Viewing posts categorised under: France

Assurance Vie, an Alternative Way to Save For Your Retirement

By Michael Doyle
This article is published on: 15th March 2021

15.03.21

Many people are looking for an alternative to setting up a regulated pension for their retirement savings. Whilst there is tax relief on pension contributions in the savings phase, they are happy to give this up for more flexible and tax-effective income during retirement. In France, the most popular vehicle used for long-term savings is a contrat d’assurance vie, in which investors have the opportunity to invest regular premium savings or a temporary amount.
What Is an Assurance Vie?

An assurance vie is an insurance-based investment that can be as straightforward or as nuanced as you like. The following are the benefits of assurance vie for French residents:

While the funds remain within the assurance vie, there is usually no tax on any income or gains (i.e., the tax is deferred). However, social contributions are now withheld on an annual basis (rather than when the funds are withdrawn) for sums invested in a fonds en euros portfolio, just as they are for French bank deposits
A portion of any withdrawal is regarded as a capital withdrawal and is tax-free
An assurance vie becomes more tax-effective over time, and after eight years, the income can be offset against a tax-free allowance of (currently) € 9,200 per year for a couple submitting a joint tax return or €4,600 for an individual
You have total control of your money and may obtain monthly income payments from the insurance provider. However, withdrawals in the policy’s early years you can incur penalties, depending on the contract you select
If your circumstances or attitude toward investment risk changes, you might be able to change the funds in which you invest
For inheritance purposes, assurance vie is extremely tax-efficient

Assurance vie is the traditional form of saving for millions of French citizens. Several billions of euros are invested by French banks and insurance firms that sell their own branded products.

Additionally, a much smaller group of non-French companies have designed French-compliant policies for the expatriate market in France. These businesses are generally located in heavily regulated financial hubs like Dublin and Luxembourg.

However, before selecting such a firm, make sure that it is a product completely compatible with French law to get the same tax and inheritance benefits as the French equivalent product.

Below are some of the benefits of a foreign assurance vie policy over a French assurance vie policy:

Other currencies, such as sterling, US dollars, and Swiss Francs, may be used to save
There is a wider variety of investment options available, including access to top investment management firms and capital-guaranteed products and funds
The report is written in English, making it easier for you to comprehend the terms and conditions of the assurance vie program
The assurance vie policy is generally portable, which is beneficial when travelling within the EU (or many other countries in the world)

When it comes to EU countries, the taxes can be confusing. In these jurisdictions, the plan is often accepted for its beneficial tax performance.

How Does Assurance Vie Work?
Your one-time or regular investment or premiums are paid to an insurance firm, which then invests the funds with the investment managers of your choosing. These are typically unit-linked investments, such as equity or bond funds, but they may also be deposits or unique products sold by different financial institutions.

You may invest in a range of funds which the insurance provider can pool together to create a mutual bond, which is your assurance vie policy. The value of the units you keep in managed funds is likely to increase over time if you have selected your investment wisely.

As a consequence, the value of your assurance vie policy will grow accordingly. You must, however, be fully conscious of and comfortable with the level of risk you are taking. As with any unit-linked investment, your fund’s value will go up or down depending on what is happening in the investment markets. Short-term market instability, on the other hand, typically has a lower impact over time

How Do I Choose What to Invest Inside My Assurance Vie?
You may hold strong opinions on the subject or have no opinions at all. In any case, having an excellent financial planner on hand is helpful. His or her job is to help you comprehend the full definition of investment and decide your attitude toward investment risk.

Without acknowledging any risk, there is little reasonable chance of making a significant return on your savings. Even leaving your savings in a bank these days carries the risk of not receiving a ‘real’ rate of return, i.e., one that keeps up with inflation.

An adviser can show you various types of investment options, clarify how they operate, their track record, and the nature and level of risk that the investment entails. Although you make the ultimate decision, his or her support may be helpful.

Following the initial investment, there should be regular follow-up meetings to assess your investment’s success and make any appropriate adjustments. This may be because your circumstances have changed or because certain funds aren’t performing as well as anticipated, and you’d like to replace them with funds that are.

Can Capital Be Guaranteed Via a French Assurance Vie?
The willingness to invest in a fonds en euros is a common feature of the French assurance vie (though this is also available, in limited circumstances, from insurance companies outside France).

Since your money, as well as any interest and year-end bonus applied to it, is guaranteed, this unique type of fund is structured to shape a very conservative base for your overall investment.

The majority of foreign companies that supply these forms of funds also provide sterling and US dollar equivalents. Intending to increase returns, the funds invest mainly in government and corporate bonds, with some exposure to equities and assets (real estate). Your money will earn interest over the year.

The insurance firm is allowed by statute to refund the bulk of the funds to your account in the form of a year-end bonus. The remaining portion of the fund’s return is kept in the insurance company’s reserves to smooth out potential investment gains, such as in periods of weak market results. However, the rate of return on the fonds en euros is ordinarily low due to the quality of the guarantees. Still, it is generally better than the interest received on a bank deposit account with immediate access.

However, the French tax authorities consider this form of a fund to be so without risk that annual social charges are imposed on the gain, potentially lowering the return rate over time.

It is also possible to invest in structured bank deposit offerings through some foreign assurance vie policies. The investment return is related to the stock market, but the capital invested is guaranteed.

How Is an Assurance Vie Taxed?
Only the benefits portion of every amount you withdraw is taxable, and after January 1, 2018, the tax treatment differs depending on whether premiums were charged before September 27, 2017, or after that date.

Premiums paid before September 27, 2017
You may either be taxed at the set prelevement rate or file an annual income tax return, depending on your tax situation. The following is how the prelevement scale works:

Withdrawals made within the first four years are taxed at a rate of 35 percent
Withdrawals made between years four and eight are taxed at a rate of 15 percent
After eight years, withdrawals are taxed at a rate of 7.5 percent

Furthermore, social charges are imposed on the benefits portion of the amount withdrawn, at a rate of 17.2 percent. People prefer the progressive rate tax if it is lower than their marginal rate of income tax.

In France, the highest income tax rate is officially 45 percent. As a result, even though 35 percent appears to be a high rate, it is still the best choice for higher-rate taxpayers. After four years, you’ll have to reconsider which form to use. If your marginal tax rate is at least 30 percent, a prevelement rate of 15 percent is a better choice.

If you are a non-taxpayer (as more people are now since the 5.5 percent tax bracket was eliminated), you can opt to report the withdrawal on your annual income tax return.

After eight years, there is an extra income tax incentive to encourage people to save more for the long term. A single taxpayer is entitled to a €4,600 income tax credit against the benefits portion of any withdrawals made during the tax year. This is raised to €9,200 for married couples who are subject to joint taxation. There will be no income tax to pay if the benefits portion of total withdrawals made during the year does not surpass the allowances.

This might not seem like much, but it’s a valuable allowance, as shown by this example of Peter and Pam’s assurance vie policy, which they began nine years ago with a €100,000 investment. They have not taken any withdrawals, and the account is now worth €160,000. They want to buy a new car and need €15,000 to help pay for it, so they withdraw this amount. They receive a tax certification from the insurance firm when they make this withdrawal, showing how much gain is included in the amount withdrawn. The guaranteed value has risen by 60%, but the taxable benefit factor is only 37.5 percent (or €5,625) in this case. Since they have a tax-free allowance of €9,200 and they are subject to joint taxes, there is no income tax to pay.

Premiums paid from September 27, 2017
The tax rate varies based on the contract’s duration, plus whether capital remaining in the contract as of December 31 of the year before the withdrawal was above a threshold sum for contracts longer than eight years. The threshold amount is €150,000 per person (across all assurance vie policies), measured by the amount of premiums invested minus any money already withdrawn, rather than the contract’s value. Couples taxed as a household cannot share each other’s threshold because the threshold is not cumulative between individuals. As a consequence, one spouse can meet the threshold while the other does not.

On January 1, 2018, France adopted a 30 percent flat tax,’ consisting of 12.8 percent income tax and 17.2 percent social charges. As a result, for contracts that are less than eight years old, a flat tax is levied on gains in withdrawals which are deducted automatically by the insurance provider. The flat tax replaces the pre-September 27, 2017 rate of 52.2 percent (35 percent tax plus 17.2 percent social charges) for contracts of up to four years and 32.2 percent (15 percent tax plus 17.2 percent social charges) for contracts of four to eight years.

After eight years, the tax rate is 7.5 percent. In addition, there is 17.2 percent social charges to pay. The tax free allowance of €4,600 for a single taxpayer or €9,200 for a couple is still in place after eight years. When filing their French tax return, taxpayers can also choose to pay tax at their marginal rate in the ordinary income tax brackets (rates varying from 0-45%) plus social charges. Any excess tax already charged would be refunded after processing the tax declaration made in the year after payment of the withdrawal since the insurance provider will have already deducted 12.8 percent or 7.5 percent.

However, taxpayers should be mindful that if ordinary band taxation is selected for assurance vie dividends, this will extend to all other sources of investment profits, such as interest and persons, as well as capital gains from the selling of shares.

Does Assurance Vie Have Other Advantages?
Without question, assurance vie is also a powerful tool for estate planning, both in reducing French inheritance taxes and giving you leverage over who inherits your properties after you die. This form of investment is considered outside of your estate for

When you set up this form of investment before you turn 70, each beneficiary is entitled to a tax-free deduction of €152,500 for money invested before you turn 70, with taxes limited to 20% for everything beyond that (although sums exceeding €700,000 per beneficiary are subject to a higher tax rate of 31.25 percent).

The inheritance benefits are limited for sums invested after the age of 70. There is a €30,500 tax-free exemption in this situation (plus the investment return on the total invested) for all of the people who profit from it. Any portion of the premium that reaches €30,500 is subject to regular French inheritance allowances, which differ based on the beneficiaries’ connections to the policyholder. Any gain in the scheme paid out as a death benefit is also subject to social taxes at the current rate of 17.2 percent.

Assurance vie can be a valuable tool for estate planning and providing a tax-efficient source of income for the policyholder over his or her lifetime.

Time not timing – investing for the long term

By Michael Doyle
This article is published on: 8th March 2021

08.03.21

We often get asked the question, “When is the best time to invest my money?” Our answer is never based around when you should invest, but rather how long you can invest for.

• No one can predict the top or bottom of any market.
• The market has always exceeded its previous high when it has recovered.

So the question is not when you should invest your money in the market, but how long can you stay in the market to achieve your financial goals? Or to put it more simply, time is more important than timing.

During periods of stockmarket volatility, investors often become uncertain and lose sight of their initial long-term investment view. They often find themselves postponing a new investment, or even selling their current holdings with a view to re-invest when the markets stabilise.

What often happens in times of trouble, however, is that investors sell at a lower price than that which they bought at.

A study by Dalbar in Boston USA, highlighted a key area for private investor’s underperformance:

• According to Dalbar, from 1985 to 2004 the average personal investor achieved an annualised return of just 3.7% while the S&P500 returned 11.9% and inflation averaged 3%

A further study showed that playing the waiting game could cost you dearly. Investors who remained fully invested in the UK market over the period March 2003 until March 2008 would have received returns in excess of 60%. However, those investors who tried to time the markets would have had their returns cut to 40% if they missed out on the best 10 days of the market and those who missed out on the best 40 days would have seen returns of 4%!

This applies across other major markets as the table below shows:

MARKET	INDEX	FULLY INVESTED	MISSING BEST 10 DAYS	MISSING BEST 40 DAYS
UK	FTS All Share	63.4%	40.0%	3.9%
US	S&P 500	56.4%	11.6%	-39.2%
GLOBAL	MSCI World	63.7%	21.6%	-26.2%

Sources: JP Morgan Asset Management/Bloomberg/Datastream

What we do know is that historically the markets have always recovered, as the table below shows.

EVENT	DATE	RESPONSE	AFTER 4 MONTHS
Pearl Harbour*	December 1941	-6.5%	-9.6%
Korean War	June 1950	-12%	+19.2%
JFK Assassination	November 1963	-2.9%	+15.1%
Arab Oil embargo	October 1973	-17.9%	+7.2%
USSR in Afghanistan	December 1979	-2.2%	+6.8%
1987 Financial Panic	October 1987	-34.2%	+15%
Gulf War	December 1990	-4.3%	+18.7%
ERM Currency Crisis	September 1992	-6%	+9.2%
Far East Contagion	October 1997	-12.4%	+25%
Russia Devalues Rouble / Long Term Capital Management Crisis	August 1998	-11.3%	+33.7%
World Trade Centre	September 2001	Dow -14.3% Nasdaq -11.6%	+5.9% +22.5%

*(The markets rose 8% during the year following Pearl Harbour)

Essentially what we can conclude is that most investors do not buy and hold for extended periods of time. Thus getting in and out of the market at the wrong times or switching funds with a view to chasing the top performers, unfortunately at a time when these ‘top performers’ have reached their peak.

Almost without exception, successful investment strategies rely on discipline, patience and taking a long-term view. Successful investors typically neither react to short market events, nor try to pre-empt short term market direction.

For advice on an investment solution aligned with your personal objectives and risk profile, feel free to contact me for an initial discussion.

Is your money safe under the mattress?

By Katriona Murray-Platon
This article is published on: 5th March 2021

05.03.21

March is my favourite month of the year, not least because I celebrate my birthday during this month and this year will be the end of my 4th decade. Traditionally it has always been a busy month because it is a great time for events and starting new projects. This month my colleagues and I will be attending another virtual property fair hosted by Your Overseas Home. The event we did last year was very good and lots of people were able to see our presentations and then chat to our advisers from the comfort and safety of their own homes.

By October 2021 I will have lived in France for 18 years continuously, but I first arrived for my Erasmus year in September 2001 making it 20 years since I started living in France. As you may know I am married to a Frenchman and I have adopted much of the French culture and way of life. But my husband and I have very different views in our attitude to risk and finances. My husband came from a farming background where money was hidden under the mattress, you only bought when you had the money and you insured everything that could be insured. My husband will take a 10 year extended guarantee on a toaster! I came from a background where it was common to use credit cards to fund Christmas and holidays and I went to university with a student loan.

The idea that money is safe under the mattress or in the bank is no longer true. In France the traditional popular savings accounts such as the Livret A and LDD now only have an interest rate of 0.5%. The other misled belief that French assurance vie policy holders have is that Euro Funds are a good investment and a safe investment. Whilst it is true that Euro Funds are still one of the least risky investments after the traditional bank savings accounts, their performance continues to drop year after year. The average growth rate of the Euro Funds in 2020 is 1.2% which, once you deduct social charges (17.2%) and take into consideration inflation (0.5%), the net gain is only 0.5%. One of my own French assurance vie policies, which is 69% Euro Funds, has made an average of 1.6% over the seven years since it was created. The problem with French assurance vies is that they are not bespoke; they come with certain formulas, some that you can contribute to monthly, some that you cannot, and depending on your choice you cannot go lower than the prescribed amount in Euro Funds, no matter what your risk profile.

When I compare this with the range of product providers we can offer our clients and the choice of funds, the difference is astounding. Thank goodness that as English speakers we have access to better investment possibilities from as little as £20,000/€25,000. The average performance of my clients’ portfolios is around 3% after charges, with no social charges taken at source, and they have a lot of choice and flexibility regarding which funds they want and how much of that fund they want their investment to be in. They also have access to English speaking product providers, English speaking fund managers and their own English speaking financial adviser who is supported by the knowledge and experience of all of the Spectrum advisers.

I am fully integrated into French society and believe in adhering to many things about French society, but when it comes to finances there are differences between us that we cannot ignore so it is not in our best interest to invest in French financial products.

The outlook this March is thankfully much better than last March. There is more good news for Prudential policy holders. At the end of February Prudential announced no changes to the Expected Growth Rate and upward Unit Price Adjustments in the PruFund Growth Sterling, PruFund Growth Euro and PruFund Cautious Euro funds.

For other funds and the markets in general the outlook is equally positive. “The combination of vaccine roll-out, substantial fiscal stimulus, and elevated consumer savings should drive a sharp recovery in economic and earnings growth,” said Ryan Hammond, a Goldman Sachs strategist, in a report this week.

Whilst mask-wearing and social distancing will still be necessary for some time to come, a lot of our friends and family members have been vaccinated, therefore reducing the risk to the most vulnerable. With the coming good weather, meetings and get togethers will be able to take place out of doors. As always, if clients are happy to arrange a face to face meeting, I look forward to seeing them for outside meetings in their lovely gardens. If however you prefer video meetings or phone calls that is also possible.

Wishing you all a bright, sunny and floral month of March!

Your Expat Guide to Pension Planning

By Michael Doyle
This article is published on: 4th March 2021

04.03.21

Are you planning on retiring in France or Luxembourg but have a pension in the UK?

Look no further than this article as we guide you through your options. Pensions are a pinnacle part of your retirement plan but can be a complex topic for British expatriates with rules frequently changing, so always consult with your financial adviser when deciding which plan best suits your needs.

First off, you can leave your pension as is in your existing UK pension scheme if you want. However, with the Brexit decision, you should check with your UK financial adviser and make sure they can still support you. If you want to move your funds to an international pension plan, then your best options may be opening a QROPS or SIPP account.

QROPS (Qualified Recognized Overseas Pension Scheme) allows foreign nationals who have worked in Britain to transfer their UK pensions overseas.

Expatriates can avoid various restrictions imposed by the UK when taking retirement benefits
HMRC allows individuals to access 100% their pension fund after the age of 55. However, it may not be advisable to do so as it can result in higher taxes on withdrawals. It is potentially better to draw the funds periodically in a more tax-efficient manner
There’s no compulsory annuity purchase
Reduction in currency risk because QROPS allows you to invest and take benefits in a currency of your choice
QROPS gives you more freedom to select a portfolio suited to your needs because it offers a more extensive range of investment options

SIPP (International Self-Invested Personal Pension) enables someone access to greater investment choices because it is a personal pension plan based on making your own decisions. However, the pension structure is based in the UK so it’s subject to any legislative changes made by the UK government.

Benefits include, but are not limited to:

An international SIPP can provide a regular or variable income
No obligation to purchase an annuity
They provide greater flexibility regarding investments, tax benefits, and currency choices
Ideal way to consolidate various personal pensions, which reduces administrative complications
If you plan on moving back to the UK this option may be most suitable for you

You can also try a combination between both UK and international pension plans. The main objective is to arrange your retirement in a manner where you can access your finances when you want, where you want, and in the currency of your choice. Overall, there are many things to consider when choosing your pension plan, so be sure to do your research and understand your different options before making any decisions.

It is in your best interest to act now when planning your pension scheme, so touch base with your financial adviser today to discuss your options.

Beyond Brexit… What comes next ?

By Occitanie
This article is published on: 4th March 2021

Welcome to the ninth edition of our newsletter ‘Spectrum in Occitanie, Finance in Focus’, brought to you by your Occitanie team of advisers Derek Winsland, Philip Oxley and Sue Regan, with Rob Hesketh now consulting from the UK.

In this our first newsletter of the year, it is appropriate we say a fervent goodbye to 2020 and look forward to what we all hope will be a better and much kinder year. Although we are heartily sick of hearing the B-word, we can’t let the passing of the UK’s exit from the European Union pass without addressing the question “where do we stand now?” We also invite our investment partners to give their views on the markets for the coming year.

Post Brexit Situation
As far as financial services are concerned, it is (at this stage) a no-deal Brexit. Financial services in the UK employs 1.1 million people, yet so far more time has been spent negotiating fishing rights than financial markets access between Europe and the UK. This financial services relationship between the two sides will be discussed and negotiated over the coming months. What does this currently mean for us expats? We have already seen:

Banks threatening to close down bank accounts, because they struggle to find solutions for the ongoing servicing of non-UK resident account holders.
Financial institutions no longer being allowed to ‘passport’ their services into Europe – UK based investment managers, and Independent Financial Advisers (IFAs) being just two examples of this. To continue to offer services, each must now open European offices and apply to be regulated through the relevant EU regulatory system
We’ve seen the application of duties to goods imported from the UK from online shopping, a totally new concept for most of us
The need to apply for a French Driving Licence

These are but a few of the bureaucratic changes brought about by Britain’s exit from the EU.

We have covered some of these Brexit consequences in previous editions of our newsletter, but there is perhaps a more serious implication for those who hold UK investment bonds.

Why are UK Investment Bonds a problem?
Prior to Brexit, as investment bonds issued in an EU country, UK bonds were treated in the same way as assurance vie policies, with only the gain element of the investment subject to income tax and social charges. How quickly your local tax office recognises that this situation has now changed will vary, but in time it is inevitable that questions will start to be asked regarding those withdrawals that you are taking to support your lifestyle.

Why should that bother me?
As a non-EU qualifying bond, your local tax office could, as a worst-case scenario, treat the whole of any withdrawal as taxable income unless the split between capital and gain can be proved. It is more likely, however, that withdrawals from UK bonds will still only be taxable on the gain element, but the taxpayer will no longer benefit from the favourable tax treatment that the assurance vie enjoys, such as the annual tax-free allowance of €4,600 (€9,200 for a couple) after 8 years and the preferential 7.5% rate of income tax. We urge all our readers to assess their current savings and investments, to ensure that they are all France tax compliant. We can help you with those assessments.

What can we expect from investment markets this year?
We have invited one of our investment partners to give us their Investment Outlook for 2021. These are the views of Tilney Smith & Williamson that we would like to share with you.

A review of a tumultuous 2020
The investment landscape in 2020 has been dominated by the COVID-19 virus, lockdowns and unprecedented policy easing by Central Banks and governments around the globe. The US election and UK-EU negotiations provided further risks to markets. The pandemic led to a global economic shock that established new multi-generational records. For instance, UK GDP fell by over 11% in 2020, the biggest decline since the Great Frost of 1709 (1).

In financial markets (2), the MSCI All Country World equity index fell 32% in total return terms (including dividends) once COVID-19 new cases spread outside China, while government bonds outperformed as investors became more risk averse. The low point came on the 23 March prompting the Fed to say that it was prepared to buy US corporate bonds as part of a new round of quantitative easing (e.g., asset purchases). Global equities then went on to rally 63% from the trough, supported by – at various points – fiscal and monetary stimulus, economic recovery and hopes of a successful vaccine rollout, to close out the year up 15%.

The main winners of 2020 were ‘growth’ equities and direct COVID beneficiaries such as Big Tech, following widespread adoption of e-commerce and working from home practices. Long-term government bonds benefited from central bank asset purchases. In turn, gold gained from concerns about the debasement of the fiat currency system from money printing: the US created 21% more dollars in 2020 than existed previously. Despite the virus originating in Wuhan, China was one of the quickest economies to re-open and MSCI China equities rose 28%. China’s economy benefitted from lockdowns in the West, since services were restricted, but buying goods was not. China even managed to boost its share of global merchandise exports, driven by stimulus in the West creating demand. The biggest losing sectors were energy (-32%), real estate (-9%) and banks (-11%), with the COVID-exposed UK and Eurozone the laggards in geographical terms.

Reasons to be optimistic in 2021

We maintain an optimistic outlook for equities for several reasons. First, the rollout of vaccines and a gradual opening up of economies from lockdowns should encourage households to run down savings rates to sustain consumption.

Second, we expect a synchronised broad-based global economic recovery that supports company earnings. The IMF forecasts that a record 79% of nearly 200 economies will experience growth higher than 3% (3) this year. Not only would this recover much of the lost output last year, but it adds support to consensus global Earnings per Share growth of 28% expected in 2021.

Third, central bank liquidity is still projected to remain highly accommodative. The ECB topped up its pandemic emergency purchase program by €500bn in December to €1,850bn and extended the horizon of net bond purchases to the end of March 2022 (4). In a major policy change in September, the Fed made clear that it intended to “run hot” with regards to maintaining easy monetary policy in order to achieve above 2% inflation (5). Morgan Stanley forecasts that the combined balance sheet of G4 central bank assets will rise by $3.4trn by the end of 2021(6).

The UK and Brexit
Despite the widespread recovery in global risk assets, all UK equity indices were laggards, handicapped by the ongoing Brexit uncertainties and a compositional skew towards value orientated economically sensitive businesses. Should current assumptions over a vaccine inspired economic rebound prove correct, it seems probable that this skew, allied to the removal of Brexit trade uncertainties, could give rise to some relative recovery in UK equity valuations. However, with the longer term balance sheet impact of the Covid lockdowns still to be fully understood, remaining focused on the fundamental quality of the businesses selected, even in an ostensibly cheap market remains paramount.

Risks to the outlook
In terms of the risks, we continue to monitor: i) a sudden removal of accommodative policy, perhaps if inflation returns at a pace that exceeds central bankers’ expectations, ii) fears of another COVID-19 surge, or a disappointment in the effectiveness in vaccines/a mutation to a more virulent virus, iii) social unrest in the politically polarised United States, and iv) extended valuations in some sectors triggering a broader market rout.

As a reminder to our readers, Spectrum is a registered French company, regulated in France. We are not passported in from the UK, so for us it’s business as usual.

For those of you who still have investments in the UK, whether they be stocks and shares ISAs, investment bonds, pension funds or other investment portfolios, now would be a good time to review these and discuss with your provider as to whether they will be able to continue advising you in a post-Brexit world. Even if your UK provider will be able to continue advising you, they may not be familiar with the French taxation framework and the investments you hold may not be tax efficient in France. We can advise you on investment products that are suitable and tax-efficient for living in France and provide you with ongoing advice to ensure that your financial plan remains on track as your situation and attitude to risk change over time.

Please do not forget that, although we may be restricted on where we can travel at present, we are here and have the technology to undertake your regular reviews and financial health checks remotely. If you would like a review of your situation, please do not hesitate to get in touch with your Spectrum adviser or via the contact link below.

Occitanie@spectrum-ifa.com

We would love to hear from you with any comments and/or questions, as well as suggestions as to future topics for our newsletter. Please feel free to pass this on to any friends or contacts who you think might find it interesting.

UK pensions and investments after BREXIT

By Andrea Glover
This article is published on: 25th February 2021

25.02.21

After several years of uncertainty, the UK has now fully left the EU and whilst many of us understand exactly what that mean in terms of French residency requirements, the impact on the financial services world is only just starting to unfold.

We asked Andrea Glover, International Financial Adviser at The Spectrum IFA Group, for her thoughts on the matter and to provide guidance to those of you who are affected.

Andrea explained “Brexit ended automatic ‘passporting’ rights for UK financial services in the EU. So, if you either live in France or are looking to move to France, it is important to check that, if you have a UK financial adviser and/or UK insurer, that they can still support you.”

Andrea commented “For those of you living in France, contact your UK financial adviser if they have not already been in touch and ask if they are still able to provide financial advice to you as a French resident. Also, ask your UK insurer if they have put in place measures to ensure that your policy or pension can continue to be serviced. Your insurer or financial adviser should always act in your best interests. It is also important to note that in the case of a dispute with your insurer or financial adviser that you might not be able to refer the problem to an ombudsman or court in France.”

Andrea continued “My advice would always be to seek advice about the rules, from a French tax perspective, for any pensions and investments held in the UK and check that anyone offering you advice, or financial services, is authorised to do so in France. Further, a suitably qualified financial adviser who is based in France will undoubtedly have first-hand experience of living in France and therefore have greater empathy with their clients.”

Andrea went onto say “Giving advice on UK held investments and pensions is only one component of comprehensive financial planning. A qualified financial adviser will also be able to provide guidance on matters such as Inheritance Tax planning in France and look at alternative tax efficient investment vehicles such as an Assurance Vie.”

For those of you looking to move to France Andrea explained further “Moving to France as a UK citizen is obviously more onerous than previously in terms of residency. I believe this places even greater importance on seeking suitable financial advice before any firm plans to move are finalised.”

From her own experience, Andrea commented “We are receiving a number of enquiries from people looking to move to France, which is firstly encouraging but secondly it means that we can really help clients structure their financial affairs efficiently before they move. We quite often work in partnership with international tax lawyers to assist clients who, for example, have a business in the UK but want to run it from France. Having a clear and defined plan, after seeking advice from the suitable experts, prior to any move to France, is undoubtedly beneficial and avoids any nasty surprises further down the line.”

*This article first appeared in The Local Buzz

Currency Exchange and the benefits of using a specialist provider

By Spectrum IFA
This article is published on: 2nd February 2021

02.02.21

Relying on a bank to transfer currency is an expensive option. Currency transfer specialists provide competitive terms, secure, swift transactions and a range of other benefits including regular payments, forward contracts and rate tracking alerts.

At The Spectrum IFA Group we work with Smart Currency Exchange to deliver the best possible rates, service and support for our clients.

Whilst nobody can predict exchange rate direction, the relative strength (or weakness) of the euro is relevant for most of us. I attached a weblink to Smart’s 2021 quarterly currencies forecast.

Smart Currency Exchange
Quarterly Forecast 2021

A historic Presidential election, Brexit deal and global pandemic sent currencies in directions that no one could have predicted in 2020.

Does that mean matters will settle down in 2021? We wouldn’t suggest you bet your transfers, your property budget and your future plans on that!

Fresh uncertainties for the year ahead bring new challenges for economies – and currencies – too. So, predicting the pound’s movements accurately can be a near-impossible task – even for the major banks.

I invite you to read this quarter’s currency forecasts, but with a strong suggestion that you do not base any decisions on them. Predictions for GBP/EUR range between 1.06 and 1.28 over the next 12 months!

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What’s in your Quarterly Forecast?

Post-Brexit special – what happens now?
Looking to buy a property overseas this year? What do you need to consider in a post-Brexit world? Our resources section can help.

New and improved tables and charts
How are economies coping in the midst of the pandemic? Our new charts and tables offer a deeper insight.

Expert analysis sections
Smart’s Senior Risk Management Analyst offers his insight and opinion – do you agree with him?

Your next move?
In this climate of uncertainty, how should you plan for the future?

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For any further information on currency exchange, please contact your local adviser or please send an email to: info@spectrum-ifa.com

Looking back at 2020, looking forward to 2021

By Occitanie
This article is published on: 12th December 2020

12.12.20

Welcome to the 8th edition of our newsletter ‘Spectrum in Occitanie, Finance in Focus’, brought to you by Philip Oxley, Sue Regan, Rob Hesketh and Derek Winsland, your Spectrum team of advisers in the Occitanie.

2020 has been a year like no other we can remember. We have had a global health pandemic with tragically unprecedented levels of deaths in peacetime and significant changes for many people in relation to both their work arrangements and social lives, notwithstanding challenges in relation to individuals’ physical and mental health.

In the financial world, economies have suffered deep recessions and economic rebounds within the space of months. All financial markets plunged sharply in March, but many have recovered those losses, and more, with the US Dow Jones index recently breaching 30,000 for the first time ever. In the UK, the recovery of the FTSE 100 has been more muted and even with advances in the last few weeks, the index is still currently down about 15% from its starting point at the beginning of this year, although there are still a few weeks to the end of the year for the market to surprise!

Vaccines
Perhaps the single most positive piece of news in 2020 has been the recent succesful trials of a number of Coronavirus vaccines. With approval granted by the MRHA, the UK’s medicines agency, for the Pfizer/BioNTech vaccine, there are 800,000 doses heading to the UK with care home residents and staff thought

to be at the top of the list of recipients, followed by the over 80s and healthcare workers.

There are many other vaccines in the pipeline with Moderna and AstraZenica/Oxford University vaccines thought to be close behind in the approval process. Vaccines from Johnson & Johnson and Novavax are both in the final Phase 3 of trials, China has at least three and Russia one, which are all undergoing trials currently.

Interestingly the storage conditions and price vary greatly, with the Pfizer/BioNTech vaccine requiring about -70°c conditions, dilution before administering and is thought to cost in the region of £25 per dose. The vaccine from AstraZeneca & Oxford University, however, can be stored at fridge temperatures for up to six months, with an estimated cost of about £3 per dose (because the company has committed to distributing the vaccine at cost, during the course of the pandemic). On the day the company announced the results of its trials, the markets somewhat cruelly knocked nearly 4% off the company’s share price! Some confusion over the vaccine dosage and efficacy results didn’t help, but supplying the vaccine at cost is not going to provide the profits boost that investors might have expected.

Politics
Politically, both Biden and Trump registered more votes each than any other US President in history. Whilst Biden undoubtedly won this contest (despite Trump’s protestations), Trump and his views clearly still resonate strongly with many Americans. Politics aside, the economy, employment and equity markets have actually had a particularly good run under Trump’s stewardship. However, the markets have also taken the Biden victory in their stride. Despite what was said during the heat of the election campaign, Biden is a moderate and the response of the markets shows that also to be the view of most investors. The markets’ reaction was also supported by the likelihood of a Republican Senate (still to be determined) which will act as a check on any of the more radical instincts of the new administration. Much of the world will welcome the likely return of US support for the World Health Organisation (WHO) and the Paris Climate Accord.

Closer to home, Boris Johnson’s stock has plummeted from a comfortable election winner only a year ago, to talk of grumbling amongst his own MPs. There has been speculation of possible moves against him by his own MPs, although if this dissention does snowball, it will probably not be until 2021.

President Macron has been busy on the world stage in recent months; although interpreting the polls would suggest the French people would rather he focused on domestic matters instead. His popularity has improved from lows seen previously, but the numbers who disapprove still outnumber those who approve of his presidency and polling on people’s voting intentions for the 2022 Presidential Election show him only a whisker ahead of Marine Le Pen. But with nearly 18 months to the end of the President’s term, much can still happen.

Brexit
As this article goes to press, negotiations are still ongoing between the UK and the EU. Many areas remain unresolved including fishing rights (which seems to be one of the key sticking points in the deal, particularly due to Macron who,according to press reports, is the chief instigator behind the EU’s tough negotiating stance) as well as many other aspects of the UK’s future relationship with the EU. One item that has been clarified recently, however, is in relation to French residents in possession of UK driving licences. It has been confirmed that these will need to be exchanged for French licences, but those affected have until 31 December 2021 to secure their new licence. UK nationals who have driving licences from another EU country do not need to make this switch.

QROPS
Remaining on the subject of Brexit, one of the “go to” financial products within the expatriate market for pensions has been the Qualifying Recognised Overseas Pension Scheme (or QROPS). Since its inception 14 years ago, HMRC figures indicate there have been over 130,000 transfers and the average transfer value in 2019/20 was £125,000. This useful financial planning product has an uncertain future after the end of this year. From 9th March 2017 transfers to and from a QROPS became liable to an Overseas Transfer Charge (OTC) of 25%, unless one or more of five conditions was met. One of those conditions was that the pension member was resident in a country within the European Economic Area (EEA) and the QROPS was established in a country within the EEA. This meant that whilst the QROPS remained an attractive proposition to many expatriates within the EU, the number of individuals who went ahead with a transfer to a QROPS and paid the OTC in the tax year 2019/20 was only 13, according to an article published by Canada Life. The UK left the EU on 31 January 2020 and also left the EEA (the EEA comprises all EU member countries plus Iceland, Liechtenstein and Norway). The transition period agreed in the Withdrawal Agreement requiring the UK to be treated as an EU and EEA member, and bound by the rules of both, expires on 31 December 2020. It seems that this may mark the effective end of the QROPS, although we wait to have this confirmed. Fortunately, an International SIPP is still available to those looking for favourable solutions for their UK pension schemes and this product can provide many of the advantages afforded by a QROPS.

2021
One of our favourite quotes about predicting the future in relation to the world of finance is from the late J.K. Galbraith, who was for many years the Professor of Economics at Harvard University. He famously said that “The only function of economic forecasting is to make astrology look respectable”. For that reason, we will focus on possible trends rather than predictions!

The positive vaccine news has already seen a surge in value to those stocks in sectors that have been battered for most of 2020 – leisure, transport, hotels, restaurants, cinemas etc. It is also likely that prices in banking stocks will stabilise or possibly recover further. Furthermore, it is probable that a lot of the old traditional stocks such as oil, industrials, consumables etc. will improve as we move into 2021. What is not so clear is whether those technology stocks, seen also as “stay at home” stocks (Facebook, Alphabet, Apple, Amazon, Microsoft, Netflix etc.) which have had a stellar 2020, benefitting from the impact of Coronavirus, will continue to power ahead or take a breather in 2021. With regard to some of those sectors that were hit badly this year (hospitality, cinemas, airlines etc.) it is also unclear whether the change in consumer behaviour seen this year is here to stay, in which case any recovery in these sectors may be limited in scope.

Gold, seen as a safe haven during this year’s turbulence, fell back sharply with news of vaccine progress, but has recently stabilised, whereas Cryptocurrencies have strongly advanced in value over this period. It is difficult to assess the future direction of either of these assets, but as the vaccines get rolled out and economies improve, the predictions earlier this year that gold could reach $3,000 per ounce seem unlikely, in the short term at least. What can be predicted with more confidence is that there will still be volatility in the markets, because whilst they have been buoyed by the vaccine news, in the “real economy”, the fallout has yet to be properly felt.

Unfortunately, rising unemployment is inevitable, as are tax increases at some point, to start to chip away at the mountain of debt that has accrued through increased government spending and falling tax receipts. There has been much talk about the shape of the recovery, e.g. “V”-shaped, “U”-shaped, “W”-shaped (reflecting a double-dip recession) or even a reverse square root (unfortunately not an available button on this author’s keyboard!). The answer seems increasingly that all of these may happen depending on the country, the market sector or the company.

What we would comfortably recommend however, is to stay invested in the markets. To conclude with another well known quote from Warren Buffett, now 90 years of age and considered one of the world’s most successful investors, “The stock market is a device for transferring money from the impatient to the patient”.

We wish all our readers a very happy and healthy Christmas and we hope 2021 will be a better year for all. We will be back in touch again next year.

If you have any comments or questions, as well as suggestions for future topics for our newsletter, we’d love to hear from you at occitanie@spectrum-ifa.com. Please feel free to pass this on to any friends or contacts who you think might find the content of interest.

UK bank accounts after Brexit

By Occitanie
This article is published on: 20th November 2020

20.11.20

Welcome to the seventh edition of our newsletter ‘Spectrum in Occitanie, Finance in Focus’, brought to you by Sue Regan, Rob Hesketh, Derek Winsland and Philip Oxley your Spectrum team of advisers in the Occitanie.

As we are approaching the end of 2020, to say that it has been an unusual year would be a gross understatement. Countries across the globe continue to adjust to life with Covid-19 and with the ongoing and ever-changing restrictions that the predicted second wave has brought with it. As this goes to ‘press’ we now find ourselves once again in a national lockdown in France.

Although it had taken a back seat since the virus outbreak, Brexit is once again at the forefront of the minds of UK expats living in the EU. Will there be a trade deal? Are we heading for a cliff-edge ‘No Deal’? It is almost unbelievable that we are still at this point in the deliberations with only eight weeks of the transition period to go.

UK Banks accounts after BREXIT
As the deadline approaches one issue that we are frequently being asked about lately by concerned clients, is that some UK banks have been writing to their customers resident in the EU putting them on notice that their UK bank accounts and credit cards will be closed either at the end of the year or, in some cases even earlier, as a result of Brexit.

Although some banks have already contacted some customers, it is apparent that only some types of account are affected and only in some EU countries. The two main banking institutions that have taken such action so far are Barclays and the Lloyds Banking Group, which includes Lloyds Bank, Halifax and Bank of Scotland. Many other banks have stated that they ‘currently have no plans to close customer accounts, but they are monitoring the situation’. Given that this could potentially affect all of us with ties to the UK banking system, we thought this would be a good topic to focus on this month.
So why are some banks closing UK expats’ accounts?

UK banks and other financial firms are currently allowed to trade as part of the European Economic Area (EEA), as all member countries use the same regulatory framework. This arrangement is known as ‘passporting’, and it is why Brits who have moved abroad have been able to use credit cards and banking services from UK-based banks, even though they’re no longer living in the country. However, once the Brexit transition period ends on 31 December, this passporting arrangement will no longer be in place – that is, unless a specific agreement to carry it on is reached as part of a Brexit deal. With no such deal confirmed, UK banks would have to attempt to negotiate and fulfil the stipulations from every EEA country’s regulator. All of them work differently and a continuation of providing services to UK expats will be more feasible for some banks than others.

The impact on each customer will vary depending on how their bank or financial institution currently operates, the product or service being provided, and the legal and regulatory framework in the country in which they are resident. In effect, this means that the situation is different for each financial service offered by each financial provider in each country; for some banks, offering certain products in certain countries simply won’t work. So, certain services and accounts may be withdrawn in some EU countries but not in others.

We understand that many banks are still trying to figure out a way of working in different EU countries after the Brexit transition period, while also waiting to see if a deal can be agreed between the UK and the EU. The Bank of England and the Financial Conduct Authority (FCA) have written to banks informing them that, if they do decide to close customer accounts, they must have plans in place to service their Europe-based customers properly through the process, taking into account how their actions might impact on customer’s individual circumstances and the alternative products available to them.

What should you do?
DON’T PANIC – there have been some dramatic headlines in the press about the issue, but it is important to stay calm. If you think you will be affected, you should not act in haste and repent at leisure. Give yourself time to work out what your options are.

CHECK THE FACTS CAREFULLY – whether or not you have had a warning letter from your bank, talk to them now and find out what they plan to do on Brexit day. If you still have a UK address, your account may not be closed.

CHECK YOUR SPECIFIC ACCOUNTS – you may find the types of savings products you hold are still permitted in France. Your bank should be able to advise you on this.

ARRANGE FOR PAYMENTS TO BE PAID DIRECTLY TO YOUR FRENCH BANK ACCOUNT – if you are in receipt of the UK State Pension, HMRC will pay this directly to your French account every month and, because of the volume of payments made, the exchange rate is extremely competitive. OK, so the GBP:EUR rate isn’t that great at the moment but at least you will be guaranteed continuity of income if you rely on this to fund your lifestyle in France. Some UK private pension providers will also pay pensions to foreign bank accounts, so it is worth speaking to your provider about this.

OPEN A NEW UK ACCOUNT – find a UK bank that is operating in France (such as HSBC and Santander) and check if you can meet their eligibility criteria for opening a new bank account and that the account will meet your needs. For example, does it require you to have a minimum income or deposit with them?

CONSIDER OPENING A STERLING OFFSHORE BANK ACCOUNT – we have a good connection with a very reputable bank, based in the Isle of Man, that offers accounts in a number of currencies including Sterling and Euros and which will accept regular payments in and direct debits out. If you would like details of the account, please contact your Spectrum adviser.

If you have savings on deposit in the UK that you use for your short-term liquidity or an ‘emergency fund’ and you have been told, or are concerned, that these accounts will be closed, there are a number of tax-free savings accounts available in France, which you should consider maximising, if you have not already done so, including the following:

THE ‘LIVRET A’ – which is currently paying a rate of interest of 0.5% per annum and is available to non-residents. The maximum permitted investment into this type of account is €22,950 per individual.

THE ‘LIVRET DÉVELOPPEMENT DURABLE (LDD)’ – this account is available to residents of France and the maximum investment permitted is €12,000 per individual. It is currently paying an interest rate of 0.5% per annum.

THE ‘LIVRET D’EPARGNE POPULAIRE (LEP)’ – this account is available to residents of France who are on low incomes. The maximum investment amount permitted is €7,700 per individual. The interest rate is currently 1% per annum. For example, in order to open a LEP account in 2020, your ‘revenu fiscal de référence’ in 2018 (as shown on your ‘avis d’imposition’ of 2019) must not have exceed €19,977 for a single person or €30,645 for a two-part household.

But it’s not just bank accounts that might be affected when passporting goes………….

Some UK financial services providers are informing their non-UK resident customers that they will not be able to provide them with advice on their existing UK based investments after 31 December and that ‘you should find a new adviser or cash in your investments’.

As a reminder to our readers, Spectrum in France is a registered French company, regulated in France, and we are not passported in from the UK, so as far as we are concerned, it’s business as usual.

Please don’t forget that, although we may be restricted on where we can travel at the moment, we are here and have the technology to undertake your regular reviews and financial health checks remotely. If you would like a review of your situation, please do not hesitate to get in touch with your Spectrum adviser or via the contact link below.

We’d love to hear from you with any comments and/or questions, as well as suggestions as to future topics for discussion. Please feel free to pass this on to any friends or contacts who you think might find it interesting.

Occitanie@spectrum-ifa.com

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