UK Pension Reforms
By Spectrum IFA
This article is published on: 30th March 2015
With just a few days to go until the ‘over 55s’ can flexibly access their UK defined contribution pension pots, the explosion of information already available via the internet looks to me as if this is in danger of turning into ‘information overload’.
Now of course, this is just my opinion – and please don’t misunderstand my feelings about this – because I am in total favour of people having free access to accurate information, providing that it is understandable and definitely not misleading. However, my concern comes from the volume of information that is being made available, almost in an attempt to condense the multiple choices that people will have into a sort of ‘Dummy’s Guide to Flexibility & Choice in Pensions’.
In February, “Pension Wise” was launched and this is the “free and impartial government service that helps you understand your new pension options”, that the government promised us. My first impression from the opening page of the website was favourable – a good clear design with a simple list of six steps to help us understand how to turn our pension pots into income for our retirement.
The first step seemed simple enough – “check the value of your pension pot” – nothing contentious there. It told me that I could combine multiple pension pots into one, by transferring my pension and so I clicked on that link. Whoops, now I’m out of the Pension Wise website and I’m in the Gov.UK website, which provides me with links to such things as “deferred annuity contract”, “unauthorised payment” and “fixed or enhanced protection”. Already confused? OK fine, so let me get back to Pension Wise …..
Step number 2 is all about understanding what we can do with our pension pots. Good, I thought, until I clicked through to the page and this was the first taste of ‘information overload.
There were lots of links to things that are pretty important and these took me through to “Gov.UK”,” FSCS” and the “FCA” and actually out of the Pension Wise website. There was also a link to the Money Advisory Service, so that I could compare annuities, but it didn’t like my French postcode, so that was a dead end. Being curious though, I entered my old UK postcode and proceeded through the 6-page questionnaire, including having to answer detailed lifestyle and health questions, only to find at the end that it could not retrieve my quotes!
In fact, every one of the six step pages had links that took me into other websites and for me, that’s where Pension Wise failed. In what is clearly a brave effort to try to provide comprehensive guidance (which amazingly, even includes how to calculate the UK income tax on the retirement income), I think this has the potential for disaster. There is simply too much and by the time you get through one lot of information, you have forgotten how you got there and on which part of the website you found other information that might be useful.
According to its website, “Pension Wise won’t recommend any products or tell you what to do with your money”. Hmm, I wonder what the annuity quotes would have looked like, but there again, these would have been through the Money Advisory Service and so I guess that’s how Pension Wise gets around that one!
They also say …. “We explain how to avoid pension scams and the importance of taking your time to make sure your money lasts as long as you do”. Good, I’m all for these things, but do they really mean what they say and don’t they see any risk that people might just outlive their flexibly accessed pension pot?
Even more alarming, is some of the information being produced by other companies. For example, one company writes in its literature on defined contribution pensions after April 2015: “….. You will be able to take out as much as what’s there as you want, when you want. So it’s going to feel a bit like a bank account ….” Another company writes: “…… There will no longer be an annual limit on how much you can draw and you will be able to use your pension fund like a bank account”…….
OK, maybe I’m taking these comments out of context but nevertheless, bank accounts are short-term financial products and pensions are long-term and it’s dangerous to mix the purpose of the two.
Guidance is not a substitute for professional advice and when people are faced with such a range of choices, advice is needed more now than ever.
For anyone living outside of the UK, potentially the risks of making a ‘misinformed’ choice are increased. Even if you could find a UK adviser who would be prepared to provide advice to someone who is not resident in the UK, a UK adviser is highly unlikely to have the knowledge of local tax rules in the jurisdiction where you live. In France, it is not just income tax that we have to think about, there is also wealth tax and inheritance tax, both of which might become an issue if the pension pot is cashed-in and the monies are sitting in your bank account. Therefore, it is essential to obtain advice from an appropriately qualified adviser in the country where you live.
Pensions is one of the major subjects that we are covering in our client seminars this year. We are already taking bookings for Le Tour de Finance 2015 and more information can be found on our website at https://spectrum-ifa.com/seminars/. This is a perfect opportunity to come along and meet industry experts on a broad range of financial matters that are of interest to expatriates. The local events are taking place at:
- Perpignan – 19th May
- Bize-Minervois – 20th May
- Montagnac – 21st May
Le Tour de Finance is an increasingly popular event and early booking is recommended. So if you would like to attend one of these events, please contact me to reserve your places.
Whether or not you are able to come to one of our events, if you would like to have a confidential discussion about pensions, investments and/or inheritance planning, using tax-efficient solutions, please contact me using the form below.
Le Tour de Finance 2015
By Spectrum IFA
This article is published on: 26th March 2015
After a very successful string of events during 2014, Le Tour de Finance is back and has started its spring series.
The events in 2014 were a huge success, with large numbers attending all the events with fact filled sessions followed by an opportunity for an informal questions and answers session over complimentary refreshments and a buffet. The initial events in 2015 have been even better! The first events have been held in truly spectacular surroundings in Les caves, de la Maison Ackerman, near Saumur, the Château Colbert in Maulevrier, Pays de la Loire.and at the Chateau de Javarzay, Chef Boutonne, Deux Sevres
[nggallery id=36]
The relaxed and open forums are a chance to expand your knowledge of personal finance as an expat resident in France. The panel of speakers are experts in their respective fields and are on-hand to answer questions you may have about protecting and strengthening your personal financial situation while a resident in France.
The spring events are continuing throughout April in Spain and Italy:
Spain:
- Barcelona – 14th April
- Sitges – 15th April
- Denia – 16th April
Italy:
- Castiglione del Lago – 20th April
- San Gineso – 21st April
The Spectrum IFA Group is an European leader in professional personal financial advice and will be covering subjects such as; QROPS, pensions, tax advice, investments and wealth management, healthcare, and mortgages.
Le Tour de Finance is an excellent and relaxed forum in which you can get those important questions answered, plus mingle in a pleasant and relaxed atmosphere with other expat residents whilst enjoying a buffet lunch.
All of Le Tour de Finance events are very popular so we therefore recommend you to book well in advance using the form below:
Error: Contact form not found.
Living in France with assets in Sterling
By Spectrum IFA
This article is published on: 19th March 2015
Last month I ended my article with the following paragraph: Clients who have Sterling assets do not need to convert them to Euro to make use of the products available to them outside the UK. Those clients who have transferred their assets in Sterling are most probably quite pleased that they did not convert, but what about now? What if we hit 1.40, or 1.45? For my money the only way is down from there, back to my preferred levels. If we do get to 1.40, I will certainly be looking long and hard at my Sterling funds, with my finger hovering over the deal button.
Well, it did indeed happen, and as I write this sterling is worth over 1.40 Euro. Did my finger hover over the ‘deal’ button? Yes it did. Did I press that button? No I didn’t. I need to make two things perfectly clear here. Firstly, what I’m about to type must not be regarded as advice. I’m just telling you what thought process I went through. Secondly, we’re not talking mega bucks (or pounds) here, certainly not for the meagre amount that is lurking in our one and only UK bank account anyway.
It’s quite difficult to express the reason for not changing that sterling into Euro, but I’ll give it a go, at the risk of sounding somewhat deranged. Every one of my pounds somehow feels to me to be worth more than €1.40. That is of course irrational. Anyone who thinks the true rate should be in the region of 1.25 should bite the hand off anyone who offers him 1.40 or better. Yet I didn’t want to do it; I just couldn’t bring myself to sell my shiny £1 coins in exchange for what looks like a bunch of supermarket trolley tokens. Immediate apologies to ‘le Tresorie’ at this point. I suspect that part of me is being a bit greedy looking for a Euro collapse, but would that necessarily persuade me? Potentially not. The weaker a currency becomes, the less inclined I might be to buy it. In essence, I think I’m more likely to buy Euros at 1.40 when the rate is on its way down than when it’s on the way up. I did tell you that I used to be a foreign exchange dealer; funny bunch they are.
The other hot topic at the moment is of course pensions. I know that there is a risk that you might be getting fed up of hearing this, but I am largely opposed to the ‘pension freedom’ that is just around the corner for the UK pension market. I am opposed to virtually all kinds of tax grabs, and I see this as just another example, albeit dressed up as a fabulous opportunity for the over 55’s Or maybe that opportunity is for anyone who can take advantage of the over 55’s, including conmen; salesmen, and taxmen.
For me, the writing is on the wall regarding UK based pensions. They are ‘in play’. Shedding all access restrictions is designed to provide a huge tax income boost for the UK coffers. If it doesn’t work, they will look for another way to get their hands on our savings. Even if it does work, there will come a time when more cash is needed to bale out the UK economy. Pensions will then come under more fire, and more ways will be found to raid the coffers.
I will not be a part of either process. My pension funds are safely housed away from the UK jurisdiction. They will be used as pension funds should be used; to provide an income when I retire, whenever that might be. Hopefully that won’t be any time too soon as I’m enjoying myself too much to stop, but when the time comes I won’t be relying on a UK state pension alone. That would not be an attractive proposition.
QROPS is an extremely welcome result of the European freedom of movement of capital. We should all grasp the concept and use it to ring-fence our future incomes.
Are you thinking of moving to France?
By Amanda Johnson
This article is published on: 10th March 2015
Question:
I am planning to move permanently to France but am not sure where to go for information on the differences in regulations regarding tax, inheritance and pensions between France and my current country of residence?
Answer:
Whilst there are a number of forums and websites offering opinion and suggestions regarding the differences in French taxation from where you currently live, it is worth considering the following points before you make any decisions:
What experience does the person/site/forum have in this field?
- Ensuring that the information you want is accurate, relevant to the country you will be living in and free of any personal bias and opinion, is vital in enabling you to make the right choices going forward.
Is the information you will receive regulated in the country you will be living?
- Rules and regulations in the country you are leaving will most likely be different to France. Making sure the recommendations you receive are based on what is best for you as a French resident is very important.
Has the person providing you the information personal experience of your questions?
- It is always a comfort to speak to someone who has ‘walked the walk’ and not just a casual or second hand grasp of your questions. Personal experiences can often assist people getting used to new legislations and bureaucracy.
Whether you want to register for our newsletter, attend one of our road shows, Le Tour de Finance or speak to me directly, please call or email me on the contacts below & I will be glad to help you. We do not charge for reviews, reports or recommendations we provide.
Producing income from your investments
By Peter Brooke
This article is published on: 9th March 2015
Restructure your investments before you need the money. This gives you time to ride out any difficult market years before you retire or move ashore. Crises in stock markets always affect stocks in pre-retirement worse, so protect the value of your funds in the few years running up to taking an income, but keep one eye on inflation as this will reduce the buying power of the “pot” of money you’ve built up.
Consider the total value of your retirement assets — shares, pensions, funds, investment properties, cash and bonds — as one entity. Then ask yourself, “If I had all of this as cash today, what assets would I buy to give me the income I need?” This question helps you reassess all your assets and bypass any loyalty to a certain asset type, such as property. If Dave bought an apartment nine years ago for €180,000, rented it out and paid off the mortgage, and the apartment is now worth €280,000 with rent at €1,000 per month, after management
charges, this works out as a 3.8 percent yield. Dave may do better using the money from the property elsewhere, perhaps by reinvesting in bonds.
Once the income starts, look at each asset class in terms of income stream and cash flow rather than capital appreciation. It’s important to try and grow the “pot” to beat inflation, but
the income is paramount. Yields on equities today are outstripping most government bonds; the capital may fluctuate but the income will remain. To draw an income of €3,500 per month, you need an asset pot of approximately €900,000. With €42,000 per year, a proportion of the cash can be put in longer term assets (property, equities, etc.) to help grow and replace the funds you withdraw.
Many yacht crew have a large proportion of their assets inside insurance bonds, as they offer tax-advantageous growth and income. However, some don’t offer a way to take a “natural income,” as the funds are all accumulating-type funds. The income that you draw down by cashing in fund units affects the underlying balance and needs to be rebalanced with a steady internal income stream.
The currency exchange rate
By Spectrum IFA
This article is published on: 17th February 2015
Time to revisit an old friend this week, the exchange rate. Long term sufferers of my monthly missives will possibly recall that in my dim and distant past I used to be an international banker, and for part of that time a foreign exchange dealer. It was so long ago that we used to have exotic currencies such as the French Franc; Italian Lire, and even the Deutschmark. Heady days indeed! By the time I escaped from the banking world in 2002 these currencies were dead or, perhaps more accurately, held in a cryogenic state, ready to be reheated if need be. The exchange rate between Sterling and the new super-currency, the Euro, was in the mid 1.60s in 2002, and had declined to the mid 1.50s when I finally got to France in 2003. By the time I bought property here in 2004, I averaged 1.45.
The trend was set, but few people were prepared for it. During the financial meltdown in 2007 and 2008 ‘la merde a vraiment frappé le ventilateur’, and the pound plummeted almost to parity with the Euro by the end of 2008. In 2009 I stupidly agreed to start a weekly column for an internet magazine, giving my predictions for the week to come. I struggled with this millstone for nearly three years. My basic message was that large F/X movements like this are always exaggerated. Parity was plainly nonsense, and the pound ought to recover to between 1.25 and 1.30. It takes some ingenuity to deliver this basic message 130 times, and in 2012, with the pound at 1.25, I called it a day. I still remember the sense of relief when I realised I wouldn’t have to sit down at 4pm on any more Fridays to write about why the previous week’s forecast had been so wrong.
It was a good time to stop, as the rate fell again during the second half of 2012 to 1.15 before slowly resuming its upward trend. Interested parties, and by that I mean all expats, probably didn’t take too much notice as we clawed our way back up through 1.20s and on to 1.25 once more. Then, at the start of November last year, a big market move started, and people began to sit up and take notice. Two months later, and as I write, we are at a shade under 1.35. So what is going on?
Politics and economics are of course the answers. They govern supply and demand, which is the final arbiter of the exchange rate. Germany, the powerhouse of Europe, now has a stagnating economy, and Greece, not the powerhouse of Europe, is stirring up political trouble. None of this bodes well for the Euro. So we can all sit back and relax. The pound is heading back to 1.60. Hundreds of thousands of Brits will be pouring into France waving their new cheap wads of Euro, buying up all the property in sight and sending up the values of our houses at the same time.
Does anyone really think that? I certainly don’t. There is no such thing as a safe bet in the currency markets. You must never forget Murphy’s law. Whenever you really want something to happen, Murphy’s law dictates that the opposite will occur.
I think that we are approaching the time when we need to think about selling Sterling. I don’t think we’re there yet, but we need to be careful. We live, after all, in the Euro zone, and thus most of the money we spend is Euros. We may have pensions or indeed other income in Sterling, but that won’t buy your morning croissant. Until you change it into Euro; it is largely useless while you live here. Of course there is nothing you can do about your UK State pension, if you are in receipt of that princely sum. You will just have to be savvy about when and how you convert it. You can however do a great deal with an occupational pension, and you can do a great deal with your savings and investments. There is no better time than now to take a long hard look at your UK pension pot. Savings and investments held in non-French tax efficient bonds are a nonsense. Come and talk to me about them now!
For years now The Spectrum IFA Group have been advising clients on pensions and investments and I have been keen to point out that clients who have Sterling assets do not need to convert them to Euro to make use of the products available to them outside the UK. Those clients who have transferred their assets in Sterling are most probably quite pleased that they did not convert, but what about now? What if we hit 1.40, or 1.45? For my money the only way is down from there, back to my preferred levels. If we do get to 1.40, I will certainly be looking long and hard at my Sterling funds, with my finger hovering over the deal button.
The Spectrum IFA Group Economic Forum
By Spectrum IFA
This article is published on: 2nd February 2015
We have just had our annual conference, The Spectrum Economic Forum. We had presentations from leading investment managers including BlackRock (the world’s largest investment house), J P Morgan Asset Management, Rathbones, Kames Capital, Jupiter Asset Management and Henderson Global Investors.
The conference is a great opportunity for us to hear directly from some of the investment management companies, which we recommend for the investment of our clients’ financial assets. Their collective forward-looking views on markets and key issues for 2015 provided us with a valuable insight, so that we are better able to advise our clients.
We also had presentations from several product providers, including Prudential International, Old Mutual International (formerly Skandia International), SEB Life International and Tilney Best Invest (who also provide discretionary asset management services). All companies gave interesting presentations on developments in their products, which are focused upon the needs of expatriates.
The conference is always a good opportunity to get together with colleagues from the six countries in which we operate. It’s a chance for us to exchange views and discuss issues that are common to all our clients, wherever they live.
There was agreement amongst us that one of the biggest potential ‘issues’ that the financial services industry is facing this year is the subject of pensions, as a result of the forthcoming UK pensions reform. Many Spectrum advisers expressed concern about predatory companies that are already operating, which could result in people unwisely cashing in their UK pension pots. The importance of obtaining professional advice from qualified advisers, who are regulated by the authorities in the country where the pension scheme member is living, was highlighted.
We were fortunate to have Momentum Pensions present to us, which is the first company to be able to offer a truly multi-jurisdictional pension solution for clients. Like us, Momentum has their clients’ best interests at heart and they understand that expatriates can move from one country to another. Therefore, Momentum has now added a UK Self Invested Pension Plan to their range of international pension solutions, which means that even if the client moves back to the UK, they can have a smooth transfer of the pension benefits from the overseas pension scheme back to the UK.
As can be seen from the above, we are constantly working closely with investment managers and product providers to find the best solutions for our clients, whether this is for the investment of financial capital, using tax-efficient solutions, pensions or inheritance planning. This forms an important part of our Client Charter
Planning for Le Tour de Finance 2015 is also now underway. As many people reading this know, this event is a perfect opportunity to come along and meet industry experts on financial matters that are of interest to expatriates.
We are now taking bookings for May 2015 events, please contact us here:
- Perpignan – 19th May
- Bize-Minervois – 20th May
- Montagnac – 21st May
Le Tour de Finance is an increasingly popular event and early booking is recommended. So if you would like to attend one of these events, please contact me to reserve your places.
The France Show, 23-25 January 2015
By Lorraine Chekir
This article is published on: 21st January 2015
Visit the Riviera Alliance stand (P268) at The France Show, The Olympia Exhibition Centre, 23-25 January 2015 10am-5pm
The Spectrum IFA Group is one of the founding members of the Riviera Alliance, an established network of professionals based in the south of France. Spectrum will be represented by Lorraine Chekir, one of the advisers in the Cote d’Azur region. The Riviera Alliance covers every step in the process of buying, owning, renovating, or selling real estate. Each member is a specialist in their field and will make your life in the Riviera easier.
“We are here to help you”
Looking forward to your pension
By Spectrum IFA
This article is published on: 21st January 2015
Welcome to 2015. Let’s all hope for a prosperous and, maybe optimistically, safe year to come. This is my 60th year on the planet, and the cracks are starting to show. Many thanks indeed to the many well-wishers who sent me messages of goodwill following my hip replacement in December. They were much appreciated. I am up and about again now and, whilst I may leave it a few more weeks before I resume training for the triple-jump, it is good to be able to get around freely. Bear with me, I will get to the financial stuff soon.
With the physical recovery going well, my mental state did take a knock however on an early foray back into the big wide world. Congratulating myself on being able to get around with only one crutch, I decided to take myself off to my local Bricomarché to buy some light fittings. With only one checkout open, I resigned myself to a long wait at the back of the queue. I suddenly realised that the people in front of me were moving aside, and I was being beckoned to the front by the cashier. How utterly charming and, yet, completely crushing. When I protested, I was told that this was normal treatment for ‘handicapped’ people. I was appalled. Not that a DIY chain should treat its clients this way, but at the fact that they should regard me as a ‘client in need’. It was like peering into my dotage. How many years before I will have a long grey beard, waving a walking stick, being pushed in a wheelchair?
Looking back on that day recently, it struck me that there is probably a link with my recent focus on old age and pensions. I know I’ve said before that the older you get, the more interesting pensions become, but I really think that it is true. What is worrying me now is the growing list of younger people who are getting very interested in our pensions, for all the wrong reasons. The younger crowd I’m referring to are politicians who are gleefully rubbing their hands and salivating over our pension assets. There seems to be no political argument over the new pension reforms due in April that are to sweep away all forms of prudent financial planning for old age. They’ve all got their eyes glued on the same pot.
Please allow me to get slightly technical for a moment and explain GAD to you. The initials stand for Government Actuarial Department. Actuaries are very clever people, mathematicians basically, who walk around wired into computers. One of their jobs used to be to come up with a formula that worked out how much you could draw from your personal pension per year without reducing your pension pot too quickly. In short, they were there to make sure that your pension outlived you. 100% GAD meant the maximum you could safely draw from your pension.
Then the politicians started to get interested. Wouldn’t it be a good idea if we let the old fogeys have more of their pensions to spend? That way we can boost the economy for the rest of us and we can tax them as they do it. It won’t be a problem because they’ll probably still die before the pension runs out! Let’s try 120% GAD and see how we get on? Well, OK, it helped a bit but we still need more capital spending. Let’s see how we get on with 150% GAD? The next logical step is of course about to take place in April. Forget GAD! You can have the lot. Use your pension as a bank account. Treat yourself to something special. A yacht? Ferrari? The world is your lobster.
This is, in my view, tantamount to criminal recklessness. You and I may be completely confident in our ability to run our own finances, and I trust that that is in fact the case, but who is going to protect the vulnerable amongst the older generations? Who is going to protect pensioners from double glazing salesmen; roofing contractors; cowboy builders; money grabbing children looking for early access to their supposed inheritances?
And then there are the annuities. These are financial instruments that you used to have to buy with your pension funds. These gave you a guaranteed income for life. You are no longer obliged to buy an annuity with your pension fund. I do agree with this. The fall in long term interest rates meant that annuity rates fell quite dramatically over the years, and the income you bought became less and less. I suppose then it should come as no surprise when we hear that pensioners are to be allowed to sell their annuities, and receive lump sums instead. More money to spend! More tax to pay! In twenty years’ time this could turn into a monumental national scandal, but by that time our current batch of politicians will be retired, enjoying their protected pensions.
My own personal pensions are now safely housed well away from further potential meddling. I will not be drawing out huge (I wish) sums to finance cars or cruises, and barring worldwide financial calamities there will be enough money to see me out. If I do last another 15 years, whatever is left will also go to my chosen beneficiaries without any tax deducted. Did I mention the 45% tax that will be payable in the UK?
Investments: The Unconsidered Risks
By Peter Brooke
This article is published on: 17th January 2015
Many yacht crew have made the excellent decision to invest some of their hard earned money into an investment scheme for their future financial security. There is often much discussion about investment risk, be it bonds, equities, property, commodities or alternative investments.
What is not considered and discussed enough are the structural risks of buying into an investment scheme. It’s important to understand all of the risks to your capital, not just to what can happen to the value through poor investment performance.
Policyholder protection:
Most yacht crew investment schemes are set up via insurance policies; these often have significant tax advantages and offer levels of policyholder protection not provided by banks or investment/brokerage accounts. Unlike a bank the insurance company model means that a life company is required to hold all the assets underlying its clients’ policies at all times plus an additional amount of its own capital for a “solvency margin.” If the insurance company is put into liquidation, then the client assets are ring-fenced, and the company can pay for all of the costs of transferring the “book of business” to another insurance company or return the money to its policy holders.
The better the jurisdiction (eg EU) in which the life company is based, the stronger the regulation tends to be (eg UK FCA or Central Bank of Ireland) and the more capital it must have; therefore the less likely it will be become insolvent. Big is beautiful!
Credit Rating:
When it comes to most financial institutions, it’s important to understand the solvency of the financial institution, i.e. how likely it is to make its financial obligations. This is often measured via a credit rating from one of the rating agencies (eg Standard & Poors).
Custody:
Most life companies and investment “platforms” add another tier of protection by using a third party custodian, which avoids conflicts of interest and helps segregate your assets from those of the company. This custodian should be well rated too.
Investment Fund Structure:
Very careful consideration should also be given to the actual structure of the investment you choose. There are thousands of collective investment funds in the world, and where they are registered and how they are regulated can vary enormously.
Consider liquidity – (daily priced is vital), domicile (EU, inc Lux and UK are normally better regulated) and regulatory structure (look for SICAV, UCITS, OEIC – for most stringent reporting standards).
Rating – check the funds have been rated by one or two independent companies (Morningstar, TrustNet, etc.) and check the fact sheets of the funds carefully for SIF, EIF or QIF; these are Specialized, Experienced or Qualified investor funds that should not be bought by anyone who is not a professional or very experienced investor. If you want to buy one you should sign a disclaimer to that extent.
If in doubt take at least two opinions from properly regulated advisers (oh.. and check their regulatory structure too!!)