Viewing posts categorised under: Spain
Financial Independence: What’s your number?
By Jonathan Goodman
This article is published on: 16th February 2015
16.02.15
What does financial independence mean to you? Are you on track for a future free from financial stress? Do you know what your number is?
Knowing the answers to these questions could help determine how soon and how well you could retire, yet many of us don’t…
If you are financially independent you have amassed enough wealth to generate a passive income sufficient for meeting all financial obligations, without the need to work. Your potential for financial independence is dependent on your current net worth, your target net worth and the years remaining before retirement, as well as how much you spend. The more money you spend now and going forward, the more you will need to accumulate to support your lifestyle.
So how do you calculate exactly when you could comfortably retire?
Number Crunching
The first step towards financial independence is to calculate how much you’d need to save. A simple formula can tell you not only how much you will need, but also how close you are now to getting where you want to be:
- Study your statements and determine how much you require annually in order to meet all your financial obligations. Could this number be reduced? Are there any unnecessary expenses? Could home and car insurance premiums be reduced? Is downsizing your home an option?
- Determine what return you could get on your investments. As intimidating as the stock market may seem at first glance, it’s possible to assemble a portfolio that pays you 3-5% in dividends annually. This dividend income is cash paid to you monthly, quarterly, or annually and doesn’t erode your investment.
- Calculate what nest-egg you need to build to generate the annual income you require. Annual income required divided by the percentage return you expect to get. Calculations should include cash only, not property or assets.
Remember…
- This calculation does not account for inflation or taxes.
- This calculation only covers essential expenses. Determine how much spending money you need monthly, then calculate the annual amount and add it into your figure.
- Your life could change in the next few years, which means you’d have to recalculate. If you decide to upgrade your home or have a family, you’ll need a bigger number.
What’s Your Number?
Smart Ways to Make the Most of Your Finances
By Chris Burke
This article is published on: 10th February 2015
10.02.15
The year 2015 is picking up speed, and now is the perfect time to stop and re-evaluate our finances before we slip back into our old comfortable routines. A time to review the past year and determine those areas with potential for improvement, to make sure we are getting the most out of our investments and reaching all our financial goals.
Do you know where your money goes each month? Could you be making more if you invested elsewhere? Is your credit rating a true reflection of your financial situation, and are there things you could be doing to improve your standing?
Follow these smart ways to make the most of your finances and put you and your family on the right track for a wealthier future.
Study your Credit Report
Have you ever seen a copy of your credit report? Most people haven’t and it may surprise you to hear that they very often contain errors. Research online and get access to your report and make sure there aren’t any mistakes which could be having a negative impact on your rating. If you don’t, you could be at risk from undiscovered inaccuracies.
Study your Cash Flow
Set some time aside to study your cash flow. Go over all your statements from the past year and crunch those numbers to gain a true understanding of where your money goes each month. How much are you spending? Where is it all going? Where can you make cuts to your monthly outgoings?
Credit Cards & Banks
Check the Terms and Conditions of all your credit cards and compare terms, rates and fees with those of other cards. Are you getting the best deal or are you just renewing cards out of habit? Get rid of credit cards which don’t give anything back, and compare rewards and cash back with other offers. If your current bank is letting you down and not providing the service you need, change.
Understand Investments
Most of us don’t fully understand investments. Be the minority. Do your research and find out as much as you can about viable investment options. Use the Internet and its many free tools, and study the market to assess how to make the most of your finances.
Seek Professional Advice
Ultimately, the best advice is professional advice. The Spectrum IFA Group can assist you in reviewing your financial situation and advise you on smart ways to make the most of your finances. For more information or to contact one of our Financial Advisers please use the contact form below.
The Financial Implications of Moving Abroad
By Chris Burke
This article is published on: 30th January 2015
Moving abroad can be a stressful and confusing experience and starting from scratch in a new location can often be overwhelming.
If you have recently decided to up sticks and move to Barcelona, or if you’re a recent arrival in the sunny Catalan capital, then you will have many choices to make. Aside from the immediate practicalities of moving to a new country, such as choosing schools, buying or renting property, and setting up residency for you and your family, there are many other (often overlooked) factors to take into consideration:
Pensions:
Unlike the UK, most companies in Spain don’t provide a private pension scheme or private health insurance. However, as an Expat, you may have unique opportunities available to you. An adviser will be able to discuss each of the options enabling you to make a decision.
Banking:
Having the right banking arrangements is a key part of life overseas. It’s best to sort your finances out before you go, as local banks usually require a credit history and proof of address to set up an account – which you won’t have when you arrive.
Tax:
Dual-Country financial arrangements are complex and should not be taken lightly, as even the most innocent transaction can be costly if not well planned.
Savings and Investments:
There are many factors that go into determining the best country in which to locate your investments. Bear in mind that you may have access to, and potentially benefit from, onshore and offshore savings and investment assets.
ISAs:
If you currently have an ISA and are planning to move abroad, they are not tax efficient in Spain. You also need to be fiscally resident in the UK to pay into one.
Will & Testimony:
Your Will (and those of your family members) will need to be updated so that it is compliant in Spain
Financial Advice:
The complexities in managing currency risk, an investment portfolio, and dual-nation tax reporting are many. It is important for expats to have a trusted adviser who understands the financial nuances of living an international lifestyle.
Smoothing: Reduce Volatility and Increase Growth
By Jonathan Goodman
This article is published on: 15th January 2015
15.01.15
Investment Smoothing
Investment Smoothing is a process used in pension fund accounting by which unusually high returns in a given year are spread over a multi-year period. By taking an average of all the different values, smoothing can deliver a constant figure for shorter time periods.
Instead of simply sharing out what the fund makes or loses each year, a smoothed growth fund aims to even out some of the variations in performance. This process is what we call ‘smoothing’.
How Smoothing Mitigates Volatility
The logic behind smoothing is that it lowers the volatility of profit and loss credit from pension fund returns. During positive markets, some profits are retained by the underlying fund manager as reserves to be paid out during market downturns. This process dampens the volatility typically seen when investing in other types of long term mutual funds.
Smoothing from the Pru
The PruFund funds are designed to deliver smoothed growth by investing in many different investment areas. By investing in a range of assets the fund is less exposed to significant changes in the values of individual assets.
Prudential’s investment specialists will constantly look for the best opportunities for growth within a wide range of investment areas. Prudential apply a unique smoothing process to these funds to provide a more stable return, than if you were directly exposed to daily changes in the fund’s performance.
Prudential Smoothing: Reduce investment volatility, but keep the potential for growth.
Risk – Simply a Box of Chocolates?
By Jonathan Goodman
This article is published on: 7th January 2015
07.01.15
What is financial risk, and is it all down to chance?
Whether you are investing for your retirement or for more immediate financial needs, there are three factors that could keep you from achieving your goals: inflation, taxes, and risk. It is easy to plan for inflation and to reduce taxes, but risk is another matter as it is so unpredictable.
Types of financial risk to watch out for include:
Investment Specific Risk:
Risk that affects a very small number of assets.
Geopolitical Risk:
Risk of one country’s foreign policy unduly influencing or upsetting domestic political and social stability in another country or region.
Credit Risk:
Risk that a borrower will default on any type of debt by failing to make required payments.
Interest Rate Risk:
Risk that arises for bond owners from fluctuating interest rates. How much interest rate risk a bond has depends on how sensitive its price is to interest rate changes in the market.
Inflationary Risk:
The possibility that the value of assets or income will decrease as inflation shrinks the purchasing power of a currency.
Currency Risk:
Risk that stems from the changes in the valuation of currency exchanges. Fluctuations result from unpredictable gains and losses incurred when profits from foreign investments are converted from foreign currencies.
Volatility:
Risk of a change of price of a portfolio as a result of changes in the volatility of a risk factor. Usually applies to portfolios of derivatives instruments, where volatility is a major influencer of prices.
Liquidity Risk:
Risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit).
Diversification Risk:
Allocation of proportional risk to all parties to a contract, usually through a risk premium.
Leverage:
The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.
Counterparty Risk:
The risk to each party of a contract that the counterparty will not live up to its contractual obligations.
Overcoming Risk: Prudential & Smoothing
Prudential Multi-Asset funds work by spreading your money across a number of different types of assets. Funds are designed to deliver smoothed growth through a number of investment options, such as company shares, fixed interest bonds, cash and property, balancing the risk being taken. So if one asset is falling in value, another may be increasing.
Risk: Simply a Box of Chocolates?
Understanding the importance of risk is a central pillar of financial planning. Risk can be measured and assessed; it can be managed. Learning how to do this is an invaluable aspect of becoming a successful investor.
Risk may be uncertain but it’s no box of chocolates. If you prepare for the uncertainty – do your research and seek relevant and informed advice – you can be fairly confident of what you’re going to get. It’s not all down to chance.
Saving for Retirement in Spain
By Chris Burke
This article is published on: 28th December 2014
How do you save for retirement in Spain and what are the best options for expats?
These days there are quite a few choices on how to receive your pension as a British expat and, if you qualify for a UK state pension, you can claim it no matter where you live. The money can be paid into a UK bank or directly into an overseas account in the local currency. If you move to Spain before retirement and work there for a number of years, it may also be possible to receive a state pension from more than one country.
If you’ve qualified for a state pension from the UK, it will be paid (and taxed) in Spain but uprated every year in the same way as the UK. The personal tax allowance in Spain is €6,069 (£4,923) compared with £10,000 in the UK. The basic rate of tax is also higher, at around 24% compared to 20% in the UK. And in Spain there is no 25% tax free lump sum available when retiring, and any Isa’s you have in the UK will be liable for tax if you become resident in Spain.
A lot to consider…
Saving for Retirement: Tips
Plan Ahead: Pay off debts and take advantage of tax free personal allowances.
Do Your Homework: Before sitting down with an independent financial adviser, make sure you have a clear picture of your current finances and what you need to consider in order to achieve the lifestyle you want over the years ahead.
Consider Your Saving Options: The recent Budget announced radical changes to pension schemes – good news for savers. From April 2015, individuals may withdraw as much or as little from their pension fund in any year with 25 per cent being withdrawn free of tax.
Regularly Review Investment and Retirement Plans: Review your investment and retirement plans every six months to ensure any advice received is up to date and relevant.
Prudential: Flexible Savings for Retirement
The Prudential Flexible Retirement Plan gives access to a range of flexible retirement and investment solutions to suit your changing needs and priorities. Whether you are approaching retirement or some way off, the flexibility provides an easy transition from saving for retirement, through to approaching retirement and then taking an income.
Professional Advice for Expats
The earlier you get your financial planning in order, the better. Make a mistake with your pension, and you could end up paying for it for the rest of your life.
A pensions expert will be able to point you in the right direction. You will need to take Spanish rules into consideration, so taking advice from an adviser conversant with both UK and Spanish pension and tax rules is essential.
Finding a Financial Adviser in Barcelona
By Chris Burke
This article is published on: 27th December 2014
The number of British people moving abroad is rising, with about one in 10 British people now living overseas.
Despite its obvious economic difficulties, Spain continues to be one of the most popular destinations for British expatriates, as the laid-back lifestyle and improved transport links with the UK gives it an allure that is hard to resist.
However, setting up residence in a Spanish city, such as Barcelona, involves a great deal of upheaval, both on a personal and practical level, and it’s a sad reality that expats can be particularly vulnerable to poor financial advice.
How to Choose a Financial Adviser
In practical terms, one of the most important things to get right as an expat is your finances, and having the right banking arrangements is a fundamental part of life overseas. Banking services should ideally meet at least two main criteria: flexibility (money should be easy to access and transfer between countries); and financial security (in a reputable bank that complies with international financial regulations and has a solid capital base).
But what other factors should you take into consideration when searching for a Financial Adviser in Barcelona?
- Are they regulated? Do your research, visit websites, and confirm registration with the IFA before choosing an adviser.
- Qualifications: Every nation has different rules relating to how qualified a financial adviser needs to be to gain authorisation, but the UK is a world leader in terms of required qualifications. So if you’re speaking to a British adviser abroad, you can gauge their industry education based on the British qualifications they have.
- Experience: You can ask your adviser how long they’ve been qualified and giving advice, and you can research the brokerage to see how long they’ve been in business.
- Are they independent? Ensure that your adviser is independent rather than tied to one financial institution, so that they are able to advise you on suitable products from the entire financial market place.
- Testimonials: If your IFA is good at their job, they are highly likely to have a list of satisfied clients, from whom you can request a testimonial.
The Spectrum IFA Group
At The Spectrum IFA Group, we provide financial advice to expats on all aspects of living, moving and working in Spain. From calculating the cost of living to choosing a good school for your children, our guides to money management and family finances will help you prepare for the challenges of living and working abroad – so you can make the most of your expat experience.
We provide Insurance Intermediation advice and assist clients in their choice of Investment Management Institution. Mutual respect is earned by working together, looking after your best interests and by adding value to your financial planning through qualifications, experience and enthusiasm.
UK Pension Transfers – Update for Expats
By Chris Burke
This article is published on: 24th December 2014
The rapidly changing landscape of pension schemes in the UK has led to a great deal of confusion, and it’s not just UK pensioners who are affected: the rule changes also impact expats living outside the UK, especially those considering the benefits of a Qualifying Recognised Overseas Pension Scheme.
As an expat, it’s hard to know which route to take. Should you transfer to a QROPS or leave your pension in the UK? What are the benefits and drawbacks? What impact have recent changes had on your options?
Let’s look at the facts…
Reasons to transfer
● Pension Commencement Lump Sum of 30% of the fund. This is tax-free if UK resident but could be taxable if resident outside of the UK.
● No pension death tax, regardless of age, in Gibraltar and Malta
● Greater investment freedom, including a choice of currencies
● Retirement from age 50 (Malta), and 55 in Gibraltar and Isle of Man
● Income paid gross from Malta (with an effective DTT), and only 2.5% withholding tax in Gibraltar
● Removal of assets from the UK may help in establishing a Domicile outside of the UK (influences UK inheritance tax liability)
What will happen if you leave your personal pension in the UK
● On death over the age of 75, a tax of 45% on a lump sum pay-out.
● Income tax to be paid when receiving the pension, with up to 45% tax due, likely deducted at source,
● Registration with HMRC and the assignment of a tax code.
● Proposed removal of personal income pension allowance for non-residents. Although this is still on the agenda, it has been confirmed that there will be no change to non-residents’ entitlement to personal allowance until at least April 2017.
● Any amounts withdrawn will be moved into the client’s estate for IHT purposes, if this is retained and not spent.
● As the client will be able to have access to the funds as a lump sum, these could potentially be included as an asset for care home fees/bankruptcy etc.
● No opportunity to transfer from many Civil Service pension schemes from April 2015 (Only five months remain for public sector workers to review their pension and then make their own informed decision)
What Does All This Mean?
Regardless of the proposed legislation amendments, transferring to a QROPS still provides certain benefits that the UK equivalent would not be able to offer, although it’s fair to say that both still hold a valid place in expatriate financial planning. The answer to which pension is more suitable for you will ultimately depend on your individual circumstances and long term intentions.
Certainty and Predictability for your Investments
By Jonathan Goodman
This article is published on: 1st December 2014
01.12.14
The PruFund range of funds are designed to spread investment risk by investing in a range of different assets, such as company shares, fixed interest bonds, cash and property – from both the UK and abroad.
Prufunds are managed by Prudential Portfolio Management Group Ltd (PMG), dedicated multi-asset fund managers with a team of over 30 economists, investment strategists, analysts and mathematicians, specialising in different areas of the investment world.
How PMG Manage Your Money
PMG believes that investment success should be built on clear philosophy, demonstrable processes and a team based approach. They believe that this will not only deliver superior returns, but also provide greater continuity and dependability.
They believe in the importance of asset allocation and the key role that multi-asset funds play as an investment solution for many investors. They also believe that asset allocation is a specialist skill which should, to avoid conflicts of interest, exist separately from the other investment activities in any fund.
PMG takes many factors into consideration when managing your money.
They focus on:
- Minimising reliance on economic forecasting
- Looking for irrational behaviour
- Taking a long-term approach
- Fund management
- Asset-liability management
PruFund Growth Providing Smoothed Returns
PruFunds offer a unique smoothing process designed to help protect an investment from some of the daily ups and downs associated with direct investments, providing less volatile and more stable returns over the medium to long-term, in line with each fund’s objective and allowable equity parameters.
The Prudential PruFund smoothing process has two elements:
- Expected Growth Rates (EGR) applicable to each of the funds, normally applied on a daily basis. The EGR is the annualised rate that is normally used to increase the value of your unit price each day, and they are set quarterly by the Prudential Directors having regard to the expected long-term investment return on the underlying assets of the funds.
- Upwards and downwards pre-defined unit price adjustments are applied in line with fully transparent process requirements.
For more information on PMG and the PruFund range of funds or to contact one of our Financial Advisors to arrange a full financial review of your current situation please use the contact form below.
Do You Fear For Your Financial Future?
By Jonathan Goodman
This article is published on: 24th November 2014
24.11.14
How do you choose your investments when you are an expatriate?
International investors face many choices, and taking personalised advice can be vital, especially in the current economic climate. With high inflation and record low interest rates, volatility, complexity, uncertainty and a huge amount of change sum up the current state of the global economy.
Picking the right investment opportunity with maximum return objectives can be a risky and complicated process, and mapping a financial strategy that enables you to better navigate these turbulent financial times is a must.
The International Prudence Bond (Spain)
The International Prudence Bond (Spain) is a medium to long term bond designed with the needs of international investors in mind. Tailored to each market and sold via professional Independent Financial Advisers, it allows access to a range of unit-linked investment funds with the aim of increasing the value of the money invested over the medium to long term.
The PruFund Range of Funds includes guarantee options where the choice of guarantee can be linked to the anticipated year of retirement. The funds utilise the asset allocation expertise of the Portfolio Management Group and offer a truly global investment perspective.
Benefits
- Funds denominated in euros, sterling and US dollars
- A minimum investment of only £20,000, €25,000 or $35,000
- A minimum allocation rate of 100%
- No set investment terms
- Top-up facility from £15,000, €20,000 or $25,000
- Cumulative allocate rate on top-ups
- Flexible withdrawal options so clients can access funds when it suits them
- PruFund Protected Funds guarantee
How Spectrum Can Help
Spectrum’s role is to provide Insurance Intermediation advice and to assist clients in their choice of Investment Management Institution. Our Financial Advisors can help you decide which investment opportunity is right for you.
For more information or to contact one of our Financial Advisors to arrange a full financial review of your current situation please use the contact form below.
