the profile below, then you should consider contacting us for a free analysis of your situation:

  • You are no longer resident in the UK.
  • You do not intend to return to the UK.
  • You have a UK pension (or a number of pensions) with a total minimum value of GBP 50,000.

So what are the key benefits?

Succession Upon death most people would like to think that as much of their assets as possible would be passed onto their heirs. However, in the UK there can be a tax charge of 55 percent on your remaining pension if it is in drawdown and paid out as a death lump sum.

Furthermore, with many conventional final salary schemes, the widow’s/widower’s pension is only half the main pension, sometimes less if the spouse is quite a bit younger. A QROPS gives you the option to pass on the pension fund to your spouse, children and/or grandchildren as a pension or a lump sum, free of tax.

Investment choice By moving an arrangement out of the UK, there is a much wider choice of international investments available. Some existing pension schemes can be very restrictive in the choice of funds (UK only), or permitted investments. Most QROPS transfers can provide access to a wide range of sophisticated funds to suit your risk profile and lifestyle stage.

Currency Risk The underlying investments and income payments from a QROPS scheme can be denominated in a choice of currencies to reduce the risk of currency fluctuations. Many British retirees have suffered as the British pound depreciated in recent years against the currency zone they are living in. A QROPS can help you manage this risk.

Flexibility in retirement Your circumstances can change during your retirement years, for example, you may still do some work or you may move countries again. You will therefore need a number of options when it comes to taking your pension benefits.

In such situations, pensioners need to consider the PCLS (Pension Commencement Lump Sum – up to 30 percent with a QROPS scheme) and the level of regular income you need. A good solution under QROPS will allow you to vary your income in the future, rather than fixing it at one rate. Professional Advice Above all, getting professional advice is crucial, as well as choosing the right jurisdiction in which to transfer under the QROPS provisions. The pension should still be treated as a pension, i.e. it is not intended to be a way to ‘cash-out’ early. HMRC will come down hard on individuals, schemes and jurisdictions which abuse the rules.

A suitably approved scheme provider is also essential. At Spectrum we offer a free analysis of your pensions by our highly qualified advisory team, as well as our ongoing advice on portfolio management and the various retirement options.

How can expats can get their ‘nest-egg’ savings working harder despite low-interest rates

By Craig Welsh - Topics: Investment objectives, Investment portfolios, Investments, Malta
This article is published on: 2nd April 2013


Returns from bank savings accounts are at an all-time low, and savers are becoming increasingly frustrated. Interest rates in the western world are at extremely low levels, with the euro base rate at 0.75 percent. In the UK it is even lower, at 0.5 percent. While this helps some people, such as mortgage holders with tracker rates, savers are being punished as banks have continually cut the interest rates paid on savings accounts. Retirees drawing a pension, or looking to buy an annuity, have also been hit hard in this low-interest rate environment.

Low interest rates are here to stay
First, it doesn’t look like this will change for quite some time. The prevailing policy of central banks has been to increase money supply (quantitative easing), maintain liquidity in the banking system and keep interest rates low. Even a slight increase in the base rate over the next couple of years is unlikely to result in decent interest rates on savings.

Second, inflation is running at around 2 – 3 percent depending on which part of Europe you live in. It just feels like everything is getting more expensive, especially food and energy costs. The end result is that we are effectively losing money by leaving it in the bank.

Of course, we all need to leave some cash in the bank as our emergency fund (most financial planners would recommend around six months of income). But it is the ‘nest egg’ money (the savings that we don’t really need in the short-term) that we can do something about.

How can you get your nest egg working harder?
With the objective of ‘beating the bank’ over the longer-term, you can build a diversified portfolio of investments. In plain English this means spreading your money around and not having ‘all of your eggs in one basket’. Assets primarily fall into one of the following categories: equities (shares in companies), fixed-interest bonds, property, cash or commodities.

Lifestyle investing
You need to be clear about your ‘Risk Profile’. At Spectrum, we carry out a ‘Risk Profiler’ exercise which aims to establish the level of risk you are comfortable with and helps you understand the relationship between risk and reward. We then employ a forward-looking ‘Life-styling Process’ which means building a portfolio to match your own personal situation and objectives.

The eventual portfolio should therefore match your risk profile, usually measured from ‘cautious’ at the lower end of the scale, ‘balanced’ and then ‘adventurous’ at the higher end. The investment strategy should therefore be appropriate for your stage of life.

What assets to invest in
There are literally thousands of investment funds and vehicles to choose from. At Spectrum, we filter these by using strict criteria when choosing clients’ investments. For example we only use: UCITS compliant, EU regulated funds. This ensures maximum client protection and highest levels of reporting. Daily priced, liquid funds, so that clients do not get ‘locked-in’ to funds. Financially strong and secure investment houses. Funds which are highly rated by at least two independent research companies.

Multi-asset funds
Multi-asset funds are popular with clients as they are managed by experienced asset managers who, through active daily management, can offer access to all asset classes within a single fund. Their job is to capture capital growth while also protecting investors when markets suffer a downturn. Some fund managers have a great track record of doing this, for example Jupiter Asset Management’s Merlin International Balanced Portfolio, which has returned +34 percent (euro share class, as at end Feb 2012) since launch in late 2008, with relatively low volatility.

Multi-asset funds can be used as a ‘core’ holding within a portfolio, with more specialised and sector-focussed funds making up the rest of the portfolio.

Equities (shares)
Many blue-chip companies have very strong balance sheets and pay dividends of around 4 percent, which is higher than current interest rates. This dividend income can be re-invested into your capital (unless you need the income). The capital value of course will fluctuate but if you are investing for the longer-term you have time to ‘ride out’ any volatility.

Equity funds can be global in nature, regionally specific (for example focussing on emerging market countries) or even country specific. Other types of equity funds focus on smaller ‘growth-orientated’ companies rather than blue-chip, dividend paying stocks.

Ethical investing
Ethical funds are also an option. These are funds which only invest in ‘ethical’ companies. They are screened and assessed on criteria such as environment, military involvement or animal welfare.

Fixed-interest bonds
These include government bonds and corporate bonds. Western government bonds were traditionally seen as ‘safe havens‘, however yields are now currently as low as cash. You could consider corporate bonds, which are categorised in terms of risk (higher-yielding bonds means higher capital risk). Emerging market bond funds (with exposure to local currencies) could also be considered.

Many investors like to get exposure to bonds via a fund, which is a diversified mixture of bonds. One good option may be Kames Capital’s Strategic Bond Fund, with a return of +57 percent (euro share class, as at end Feb 2013) since launch in November 2007.

Commodities Commodity-focussed funds can be volatile and would normally make up only a small part of a portfolio. However there is potential for long-term growth by investing in companies with exposure to precious metals and resources (gold, silver, iron ore, copper) as well as other ‘soft’ commodities such as agricultural resources and the food sector.

Collective property funds or property-related shares could also form a small part of your portfolio. Physical property by its nature is illiquid but by using a property fund you can obtain exposure to shares in property companies, keeping your money liquid.

Review your portfolio regularly

It is vitally important that your portfolio is regularly reviewed. One reason why people do not get the most from their finances is the lack of regular attention paid to their arrangements. Consider using a regulated, independent adviser who should offer regular reviews as part of their ongoing service.

At Spectrum we have an in-house Portfolio Management team, helping advisers and clients monitor client portfolios regularly for performance and suitability. One aspect of our regular reviews is ‘profit-take alerts’; when one area of your portfolio has out-performed, then why not take some profits? Investors can really benefit from such active management.

How to plan your retirement

By Craig Welsh - Topics: Investments, Malta, Pensions, QROPS
This article is published on: 28th March 2012


Most expats today know they can’t rely on the state or even their company pension schemes to keep them in a comfortable retirement. Here we look at an international savings plan, designed for expats who are often on the move.

We all work hard and when the time comes to enjoy retirement, we’d like to be financially comfortable enough to enjoy it!

David moved to the Netherlands from England one year ago. The 30-year-old works in IT and earns approximately EUR 4000 per month. He is planning to work in the Netherlands for another five or six years and then he thinks he may move on to another country before probably ending up back in the UK.

He feels that he would like to have the option to retire before the company pension age of 65. He has built up some cash savings as his “emergency fund”, and this can be used in the event that he loses his job or something else unforeseen happens. He thinks it is sensible to set aside an extra EUR 500 per month for the longer-term, but wants to know how he can do this best.

Retirement planning for internationals

It is becoming abundantly clear that, as individuals, we have to take more responsibility for our own retirement planning. It will not be enough to rely on employer pension schemes (where many people are only making minimum contributions and most final salary schemes are closed to new entrants) or, indeed, government support.

As we have seen, most Western nations are now running huge deficits and are considering raising state pension ages. Furthermore, most developed countries have an ageing population, meaning that fewer people will be working to fund those who are retired.

Of course, if you are a contractor or self-employed, you will not be accruing any company pension benefits at all. Taking responsibility for your own finances is therefore even more crucial!

Often, expats are in good jobs and like to think that they will have options in later life in terms of retiring early or pursuing other projects. They can also be in a position to set some of their income aside for the longer-term, but where best to put it? When you are living and working abroad, it is often difficult to know how to use your money sensibly.

You should, of course, look into which tax-efficient savings schemes are available in your country of residence. While these differ from country to country, there are usually limits on how much you can contribute to these schemes and sometimes there are restrictions on when you can access the money.

Solution for David: International Savings Plan

David should consider an International Savings arrangement. By putting his EUR 500 per month into an International Savings Plan, David can continue paying into it even if he moves to another country. He is also not tied to a particular retirement age. Moreover, he retains control of the money at the end, as he is not required to give up the capital for an annuity (i.e. give up most of the money in the pension for an income).

Key features of an International Savings Plan:

If you move back home, or work in a different country, you can take the plan with you and you can continue to contribute to it. This is a major advantage of using an International Savings Plan, as you cannot do this with most other pension schemes. Instead, expats are often left with a number of small pension schemes scattered across different countries.

Most International Savings Plans will take into account the uncertainties of working internationally and allow you to control how and when you make contributions, as well as how much you contribute and in what currency. Plans can be started from around EUR 150 per month.

It is a private plan, which you can control. For example it doesn’t need to tie you to a specific retirement age and doesn’t require you to take an annuity (exchanging capital for a lifetime income). You can choose when and how you use the money you have saved, and retain control of the capital.

Investment choice
Most International Savings Plans give you cost-efficient access to an excellent range of funds, to suit most risk profiles. You can switch these funds at any time. This is important, of course, as you get closer to the point when you actually need to use the money; for example, it is not advisable to be fully invested in shares with only a year or two left until you take the money. Regular reviews are important!

Savings are usually based in a tax-efficient environment, where they can grow tax-free. Contributions are generally not tax-deductable.

Other points to note
Financial strength and regulation are important factors and each individual will have different requirements. This can depend on your current country of residence and your expected destination (i.e. where are you most likely to be in retirement?). These factors should all be taken into account as this can impact which type of savings arrangement will suit you best.

For example if you intend to retire in France, you should be aware that some plan structures (with assurance vie status) are particularly tax-efficient in France, while others won’t be.

Retirement plans should be regularly reviewed, as part of your overall financial planning. One of the reasons why people do not get the most from their finances is the lack of regular attention paid to their arrangements. Consider using a regulated and qualified independent adviser who should offer regular reviews as part of their ongoing service.

The sooner the better!

The sooner you start to set aside something for the long-term, the better! Your money then has more time to grow and allow you to build a comfortable retirement pot. Consider the “Cost of Delay”; the lost contributions and compounded interest that would have been earned. “Putting it off for now” can cost you a considerable amount and only means you have to save more in later years.

The advice is therefore to set aside whatever you can from your monthly income and start planning today.

Investment options

By Craig Welsh - Topics: Investments, Malta, wealth management
This article is published on: 16th November 2011


In the last article we looked at investment options that provide a capital guarantee – ideal for those investors who want some growth on their savings but are afraid of too much risk.

Now we will discuss more “liquid” options; investments which do not involve locking up money for a certain time, and are liquid (i.e. can be traded daily).

Again, some important financial planning rules come into play:

  • First, it is always recommended to leave some savings as accessible cash in the bank (at least 6 months income, which you can easily access if required).
  • Second, you need to establish your attitude to investment risk and return – the so-called “Risk Profile.” This should be fully clarified before entering into any investment.
  • Third, your time horizon is a crucial factor. Put simply: how long do you have before needing this money?

Medium / High risk investors For those who have anything between a “medium to high” risk category (i.e. those who are comfortable with volatility and accept higher levels of risk for a potentially greater return) it could now be a very good time to invest in equities (shares).

After the recent falls, some people feel that some equities may be undervalued. Timing the market however is notoriously difficult and so a “drip-feeding strategy” could be used.

Looking ahead with a 5 to 10 year investment outlook, the emerging economies (Asia, Latin America, etc.) continue to look attractive. China and India alone now generate around 40% of the world’s economic growth and there is a rising middle class in these countries. This creates demand for goods, materials and infrastructure.

Demographic trends (the larger proportion of young and educated people compared to retirees), growing urbanisation and increased demand for natural resources (it seems likely that commodity prices such as hydrocarbons, metals and water will rise in the long-term) mean that some excellent investment opportunities are available. Again, a drip-feeding strategy could be the most sensible approach here.

Emerging market equity funds should obviously be in a position to capitalise on this and provide some strong returns. However do not forget that strong domestic demand in emerging countries for products has helped Western companies grow their businesses in Asia and Latin America.

So, despite the public debt problems in the developed world, the private sector has some very strong companies with healthy balance sheets who are in a great position to capitalise on growth in the emerging world.

Many analysts therefore see this as a compelling reason for investing in global blue-chip companies who have exposure to growth in the emerging world. Further, this could also be a way of reducing exposure to the political risk inherent in some of the emerging countries.

Diversification The golden rule of investing! It is rarely advisable to “put all of your eggs in one basket” by choosing just one asset class. Even those with a more adventurous approach should balance out their portfolio with some exposure to other asset classes, to ensure diversification.

Low / Medium risk investors

* Multi-Asset funds “Multi-asset” funds, as the name suggests, normally aim to provide investors some exposure to each major asset class, giving the investor active management and excellent diversification.

There are funds in this sector which have disappointed but thankfully there are a handful of very successful fund managers who have delivered the steady growth that they aim for, for example Carmignac Patrimoine, Jupiter Merlin International Balanced Portfolio, and HSBC Open Global funds.

Some of these funds are for “cautious-moderate” investors who have a medium to long-term outlook.

* Fixed Interest bonds A fixed-interest bond is essentially a loan to either a government or a company, that pay a fixed rate of interest over an agreed period. The risk to the investor of course is that the debtor defaults on the loan.

This risk can be minimised by using a mutual fund which invests in a collection of fixed interest bonds, and there are many available with a long track record of steady returns (Franklin Templeton Global Bond for example).

Investors should be aware that there is still a risk to capital in a fixed-interest bond investment, particularly in the higher-yield sector.

Again the emerging markets are coming into play here with emerging market bonds attracting a lot of interest from investors due to the more fluid credit conditions in these economies.

* Absolute Return funds These types of funds aim to deliver a positive performance (absolute return) in any market conditions, even when markets are falling. They can do this by using a variety of financial strategies, and some have been reasonably successful over the last three or four years, with consistent performance and low volatility, even over the last few months.

Review regularly! Once investments are in place it is important to keep track of them and review at least twice a year.

Investment options – Captial protected plans

By Craig Welsh - Topics: Investments, Uncategorised, wealth management
This article is published on: 3rd October 2011

This summer we have seen severe volatility in global financial markets, with concerns over the European debt crisis and the pace of the global economic recovery being the principle causes. At this article, we look at investment options for people not comfortable with taking on a lot of investment risk.

Whether it is savings you have built up, a redundancy package (a Stamrecht construction for example) or money from the sale of a property, one should investigate about how to sensibly invest for the longer-term.

Stock markets have enjoyed a relatively fruitful time since the lows of spring 2009, with the S&P 500 index, EuroStoxx 50, and FTSE 100 gaining around 75%, 55% and 66% respectively up until July this year.

However when markets see a drop like we have seen (the Eurostoxx 50 lost 20% through August and September) it usually provokes one of two reactions – either concern / anxiety / panic and a reluctance to invest ANY savings in equities, or indeed you see it as a great opportunity to invest at lower prices (buying low to sell high) and get prepared to pick up a bargain.

Many bank savings accounts are failing to pay an interest rate which is any higher than inflation. This means that the value of your long-term savings can be eroded simply by leaving them in the bank.

I have some savings which can be set aside. What are my options for investing?
First, it is always recommended to leave some savings as accessible cash in the bank (at least 6 months income, which you can easily access if required).

Second, you need to establish your attitude to investment risk and return, or your “Risk Profile” as it is known. This should be fully clarified before entering into any investment.

Third, your time horizon is a crucial factor (how long do I have before needing this money?).

“Capital protected” options
There are many of these products available (most often promoted by banks) however not all of them are considered good value.

Independent advisers are in a position to research out the more attractive and sound offers. Characteristics of these products vary however they normally involve “tying up” savings for between 3 to 5 years, offer 100% protection of your capital while your overall return is linked to stockmarket growth.

Recently, the Spectrum IFA Group managed to negotiate exclusive terms with one provider that guaranteed an 8.15% return after one year (a cash deposit) on half of the invested amount, with the other half remaining invested for a further four years.

The return on the second half of the investment is dependent upon market performance, subject to a minimum return of 5%; a very popular plan and it is expected that a similar offer will be available soon.

We were also involved in the creation of a Protected fund from CitiBank and BlackRock which offers 80% capital protection, with a profit lock-in feature. This gives the investor exposure to equity growth with some downside protection. This is a daily-traded fund and so does not have any lock-in period.

Other capital protected plans that offer good value include a product from Barclays Bank which offers a 5-year plan with 100% capital protection and a potential return of 55%, depending on the averaged performance of the FTSE 100 Index. Investors who would like to benefit from positive stockmarket performance, but who are not comfortable with the risk of loss, may be attracted to this sort of plan.

There are also so-called “Kick-Out” Plans which offer a guaranteed rate of return, without the need for a rise in markets. For example, one investment grows at 9.5% per annum, with the return paid out as long as markets are at or above the same level as the starting point at any given six-month point, from and including the end of month 12. The plan “kicks-out” if at one six-monthly point (after year one) the index is at or is higher than its starting point.

It must be noted here that capital is at risk if markets fall by more than 50% at maturity and because of this we would highly recommend that investors take professional advice from a qualified adviser before investing in capital protected plans. What is crucial is who is providing the guarantee; the strength and regulation of the bank or counterparty must be analysed.

The golden rule about investing! It is rarely advisable to “put all of your eggs in one basket” by choosing juts one option. You should try to split your capital between your preferred options and sit them together in a well-diversified, tax-efficient portfolio.

Review regularly!
Once investments are in place it is important to keep track of them, reviewing at least twice a year.