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The Beckham Law 2019

By Chris Burke
This article is published on: 8th March 2019

08.03.19

*UPDATED 1st January 2020

Also originally known as ‘The Special Displaced Workers Regime’, The Beckham Law has been in place since it was passed by Spanish Tax decree in 2005. The Law has undergone two reforms/changes since its inception (2010 and 2015) and was originally open to all foreign workers living in Spain adhering to certain conditions.

Why was it brought in?
In essence, it was designed to attract brains, talent and wealth from all over the world, encouraging high earners to become Tax Resident in Spain (spending more than 183 days a year living there) and thus pay 24% income tax (IRPF), as opposed to rising up to 43% (or higher in certain circumstances). It was given its name by one of the first high profile sports people to use it, David Beckham, when he signed for Real Madrid.

Who can take advantage of it?
The main criteria to be eligible for the Beckham Rule are:

  • You must not have been a Spanish resident in the last 10 years when applying
  • You must be employed by a Spanish company, or a non Spanish company but with a permanent office here in Spain (You can be a director of a company but hold no more than 25% of the shares)
  • The rule can be used for the remaining Tax year you start in, and the following five
  • The application MUST be made within 6 months of starting your employment in Spain
  • You have to be resident in Spain and also have at least 85% of your work interests there

Reforms/Changes
The Law became infamous and a perfect fit for Spanish football clubs to buy some of the best well known footballers in the world, since the player’s tax would be much lower than in other countries. However, in 2010 the law was changed to address this popularity with high earning footballers, and a rule was brought in to limit the annual earnings applicable to €600,000, three years after David Beckham had left Spain.

Then, in 2015 they went one step further and completely excluded professional athletes from applying for this. However, those already on a contract were not affected. They also removed the limit of €600,000, but any income over that level is now taxed at 45%. Note that any capital gains would adhere to the current rules of 19%, 21% and 23% respectively (not applicable for the first €6,000).

Other Major Benefits
Critically, one of the major benefits of this rule is that under it, you do not pay taxes on any gains outside of Spain. So if you sell an asset with a taxable gain, such as a business or property in another country, you could make a considerable saving.

Moving on from this and to a more regular scenario, you would not pay tax on any property rental income, bank account interest, investments or savings in another country.

You would also not be required to submit certain other annual reports such as the ‘Modelo 720 Overseas Assets declaration’ during this period of time.

Why you might not want to apply for the Beckham Rule
There is no minimum annual earnings to apply, however you do not receive any personal income allowances, thus a general rule of thumb is that earning over €60,000 might make it worthwhile for you to apply.

The other reason you might not want to apply is that if the country you are from has a less favourable tax rate, then paying capital gains tax in Spain could be better.

If you have any questions regarding this, or would like to discuss applying for it or your personal situation, please contact us through the form below:
Source GM Tax Consultancy, Barcelona

Savings Bank Account Comparison in Spain

By Chris Burke
This article is published on: 5th March 2019

05.03.19

The most efficient way of losing money is to keep it in a current account. Many years ago offset mortgages were introduced, which were a great way of saving interest being paid on your mortgage. Effectively, any interest on savings you had in an account that was linked to your mortgage account, reduced the mortgage payments by that amount, more or less (most simplified explanation). So, if you had a mortgage of €250,000 and savings on a linked account of €50,000, each month it’s almost as if the mortgage was only €200,000 and you would only pay interest on that amount.

To understand why current accounts are the main way to lose money, let’s suppose,for example, you have €50,000 sitting in a current account for a rainy day. Inflation has been running at around 3% lately (that’s the increase in the regular items we buy). Therefore, just for your money to KEEP UP with that, it needs to grow by €1,500 per year. Over a period of 4 years that’s €6,000.

Therefore, it is very important that you have this money working for you, especially after the hard work it took you to earn it, both to keep up with inflation so it keeps its purchasing power and to grow to build your wealth.

The very least you should do is have the money in a savings account, or similar. So what are the current bank savings rates in Spain? Well, they will guarantee to lose you money every year, but they are better than having money sitting in your current account:

  • 1.5% ING – interest rate per annum, deposit term 1 month
  • 0.5% WeZink (Banco Popular) – interest rate per annum, paid given monthly
  • 0.3% BNP Paribas – interest paid quarterly

Another way of keeping your money safe and perhaps earning a larger return if you are lucky, in sterling, is having UK Government backed Premium Bonds (annual prize fund interest rate of 1.4%). Did you know that you don’t need to be British OR live in the UK to have these?

If you would like to explore other options, then feel free to get in touch and we can discuss what will work for you AND your money, giving you flexibility along the way. Knowledge and advice will help you plan your finances.

Does Qrops or transferring your UK Pension overseas work?

By Chris Burke
This article is published on: 4th March 2019

Those people who have a UK private or company pension and are resident outside of the UK, more often than not have the choice to transfer their pension to a QROPS (Qualifying Recognised Overseas Pension Scheme), that is the process of moving your pension outside of the UK. However, what are the important points to note with this, how does it differ from having your pension in the UK and most importantly, does it actually work effectively?

For just over 10 years you have been able to move your pension outside of the UK. Over that time, I have seen mixed success at doing this, with the companies providing this service changing, fees in essence reducing and the options of managing this growing. What has also changed is the benefit of doing this, alongside the advice you receive. Unfortunately, I have come across many cases where this has not worked well, and the reasons are nearly all the same: bad advice was given by the financial adviser who put their clients is funds/pensions that were overpriced and expensive.

To summarise, the current key potential benefits of Qrops would be the first step to seeing if this could be the right choice for you:

  • Pension potentially outside of future UK law changes
  • Brexit and the impact it would have on being a British person living in Spain
  • Potentially side stepping an expected 25% tax charge for moving pensions after Brexit
  • Currency fluctuation (ability to change your pension to euros when convenient)
  • Portability – the ability to move your pension in the future if needed
  • Potentially reduced tax liability
  • Inheritance – potential reduction of tax to beneficiaries or potentially lower tax on death (depending on your country of residence)
  • Peace of mind
  • Closer personal management of your pension
  • Tax efficient (working alongside a local tax adviser) potentially

And what are the key points that might mean Qrops is not right for you:

  • Returning to live permanently in the UK in the next five years (or maybe longer)
  • Pensions total value under £60,000 (the charges would be, in my opinion, punitive)
  • A company scheme where the benefits outweigh transferring
  • In the near future, wanting to take most of the money from your pension
  • Not having your pension in a Qrops managed well and expensively

From the perspective of access to your money, there is currently not much difference to having a personal pension in the UK or a Qrops. With the rule changes a few years back, you can, in essence, get access to your UK pension from age 55 in the UK and as much as you like, just as in Qrops.

Where Qrops really can help is moving an asset away from the UK and any potential rule changes, which have been regular over the recent years (mainly worse for the person owning a private pension). Couple that with Brexit and a potential 25% tax charge, then having your pension outside the UK will give you peace of mind in knowing exactly what the pensions rules would be for you moving forward. Also, given the fact that if you did ever move back to the UK (statistics show that for a British couple, there is a 75% chance one of you will go back at some point), you can transfer it back with you (there could also be tax benefits of doing this) and with some pension companies no charge.

However, perhaps the most important question is, does it work? The simple answer is yes it can, BUT it has to be set up the right way, with the right company and if you are given the right advice for what your pension is invested in. Basically, it needs to be done for your benefit, not so that the adviser can earn as much commission as possible from your pension.

Whenever I take a new client on, I always ask them if they would like to speak to an existing client to see what their experiences were, which is what I would do when performing my own due diligence.

If you would like to talk through any pensions you have and what your options are, feel free to get in touch and know that you will be given good advice, whether you become a client or not.

G transferred her pension 4 years ago; it has grown significantly over that time. “Chris has always been consultative and there when we need him.”

J transferred his pension 6 years ago. “It has grown well over that time. Whenever I have needed money from my pension Chris has arranged this for me. I would recommend him for sure.”

C transferred her pension 5 years ago. “It has grown steadily in that time (I am a cautious investor) and since then my husband and I have asked Chris to help us with our other investments.”

Récapitulatif sur le MODELO 720

By Cedric Privat
This article is published on: 25th January 2019

25.01.19

Qu’est-ce que le Modèle 720 ?
En 2013, le gouvernement espagnol décide de s’attaquer à la fraude fiscale. Il met alors en place un certain nombre de mesures.

Visant en priorité les nationaux espagnols, cette réforme affecte également les étrangers vivant et/ou travaillant en Espagne disposant d’un patrimoine en dehors de la péninsule Ibérique.

Le Modèle 720 est une déclaration informative mais obligatoire sur les biens et avoirs à l’étranger.

L’objectif de cette démarche est de disposer d’informations sur:
– les comptes bancaires situés à l’étranger
– les titres, droits, assurances-vie et placements gérés ou acquis à l’étranger
– les biens immobiliers et les droits sur les biens immobiliers à l’étranger
Ce formulaire dûment rempli doit être présenté entre le 1er janvier et le 31 mars, uniquement par internet (via le site “Agencia Tributaria – Modelo 720 Declaración Informativa. Declaratión sobre bienes y derechos situados en el extranjero”).

Qui doit présenter le Modèle 720 ?
Toute personne physique ou morale résidant sur le territoire espagnol (plus de 183 jours par an), et uniquement si la somme de ses actifs est supérieure à la somme totale de 50 000€ dans une ou plusieurs des trois catégories.

Les années suivantes, il n’est demandé de représenter le Modelo 720 qu’en cas d’augmentation de plus de 20 000€ par rapport au capital initialement déclaré.

Quels sont les risques en cas de non-présentation?
Même si cette déclaration n’a pour but que d’informer, le gouvernement espagnol menace d’appliquer de lourdes sanctions en cas de non respect de cette mesure.
– 5 000€ pour toute information incomplète, erronée ou fausse, avec un minimum de 10 000€ d’amende par déclaration.
– 100€ par information, avec un minimum de 1500€, si la déclaration a été déposée au delà de la date limite.
– Si l’Hacienda se rend compte de l’absence de déclaration, les sanctions annoncées sont extrêmes (par exemple, 150 % de la valeur du bien, plus-values sur tout patrimoine non justifié)

De nombreuses plaintes ont été déposées afin de contester ces sanctions excessives et injustes, la commission européenne serait également en contact avec les autorités espagnoles sur ce sujet.

Néanmoins, il vous est fortement conseillé d’effectuer cette déclaration afin d’éviter tout problème avec Hacienda.

Plusieurs conseillers fiscaux francophones à Barcelone, dont je me propose de vous fournir les coordonnées, peuvent vous apporter leur aide pour remplir ce formulaire.

Je reste à votre entière disposition pour vous fournir tous renseignements complémentaires.

BREXIT and our right to remain in Spain

By Barry Davys
This article is published on: 29th November 2018

29.11.18

Brexit and our Right to Remain in Spain

There is much work still being carried out by both teams in the Brexit negotiations, despite the Withdrawal Agreement. However, until all issues have been agreed upon, including the Northern Ireland border issue, fish and Gibraltar, and the UK Parliament has approved the agreement, nothing is certain about the Brexit.

For those of us living in Spain, there is something we can do now which provides some protection. We have been recommended to do this by the British Embassy in Spain. The action we can take now is to register for “Permanent Residency”.

Without having to give up our British passport or take Spanish citizenship, we can apply for permanent residence if we have lived here for more than five years. This gives us the same rights as a Spanish person to reside in Spain. Making this application whilst Britain is still part of the EU will be easier than when Britain is not part of the EU.

If you already have a residency card, please check to see whether it contains the word “Permanente”. If it does, you have already completed this process. If you have a card that does not include this word, you should complete this process.

I am applying for permanent residency as I write this article and it is not (famous last words) onerous. Other people who have completed it have found the same. There are good notes, including information on what is required to make the application, at this web address. There are two forms that are required: one is the application form and the other is the payment of the fee form. Supporting documentation is also required; this is listed in the notes on the website above.

The completed forms are submitted at your police station that deals with “extranjeros”. There are several in Barcelona, but in the Costa Brava, Girona is the place to go. Some advice suggests that the payment form should be first taken to the police station and then to the bank. Others suggest payment first (an online option is available) and then taking proof of payment with your application to the police station.

The application form is the Modelo EX-18 here and the payment form is the Modelo 790.

Confirmation of our residency status is essential for our tax situation too. I therefore recommend that if you can, you apply for permanent residency. Please feel welcome to Whatsapp me if you wish to discuss your situation at +34 645 257 525 or email barry.davys@spectrum-ifa.com

     

     

     

     

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    UK Investments & ISAs – Tax Treatment in Spain

    By Chris Burke
    This article is published on: 16th April 2018

    16.04.18

    With automatic exchange of financial information between most countries now standard practice, most of us already recognise the importance of declaring our assets properly and fully. In the UK, if your accountant or tax adviser declares your assets incorrectly, they are liable; however, that is NOT the case in Spain. I have been contacted by many people with various stories of how their accountants in Spain have reported assets. Sometimes it feels like people are speaking to numerous accountants until they find the one with the answer they want – if the declaration is incorrect though, and leads to an investigation, you are personally liable. Therefore, it is essential to have your assets reported correctly.

    It is quite straightforward to understand the Spanish tax treatment of your UK assets. If they are NOT Spanish compliant – that is to say, not EU based and regulated AND the company holding these assets doesn’t have a fiscal representative and authorisation in Spain – then income and investment growth are taxable annually. Note that investment growth on assets such as shares, ISAs and premium bonds is taxable regardless of whether you have taken any income or withdrawals.

    Below you will see the main list of investments that need to be declared and the tax rates that apply annually:

    Type of Assets/Investment Tax Payable Type of Tax
    Investment funds/stocks/shares Yes, on growth Capital Gains Tax (19-23%)
    ISAs Yes, on growth Capital Gains Tax (19-23%)
    Premium Bonds Yes, on gain/win Income Tax (19-45%)
    Interest from Banks Yes, on growth Capital Gains Tax (19-23%)
    Rental Income Yes Income Tax (19-45%)
    Pension Income Yes Income Tax (19-45%)

    Expenses may be able to offset some of the tax on gains, and for long term property rentals you can receive up to 60% discount on net rental income. However, tax reliefs and allowances that applied in the UK are not available to you in Spain.

    There are ways of reducing these taxes, by having your finances organised correctly, and in many cases there is also scope to defer tax. This means there is no tax to pay if you are not taking an income or withdrawals from your investment. In fact, the more your money grows, the greater the potential tax saving.

    The first thing you should do, and any financial adviser or tax adviser should do, is consider ways of mitigating your tax, both now and in the future. Otherwise you could end up with a ‘leaking bucket’. Many accountants are starting to increase charges for declaring UK assets, which need to be listed individually and where there is often lack of familiarity with the assets held. By the time you have paid the tax for NOT drawing your money, paid your accountant and lost any tax relief that applied in the UK, in most cases there are more cost effective, tax efficient, Spanish compliant options available. Furthermore, for those returning to the UK, there is still generous tax relief which applies to certain Spanish compliant investments.

    For an initial discussion regarding your finances and practical guidance on planning opportunities, please get in touch – my advice and recommendations are provided free of charge without obligation – chris.burke@spectrum-ifa.com

    Tax and Savings in Spain

    By Barry Davys
    This article is published on: 28th March 2018

    28.03.18

    This is an introduction to the differences between the UK and Spanish tax systems and an introduction to a European ISA equivalent. It has been produced to help answer two regularly asked questions. : “What is the difference in taxation between Spain and in the UK?” – followed by “Is there a tax free savings account in Spain similar to an ISA?”.

    For those of you not from the UK, I hope that the Spanish part of the table below will still be useful in allowing you to compare it with your home country tax situation.

    Tax UK Spain
    Tax Year Dates  6th April – 5th April  1st January – 31st December
    Income Tax Allowance  £11,500 €9250 up to age 64
    €10,400 age 65+
    €11,800 age 75+
    Capital Gains Tax Allowance £11,300  N/A but some gains can be offset against some losses
    Savings Tax Rates (interest and capital gains)  N/A
    Income Tax and CGT calculated separately
    19% to €6,000, then 21% for the next €44,000 and 23% above €50,000
    Tax Free Interest  £1,000  Nil
    Tax Free Dividends  £5,000
    Falling to £2,000 in 2018/19
    Nil
    Annual ISA Allowance  £20,000  Unlimited
    (see Euro ISA below)
    Pension Contributions Limits  100% of your earnings
    up to £40,000 pa
     €8,000 pa
    Inheritance Tax  Above £325,000 at 40% plus possible allowance against main residence of £125,000 in 2018/19 Autonomous community rules.

    Catalonia and Madrid have large discounts for immediate family

    Wealth Tax Limit  N/A at present  Autonomous community rules. Catalonia: over €500,000 with a €300,000 allowance for main residence, rates from 0.21% to 2.75%

    The main differences are in Wealth Tax, Inheritance Tax and the way savings are taxed.

    Wealth Tax in Spain

    In the UK there is not currently any Wealth Tax. There is in Spain and the rates and method of calculation are set by the autonomous communities. In Catalunya the rate is banded, starting at 0.21% and rising to 2.75%.

    Inheritance Tax in Spain

    In the UK, the estate of the deceased person is taxed as a whole, whilst in Spain, the person receiving the bequest is taxed based just on the amount they personally receive from the estate. The allowances and method of taxation also differ. The rates of inheritance tax in Barcelona and the Costa Brava are the same but will be very different if you live in Andalucia. For more information, please see Inheritance Tax in Catalunya as an example.

    However, if you prefer to speak with an experienced adviser who lives in Catalunya please click ‘Inheritance tax help

    Tax Free Savings in Spain

    In the UK, since January 1987 with the introduction of Personal Equity Plans (PEPS), we have been used to having tax free savings. Peps are now called ISAs and the allowance is now £20,000 per annum. If you live in Spain and have an ISA please note it is taxable in Spain. The fact that it is tax free in the UK does not transfer to Spain and you should look at the alternative below.

    Spain does not have an ISA system as such but there is a similar investment, sometimes known as the “European ISA”. It is tax free whilst invested and has a very beneficial low taxation basis, especially if you require income from your investment. It is a little more restrictive than the UK ISA but is still worthwhile.

    The two big advantages are that there is no limit and it is portable to other countries. If you would like to invest 10,000,000 euros in one year in the “European ISA” you can do! Unlike a UK ISA, the European ISA can go with you if you move country (not to all countries). If you return to the UK, the tax will be proportional to the amount of time you have been in the UK against the time you have had the European ISA. So if you have a Euro ISA for 10 years in total and have moved back to the UK for the last two years of the 10 years, the tax will be reduced. Specifically, the tax will be calculated and multiplied by 2/10ths. An 80% tax saving!

    *Sources: https://www.gov.uk/government/organisations/hm-revenue-customs
    http://www.agenciatributaria.es/

    If you would like more information on Inheritance Tax, Wealth Tax or the European ISA, please contact me on barry.davys@spectrum-ifa.com or telephone on +34 645 257 525. If you have UK ISAs, I will also be happy to advise you on how to make these tax efficient in Spain.

       

       

       

       

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      Tax relief on Spanish charity donations

      By Chris Burke
      This article is published on: 19th March 2018

      19.03.18

      When you pay Spanish income tax while residing in Spain, you can qualify for tax relief on any charity donations that you make (to certain types of charities such as foundations or NGO’s, i.e. non profit making organisations.

      The tax relief you can receive here in Spain, whether you are employed, self employed or have a Spanish S.L. (company) are as follows:

      For individuals & self employed (autonomo)

      Amount paid in charity donation,
      up to per year
      Percentage deduction (%)
      150euro 75%
      Amount paid above 150euro 30% (or 35*)

       

      * If the amount paid in each of the two previous years is the same or more than the amount paid the previous year of each of these two years, the percentage increases to 35%.

      The amount deductable cannot exceed 10% of the taxable income of the year.

      For companies

      Tax relief is 35% unless the amount paid in each the two previous years is equal or more than the amount paid the previous year of each of these two years, in which case the percentage increases to 40%.

      The amount deductable in a year cannot exceed 10% of the taxable income of that year. If it does, you can apply the excess during the 10 following years.

      In each of the above cases, the deduction is taken from the amount of tax to be paid.

      People are much more responsive to charitable pleas that feature a single, identifiable beneficiary than they are to statistical information about the scale of the problem being faced. In essence, we are ruled by our hearts, not our heads when donating and showing the proven effectiveness of the charity can actually have the opposite effect to that intended. Take the time to research your chosen charity to make sure your money is going to be doing what you want it to do.

      Although many people would like to leave a gift to charity in their will, they often forget about it when they write their will. Research has shown that if the will-writer just asks someone if they would like to donate, the rate of donation roughly doubles. Remember to make a list of any charities you would like to contribute to, before you sit down to write your will.

      Giving to charity is contagious, seeing others give makes an individual more likely to give themselves and gentle encouragement from a prominent person in your life can make also make a big difference to your donation decisions. Most people support charities in one way or another, but often struggle to make donations as often as they think they should or would like to.

      If you would like to donate to charity more but it slips to the back of your mind, create a habit. For example, every time you receive a bonus or every time you get paid you could make a donation, or if it is the birthday of someone close to you, send them a birthday wish and give a little to charity. Spending money on others actually makes us happier than spending it on ourselves!

      Source GM Tax consultancy, Barcelona.

      Pension Healthcheck – Tips and Advice for 2018

      By Chris Burke
      This article is published on: 2nd March 2018

      Whether you are thinking about the amount of pension you want in the future or are approaching retirement, a pension health check might be the answer you are looking for. With the UK government bringing in autoenrolment (the process by where companies who employ at least 1 person have to make sure they save into a pension) which has been massively successful, it is clear that as the years go by and with people living longer, it is more important than ever to save for the future. A pension healthcheck is your chance to ask general questions, be proactive and start planning for your retirement. Every year that you don’t start a pension, the amount of money that you will require becomes a lot more expensive for you to achieve, due to the effects of compound growth.

      The UK population is projected to continue growing, reaching over 74 million by 2039. It is also getting older with 18% aged 65 and over and 2.4% aged 85 and over. In 2016 there were 285 people aged 65 and over for every 1,000 people aged 16 to 64 years (“traditional working age”). Years ago, people generally retired at 55 and perhaps lived until 66/67 meaning 12 years of retirement income. Now, retirement starts at 60/65 and the average life expectancy is Europe is around 85. So mathematically, you can see the issue, which is why 89% of final salary pension schemes in the UK are financially in trouble: their calculations were not initiated on this model of retirement and life expectancy.

      Are pensions the answer?
      This is debatable for many circumstances, particularly in Spain where you do not receive tax relief on large pension contributions. Many years ago it was different, when you could put tens of thousands of pounds into a pension and receive tax relief, or a company paid into it for you. However, in today’s world most people don’t fall under this scenario.

      What IS the answer to retirement planning?
      Make sure any assets you own work for you, including rental properties, investments, inheritances or money saved regularly. Yes, you can receive tax relief on money you save into a pension purse, however, this money is usually blocked (except in the case of critical illness or disability) until you are allowed to have it and has to always act like a pension, i.e. less flexibility and adhering to pension rules.
      Therefore when thinking about retirement you should focus on the following tips to truly give you flexibility, confidence in your retirement and peace of mind:

      Maximise Property Assets
      If you own property, is it earning you the real value of your money invested in it? For example, a property investor today would usually want to receive a 7% return on their investment to make it worth their while:

      Annual rent of property: €15,000 pa
      Property Value:€300,000
      Annual yield:annual rental, divided by property price, x 100 = 5%.

      This may or may not take into account any expenses on the property you have. Are you also paying an agency to look after your property? Here are some areas to work on:
      Is the rent high enough given the amount of money invested?

      Can you reduce the costs of running the property, i.e. maintenance/agency fees? If they have been managing it for a while and there isn’t too much for them to do, ask them to ‘sharpen’ their pencil. More often than not they will, as they won’t want to lose the regular income you provide them.

      Investments/stocks/shares/funds
      How are these performing? Dividend paying shares (that is those with the payments /bonuses given to you, reinvested) historically are one of the best performing investments (including property).
      Are they outperforming the markets, or being managed less erratically? That means not going down as sharply as the markets do and giving a less volatile return, which in turn gives you security of capital invested

      The key areas to note here are:

      • Performance
      • Fees
      • Trust in advice given

      Pensions
      Are you currently saving into a pension and if not, what are you doing instead (as I said above it doesn’t have to be a specific pension purse). Have you accumulated more than one pension, if so what are they all doing, how are they being looked after and where might you be when you retire?

      Key points to find out:

      • Details/values/contact details of any pensions you have
      • What are they invested in and how are they performing?
      • What are your options?

      When you have gathered all the necessary information (or the advisor can gather this for you with your authority), you can then sit down with a professional and talk through your options and what journey your life might take. You can also look at maximising your National Insurance contributions (a mathematical no brainer in many people’s circumstances, even if you live outside the UK) and planning what you can do to make sure moving forward you are maximising your assets and turning them into a comfortable retirement.

      €200,000, achieving a 6% net return over a 27 year period would achieve 1 million Euros…….with good advice, planning and consistent reviews.

      The EU – a Financial success or not?

      By Chris Burke
      This article is published on: 31st October 2017

      31.10.17
      Chris Burke | Spectrum IFA Barcelona

      What better subject to discuss, than one closest to the heart of someone living and studying in Europe.

      Geneva Business School (GBS) in Barcelona, is a leading Business School providing cutting edge, innovative, Swiss quality education on a global scale. Part of their curriculum is to invite guest speakers along to hold a forum/debate on a topical subject, to enhance their knowledge, practice what they are learning and increase their debating skills.

      So, where better to format the debate on discussing what the original reasons were for the EU being formed. Easy I hear you say. Ok, well we started discussing putting all the countries together and how that could make them stronger under one currency, against other economies. It was soon apparent that although this seems a sensible idea, did this work for everyone? Greece was debated as already being financially in trouble before it joined the EU, and has continued down that path, but why? When we looked at the Government debt of each country before joining the EU and present day, it’s clear many of the country’s debt has doubled; The UK, Greece, Italy, France to name but a few, but why haven’t others? No one was surprised Germany’s hadn’t, but why hadn’t it? We discussed Germany’s manufacturing capability compared to the other countries; this could well be a valid reason. There was mention of ‘black’ money still prevalent in certain countries, mainly Italy and Greece where in some places you still couldn’t pay by card, only cash. It was well known a few years back the Greek underground had been losing money hand over fist due to passengers not paying. Was there a cultural issue here that was denying the government, in those countries, of more revenue from tax?

      Freedom of movement was on everyone’s lips as another good reason for the EU being born. Freedom to move elsewhere, find work, perhaps a new life, career. It was quickly pointed out this didn’t work for everyone, an Italian farmer (highlighted by an Italian student) would not agree this had worked well for him. Of course, you cannot please everyone and there are countries in the EU whose farmers receive subsidies to help.

      Access to the common market, so trading made easier for countries in the EU, cheaper and more direct for them to sell within. This making them potentially more competitive than those outside it. This was a strong reason for the EU to be formed.

      So there was one more, major reason, that after we discussed what it was, agreed that perhaps this could be the biggest reason for the EU being formed, but is hardly ever brought up. We discussed that during the Brexit negotiations this was hardly ever mentioned as a reason to remain, if it was its press headlines were minimal. When you are part of a team, whether it be a sports team or any other, you have a common reason/goal to make it work. You may have disagreements, but because you all want the same outcome, which benefits you all, you work hard to find a solution. Differences can be put aside, or debated, and there may be a skirmish occasionally but in general, conflict is usually avoided or at least minimal. Stopping wars and keeping the peace was one of the founding reasons for forming the EU, yet it hardly ever gets the status it should deserve.

      So, taking all this into account, did we think the EU has been a financial success? Certainly not to everyone, but if you were a consultant brought in to investigate and make a decision, the debaters at Geneva Business School voted marginally it had. Wars cost money, however they can also generate it……

      Other key questions asked were:

      Where are we economically in the world?
      We are in the second longest Bull Run in the history of the stock markets, we certainly aren’t on the bottom run of the ladder in terms of its upward curve, probably not in the middle, how long there is to go is anyone’s guess, but we are probably in the final third.

      Government debt are at the highest rates ever, can it be repaid?
      No. Even if we had ten more fantastic years on the stock markets, which is highly unlikely, it’s my belief it’s almost impossible to repay these. Looking at debt clocks is frightening and best not to be done!

      Bitcoin, good investment or not?

      The jury is still out on this, it continues to provide itself as an investment choice. Will it last? Do the bank’s want it to last? Will it be here tomorrow? For the high risk takers it’s a choice, for everyone else it’s too early to tell.

      Property, a good investment in Barcelona?
      Simply, if you are intending on holding it for a decade or so, and being able to fix the mortgage interest rate for life, it’s hard to advise against it. For anything less, you wouldn’t want all your investments in one asset class.

      So, our final thoughts were, on Maslow’s Conscious Competence Model, where did we rate the EU? And the overwhelming answer was:

      Conscious Incompetent – that is to say, the EU knows it isn’t working, and is arguably trying to fix it although isn’t sure how. But how much we wonder…….