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.
Spectrum sponsor the Barcelona English Radio Party – 20th November
By Spectrum IFA This article is published on: 14th November 2014
The Spectrum IFA Group are delighted to be sponsoring the English Radio Party on 20th November, 2014.
Have you or someone you know had to pay Spanish non-resident inheritance tax since 2010?
By John Hayward This article is published on: 11th November 2014
11.11.14
Further to the judgment made by the European Union Court of Justice (ECJ) on 3rd September 2014, that Inheritance and Gift tax rules in Spain were discriminatory between residents and non-residents, several key firms of accountants and lawyers have implied that anyone who has been subject to the higher non-resident rates in the last 4 years could make a claim.
There has not been any formal approval by Spain but proposals are to treat those non-Spanish tax residents living in the European Union (EU) or the European Economic Area (EEA) as if they lived in one of the autonomous regions of Spain where tax rates tend to be heavily discounted. The region will be determined by where you have spent most time in the last two and a half years or by where the majority of your Spanish assets are situated if you live outside Spain.
Gifts outside the EU or EEA to a Spanish resident could be subject to the rules of the autonomous region where the recipient has his/her residency.
Although the changes have not yet been formally approved, lawyers are submitting tax returns on the basis that the qualifying non-resident will receive the tax advantages of the relevant autonomous region.
This will mean that, for example, children living outside Spain, inheriting from parents in Spain, will no longer have the much higher (generally) “National” Spanish taxes to pay. Parents will be able to gift property to their children without necessarily needing to make expensive tax avoidable arrangements.
However, not all autonomous regions are so generous with their discounts. Whereas Valencia offers very large discounts to all direct family members, Murcia, next door, only offers significant discounts to those under 21. Also, there are limits on discounts in most, if not all, regions and so they may not cover all of the assets. Therefore it is extremely important to have assets positioned in the most tax efficient manner. This needs to be legal as well.
How can we help?
1/ If you or someone you know has paid inheritance tax on money from an EU or EEA resident who has died in the last 4 years, you may be able to make a reclaim. We have lawyers who can help with this on a no win, no fee, basis. (We are not tax advisers)
2/ We are experienced in helping you arrange your finances in a Spanish tax compliant manner, helping you and your loved ones to reduce the impact of Spanish taxation.
How my Spectrum IFA Group Financial Adviser in Spain saved me 82,947euro in tax!!
By Barry Davys This article is published on: 5th November 2014
05.11.14
Mr Blood had lived in Spain for eight years. However, as a result of a pension mis-selling review in the UK by a large UK bank he received compensation to cover a pension shortfall. The client was extremely satisfied with the amount of the compensation. Advice was requested from his Financial Adviser (IFA), Barry Davys of The Spectrum IFA Group, on how to invest this compensation to ensure that his pension fund returned to its true value.
Whilst this payment of compensation is tax free in the UK, Mr Blood is resident in Spain. In Spain these types of payment are taxable. Fortunately, the IFA knew the differences in the tax regimes. Barry had a tax lawyer calculate the amount of tax due on the compensation payment and Mr Blood was, not surprisingly, horrified to find that the tax to be paid was 82.947,91€.
Despite the client having signed a letter of acceptance with the bank and the compensation having been paid, Barry reviewed the case and found that the letter of acceptance did not sufficiently identify the issue of Spanish tax, having only emphasised the UK tax situation. Barry opened negotiations with the bank. As the regulatory requirements in the UK required the bank to put the client in a “no loss” position, the payment of tax resulted in a loss. To be fair to the UK bank they accepted this principle and agreed to pay a further compensation to cover the loss from having to pay tax.
The payment of a further 82,947€ could have seemed like a satisfactory outcome. However, any payment to cover the client’s loss as a result of the tax payment would be subject to taxation on the additional payment too. Our adviser again instructed a tax lawyer for the calculation of the gross amount required to ensure the client was put back in a no loss situation. Further negotiation by the IFA resulted in a grossed up additional payment to the client of 178,000€. This resulted in Mr Blood being recompensed in full for the loss.
Case Study Key Points
The key points in this case study show that a knowledge of UK and Spanish tax law was required to identify the problem. Secondly, knowledge of regulatory requirements helped ensure a successful negotiation between the bank and the IFA. Using specialist tax lawyers to calculate liabilities strengthened the client’s position. Finally the IFA’s knowledge of UK and Spanish pension law helped to identify what options were available for reimbursement.
On payment of the additional compensation Mr Blood commented;
“I was frankly shocked to learn that the Spanish Hacienda doesn’t recognize compensation for a loss as exactly that; a compensation. My initial dealings with the bank quickly highlighted my lack of experience with financial matters, and I was relieved that Barry agreed to negotiate on my behalf. His in-depth knowledge of the financial services industry and his negotiation style delivered for me the best possible outcome I could have wished for me and my family. I sincerely believe this outcome was only possible with his support.”
Barry Davys was also pleased. “It is extremely gratifying to be able to help someone in this way. The years of studying taxation, pensions, regulations etc. feel worthwhile in situations such as these. It is an extremely interesting time in Spain with many changes in taxation. I look forward to the challenge of continually helping international people with their financial planning to put them in the best possible position”.
By John Hayward This article is published on: 29th October 2014
29.10.14
Stockmarket falls and low interest rates Have you seen your investments fall by over 4% in the last month? This could be the case if you have been invested in the stockmarket. Most people know that investments can go down as well as up. Over time, stocks and shares can make significant gains. However, it still hurts when one sees a loss of this amount in such a short period. Some people prefer to keep their money in cash but then we have another risk. Interest rates are low and, even with the suggested increases in 2015, they could remain low relative to inflation. What many people want, and probably need, is a steady increase in the value of their savings with as little risk as possible. So what is the solution?
The low risk solution We at The Spectrum IFA Group have access to an insurance bond offered by arguably the largest insurance company in the UK and one of the largest in Europe. Their investment model has allowed consistent returns of over 4.5% a year (after deducting charges) whilst exposing the investor to a fraction of the risk of a stockmarket such as the FTSE100. Whilst the FTSE100 has fallen by more than 4% over the last month, this low risk approach has produced a gain of almost 1%.
Tax friendly in Spain and the UK No tax is payable on the pure growth of the insurance bond. Even if withdrawals are made, the tax treatment is vastly more favourable when compared to bank accounts or other non-compliant arrangements (see an example of how tax is calculated here). If you are currently Spanish resident, but you subsequently move back to the UK, the bond can follow you and benefit from the advantageous tax treatment awarded to these policies in the UK.
Outside Spanish inheritance tax (IHT) With Wills correctly drafted and you are deemed domicile the UK, this insurance bond is outside Spanish IHT because it is not based In Spain. With IHT in Spain extremely punitive for non-residents (law possibly to change in 2015), this is a huge benefit to the non-resident beneficiary. It can be written in joint names so as to avoid Spanish IHT on the resident owner.
No Modelo 720 declaration As this bond is Spanish compliant, there is no obligation to declare it as an overseas asset on the Form 720. This is because the insurance company declares it to Spain each year.
To find out more about how we can help you arrange your savings in a more beneficial way, contact your local adviser or fill in the contact form below.
How much is Inheritance Tax in Spain?
By John Hayward This article is published on: 23rd October 2014
There are two sets of rules that could apply; one by the autonomous region and one by the State. For these purposes I will focus on my region, the Valencian Community, which covers the provinces of Castellón, Valencia, and Alicante.
There are several factors which determine how you or your estate is treated. These include;
Your relationship to the deceased or the beneficiaries.
Country and/or region the different parties are resident.
How much pre-existing wealth the beneficiary has.
Unlike the UK, where the total estate of the deceased is taxed after allowances, in Spain it is the individual inheritor who is taxed.
State rules
Basic allowance of €15,956.87 for those who qualify.
95% reduction on the value of the main residence (max. €122,606.47). The property cannot be sold for 10 years from the date of death to retain this reduction. If sold within 10 years, the tax will be recalculated. This reduction only applies to married couples and close family.
Valencian Community rules
If you are resident in the Valencian community you, or your beneficiaries, can benefit from much higher allowances and less restrictions.
95% reduction on the value of the main residence (max. €150,000).This cannot be sold for 5 years from the date of death to retain this reduction. If sold within 5 years, the tax will be recalculated. Again, this reduction only applies to married couples and close family.
€100,000 allowance for each qualifying individual. The allowance is more for younger children.
75% reduction on the final tax bill.
Example (Husband (deceased) and wife resident in Valencia)
Main residence value €350,000
Wife inherits husband´s half €175,000
less 95% reduction (up to €150,000) €142,500
Net value € 32,500
less Tax allowance €100,000
Result?NO TAX TO PAY*
If the property was sold within 5 years, or the wife did not want the restriction of having to keep hold of the property for 5 years, the tax bill would work out to about £8,500. However, this would then be reduced by 75% (as she is resident) giving a net tax bill of just over €2,000.
For a non-resident, the tax bill would be around €23,000.
This is a simplified example but it illustrates the enormous difference in tax treatment for residents and non-residents. For a resident couple, there is not likely to be a huge potential tax bill. The problem comes after this when the non-resident children and grandchildren inherit. Spain is under pressure to equalise the rates charged for residents and non-residents and there could be changes in 2015.
If you would like to know how much inheritance tax you or your loved ones could be obliged to pay, and look at ways at reducing or even negating the tax, contact your local adviser.
Please note that these rules are subject to alteration. We are not employed as tax advisers. *There could be capital gains tax to pay. Source: Generalitat Valenciana
Spanish Tax Reforms
By John Hayward This article is published on: 29th September 2014
The latest news we have, is that there are likely to be significant cuts in income tax in the election year of 2015. The average reduction in Spanish income tax will be 12.5%, and 72% of those earning up to €24,000 will be as much as 23.5% better off, according to the Hacienda. In addition, the bands of tax are being reduced to 5 from 7.
Taxes on savings are also being reduced over the next 2 years, to the levels we saw in 2011. In addition, there are other tax benefits for families and small and medium-sized companies
Full details can be found by visiting this link to the Hacienda´s website http://bit.ly/1yDs915.
These are proposals at this stage and are subject to possible changes before the end of the year. However, it is clear that there will be changes.
As a guide, here are the existing rates and the proposed new rates.
In the meantime, if you would like ideas of how to reduce Spanish Income and Savings Tax, look at ways of increasing your income in a low-risk environment, or you would simply like to review your overall financial position, contact me below.
Scottish Independence: A major faultline exposed in the UK?
By David Hattersley This article is published on: 15th September 2014
Whatever the outcome of the referendum on September 18th, the willingness of people to take risks to free themselves from Centralised Government (ie. in this case, Westminster) has exposed the growing dissatisfaction with large centrally controlled government. This would still apply to the UK, even without Scotland. No doubt there will be intense negotiations over the coming months in relation to the outcome of the referendum.
With the UK elections due soon, this could give rise to the same dissatisfaction in the UK, particularly if it is seen that the Scots get greater freedom. As a result, the UKIP could gain some seats based on their anti-EU stance, or there could be a change in the balance of power in key seats. The potential then arises of a coalition, but how will that be formatted? Will there then be a referendum on an exit from the EU?
So, where does this leave investors? The UK has been seen as a “safe haven“ for investors and this is bound to change, at the very least just in perception. Markets do not like uncertainty and this inevitably leads to greater volatility. Currency, bonds, gilts, property and equities will all be affected.
A globally diversified portfolio, in a wide range of asset classes, will help spread the risk compared to a UK-biased selection. This is where Independent International Financial Advice is vital! Protection of wealth can only be achieved where all asset classes are considered as part of a portfolio.
Buying Property in Spain
By Richard Rose This article is published on: 6th August 2014
Investors are returning to the Spanish property market in increasing numbers following the bursting of the property bubble and financial crisis of 2008/2009. Property values have fallen by as much as 50 percent and beyond in some areas, creating pain for those who bought at the top of the market, but opportunity for new investors.
It’s not just individual investors who are returning to the market, but also large institutional property investment firms. They typically are purchasing tranches from the “bad bank,” set up by the Spanish government to relieve pressure from its banks, and also directly from banks and other institutions.
Like any investment, we would much rather purchase an asset at the bottom of its cycle than its peak. Easier said than done. I would challenge anyone who purports to be able to pick the top and bottom of any market; however, there are several pertinent points to consider when looking at the present value of the Spanish property market. The market has fallen considerably, Spain’s economic outlook appears to be slowly improving, tourism in many areas actually has picked up over recent years and demand from international individual and institutional investors is increasing.
Buying property in Spain, particularly around the yachting centers of Barcelona and Palma de Mallorca, has historically been popular and is becoming popular again, but the cost of purchasing property varies from region to region. In Catalonia, the transfer tax for the purchase of a secondhand dwelling has increased to 10 percent of the purchase price as regions look to increase their tax revenue. When you include notary fees, registration fees, property valuation costs, etc., the purchase costs can be estimated at 13 percent of the purchase price.
Borrowing in Spain, despite what you may hear, is still possible for yacht crew. Most banks will lend a maximum 60 percent of the property’s value to non residents, and a few will now lend up to 70 percent, dependent on the applicant’s financial circumstances.
Assuming the highest loan to value of 70 percent and purchase costs of approximately 13 percent, investors would need equity of at least 43 percent of the purchase price to complete the acquisition. For Spanish residents, the loan to value figure generally increases to 80 percent, again dependent on a person’s circumstances. If the property is subsequently rented, the income is taxed at marginal rates. Ongoing local taxes also apply, although they are relatively low in most municipalities; capital gains tax and inheritance tax may also be levied.
It’s recommended that professional advice be sought before making any property investment. A mortgage broker should be able to source the best terms and conditions for any financing that you may need.
