Just recently I returned “home” to continue my work under the wing of The Spectrum IFA Group. Two years ago I moved away thinking I could expand the range of services to offer my clients, but sometimes the grass isn’t greener. However, leaving one base for another also creates time for reflection and, sometimes, realisation that where you were was rather good.

Change is always happening around us, but for some it can be unsettling. I am fortunate in that all my clients and contacts have been happy to stay with me on my journey.

It made me appreciate that a client’s commitment to one adviser for the duration of their financial arrangements is fundamental to developing a strong relationship and achieving successful outcomes. It’s what an adviser can help them with that matters, and supporting those requirements over the long-term creates a unique bond. Matching the actual advice and arrangements to a client’s needs should be the highest priority for any adviser.

So what can an adviser provide:
• Helps maintain perspective (and calm) during stock market turbulence. This is particularly relevant at the time of writing!
• Able to explain and problem solve when something goes wrong.
• They provide more accurate news and updates from the real experts, steering clear of the media hype and scaremongering that is everywhere.
• Recommend tax efficient arrangements geared to your lifetime and also very importantly, after it, for your family.
• Have access to investment fund experts who often fare better than self-selected choices.
• Keep you on track as your circumstances change. Nothing ever stays the same, part of life’s rich pattern, so having a hand to hold you through that change can be comforting and supportive.
• Liaise with your tax or legal advisers to ensure your overall interests are protected.
Not everyone chooses to work with a financial adviser. Some people can’t find one they can work with or trust or just simply prefer to manage their own affairs. Many don’t do anything at all.

It made me check some UK statistics. Did you know that:
• 39% of adults (20.3 million) don’t feel confident managing their own money.
• 11.5 million have less than £100 in savings.
• nearly nine million people are in serious debt, and only around a third receive help.
• Brits who took professional financial advice between 2001 and 2006 enjoyed an average increase in their assets of nearly £48,000 after 10 years, compared to those who took no advice.
• Most millionaires likely use some type of financial adviser to grow and protect their wealth.

According to a recent report from Prudential, more than half – 53% – of UK adults say that financial problems and changed circumstances over the last 12 months have caused them to seek financial advice. Of this figure, 33% have already sought financial advice, whilst the remaining 20% are planning to do so.

Most people will benefit from the knowledge and experience of a professional financial adviser, especially if they have a variety of assets. When deciding between working with a financial adviser or doing it yourself, you just need to weigh the benefits against what you could be missing out on. Just a thought…….!

Savings accounts or investing in Spain – what is right for you?

This is one of the most common questions I am asked, and with interest rates creeping up I thought it prudent to run through how you should decide what’s right for you.

To help with this, firstly we need an explanation of the important differences between the two:

Why would you put money into a savings account?
Saving is putting money aside in a deposit account for the next few years. When interest rates are low, the return you’ll get on your money will be very modest. The risk is that it won’t beat inflation, which is the rate at which the prices of goods and services increase. So, whilst your money is safe (covered up to £85,000 in the UK and €100,000 in Europe), its purchasing power will be eroded over time, meaning you will be able to buy less with your money in the future. When interest rates are high you will get more return on your money, but generally in this type of economic climate it will still be less than inflation. Because of this, money you keep in cash savings accounts should be for short term savings of less than about 5 years.

Why would you invest your money?
Investing is another way of setting aside money for the future, where you invest your money into something with the aim of making a profit in the long run. When you invest, you’re generally exposed to the risk of stock market volatility (although some investments don’t invest entirely or solely in these markets). Your expected returns can fluctuate and you may not get back what you put in, especially in the short term.

You should aim for a minimum of 5 years when investing and start planning ahead with your investment strategy to manage this risk a few years before you want to access your money.

“Save for what’s around the corner and invest for the future”.

Why take any risk with your money?
Firstly, as explained above, inflation will eat into the power of your money over time. This is a problem while you are working, but is particularly important to manage when you are retired and you cannot replace lost buying power with income from your job. Secondly, not all investment risk is equal. The benefit of taking a calculated amount of risk over the long term is that it gives you the potential to make much more money than you would from a savings account, helping to pay for future large expenses and a more comfortable retirement.

What is the trend when interest rates are high compared to investing in the stock markets?
Over a short timeframe, holding cash in a savings account is usually a safe and appropriate option. It is less risky in the short term as it is readily accessible and interest rates are currently attractive relative to the past few years.

However, time is the critical factor to consider here, as over the longer term cash won’t beat inflation but investing should, as can be seen in the chart below:

Over long periods of time there is a big difference in the returns achieved from saving and investing. In the short-term, investing is riskier than an interest-bearing cash account, however when compared to inflation investing has offered far more certainty and success in the long run.

Prudential 90’s advert
Do you remember this timeless, funny classic: We want to be together!

The principles remain the same even today……

Click here to read independent reviews on Chris and his advice.

If you would like any more information, or to talk through your situation initially and receive expert, factual advice, don’t hesitate to get in touch with Chris.

Spain is an interesting and beautiful country with a fantastic lifestyle and very hospitable people. I have been in business here with my family for nearly 30 years and have learnt to identify the pitfalls. Here’s how to avoid some of them so you don’t spoil your early days here:

1. Visa and residency permits. It is important to seek advice from a lawyer, gestor or financial adviser specialising in assisting expatriates in Spain as to which visa or permit you need. Since Brexit this has become essential, especially for UK nationals who no longer have the right of abode in the EU.

2. Residency. Again, it is important to consult on the various ramifications of residency, particularly the timing of physically moving from your previous jurisdiction (such as the UK) to Spain. For example, the UK has the 90 day rule whereby if you spend more than 3 months there in any 12 months, you are deemed to be tax resident. In Spain, it is the 183 day rule. However, should your “centre of vital interests” be deemed to be here (if you have children in school here or you are running a business from here), then despite being physically here less than 183 days, you may well be deemed to be a fiscal resident.

3. Foreign pensions and tax efficient investments. While they may be tax efficient in your country of origin, they may not be here. For example, if you are about to draw down on your pension where there is a 25% PCLS (cash lump sum) available tax free, it may not be so here and could be taxed at full income tax rates. Likewise, UK ISAs and some UK National Savings products will probably not be tax free here. You should consider encashing these while UK resident and switching into tax efficient alternatives here (more on that later).

4. Choice of new country of residence. For me this is a no brainer. Over the years I have met many potential and future clients who let taxation rule their lives and dictate where they should live. I genuinely feel that if you and your partner (and children) want to be happy, choose the place that offers what you and yours need for a happy life. There are still too many people who choose their new home on the basis that there is less or no taxation. A frequent typical example would be a couple who spend 180 days in Spain, then 90 days in the UK, one month on a cruise and one month in Florida. While the husband might be rubbing his hands in “Fiscal Nomad” glee, his poor wife is just fed up wandering the world as Mrs Nomad and not being able to call anywhere “home” (please also remember my earlier reference to “centre of vital interests”).

5. Taxation. There are certain taxes in Spain which are foreign to many from other jurisdictions. Typically this might be wealth tax or inheritance tax (IHT) between spouses or common law partners. Please see an earlier article I wrote about how Andalucia might currently be considered a tax haven. The threshold on wealth tax has now been raised here (and in Madrid) so that most couples can avoid it. In Andalucia, there is effectively no more inheritance tax – if you plan carefully. By selecting the correct structure in which to hold your investments, IHT no longer applies between partners (more on this later).

6. Tax returns and declaration of foreign assets. Timing is all important. When you arrive here, it is important to seek advice as to when you should make your first tax return. As usual in Spain, there is the official rule and the unofficial version. As long as there is a provable intent to make one’s first return, one is not breaking the law. It is always easier to make a return for the tax year beginning after you arrive. This often coincides with the fact you have not been here for more than 183 days prior to the beginning of the tax year (1st January). Returns are made by end of June of the following year, so there is plenty of time to decide when to start. You can of course make a return for a period beginning part way through the tax year. This is sometimes done to coincide with date you left your country of previous tax residence but it is not essential. Modelo 720 (Declaration of Foreign Assets) is always made in March of the following year, with regard to the previous tax year. Note that certificates of tax residency here are only issued after you have made your first return.

7. Capital gains tax (CGT) timing. Whenever possible, dispose of any assets which are either CGT free in your previous country or attract a lower tax rate than here while still tax resident in your previous country. For example, your main residence in the UK is free of CGT when disposed of as a UK tax resident, but when you are tax resident here it would be regarded as a second home, even if you are only renting here. Your Spanish home in turn has special tax privileges as a Spanish resident when you come to eventually dispose of it (as an owner).

8. Health insurance. It is important to remember that since Brexit, UK nationals no longer have the privilege of cross border health care. It is however the rule that to obtain a resident permit or visa you must have Spanish recognised health insurance. To avoid stress, investigate options as early as possible.

9. Spanish compliant investment bonds. These are not only recognised here, but also across many EU countries and the UK (where they were pioneered). They are an incredibly effective tax efficient structure provided by several major insurance companies outside of Spain and with offices within the EU. Here in Spain, they are a flexible, 100% secure (under EU law) means of holding investment funds and cash almost without tax exposure. Only when making regular (income) or lump sum withdrawals is there a withholding tax on the growth element of the withdrawal. Even then, the tax rate is far lower than normal income tax. IHT can also be avoided and you can retain your previous investment manager to manage your portfolio. You should consult your new financial adviser in Spain for details.

10. Happiness is where the heart is. Observe these steps and you will begin with less stress and hopefully continue to happily live your lives here for the rest of your days. There is no place like Spain to have a satisfying and rewarding life (just beware when grandchildren heart strings begin to tug if they live somewhere else!)

If like many people, you’ve become hooked on life in Andalucia whilst here on holiday from the UK, what is the reality of retiring here, and what considerations need to be taken when looking at it seriously?

Since Brexit things have changed somewhat with regards the hoops to jump through to obtain residency, and nearly all of the clients we work with have had to apply firstly for permission to live here full time if they are UK passport holders.

The most common route is to apply for a non Lucrative Visa, and all of the information you need for this can be found at www.upsticks.es Essentially you will have to make your application through a Spanish Embassy in the UK, supplying them with financial information, criminal record checks and proving you have the necessary private health care in place amongst others. This can take a few months and having someone like Upsticks do this for you takes away nearly all of the pain.

This is just the first part of the jigsaw, and you will need to make very careful plans with regards the timing of your arrival if you are selling assets in the UK, typically this is your home, as well as thinking about whether to take pension benefits and what to do regarding your other assets. The most obvious is making sure you take your pension commencement lump sum as a UK tax resident by nature of the fact this is tax free when living there. If you did this after moving to Spain and becoming a tax resident, this would no longer be tax free and would attract income tax here, so it makes perfect sense to deal with this as part of the overall planning for your move.

Then there is the issue of selling your UK home, as if you are deemed a tax resident of Spain in the year in which it happens, there can be Spanish capital gains tax applied to the ‘profit’ you have made when selling. If this is your main home, and you sell when a tax resident of the UK then we all know this doesn’t attract capital gains tax, so to get the timing wrong when moving here and falling into that trap is normally the most important element to plan.

If you have ISA’s in the UK and they are in profit, then again realising these whilst a UK tax resident is tax free. If you held onto these investments and sold them after becoming tax resident here, the profits will attract capital gains tax. In many circumstances it can make sense to realise the profits before leaving the UK, and then make alternative arrangements when you get here. There are options available for tax efficient in- vestment products here, but it is important you are fully versed in the pros and cons of these be- fore doing anything.

Nearly all of my time at the moment is taken up with helping people plan their relocation carefully, so when they get here everything is done in the most tax and cost efficient way possible. With anything like this, my favourite expression is ‘relocating is like eating an elephant, it has to be done a mouthful at a time’.

We have a useful guide on our website which deals with relocating to Spain in more detail, and this can be downloaded at spectrum-ifa.com, If you are considering a new life in Spain, please do not hesitate to get in touch so we can help you every step of the way. For most people the reason they want to move here is for a less stressful life, so making sure you take the right advice is critical to helping this happen.