Living in France with assets in Sterling
By Spectrum IFA
This article is published on: 19th March 2015
Last month I ended my article with the following paragraph: Clients who have Sterling assets do not need to convert them to Euro to make use of the products available to them outside the UK. Those clients who have transferred their assets in Sterling are most probably quite pleased that they did not convert, but what about now? What if we hit 1.40, or 1.45? For my money the only way is down from there, back to my preferred levels. If we do get to 1.40, I will certainly be looking long and hard at my Sterling funds, with my finger hovering over the deal button.
Well, it did indeed happen, and as I write this sterling is worth over 1.40 Euro. Did my finger hover over the ‘deal’ button? Yes it did. Did I press that button? No I didn’t. I need to make two things perfectly clear here. Firstly, what I’m about to type must not be regarded as advice. I’m just telling you what thought process I went through. Secondly, we’re not talking mega bucks (or pounds) here, certainly not for the meagre amount that is lurking in our one and only UK bank account anyway.
It’s quite difficult to express the reason for not changing that sterling into Euro, but I’ll give it a go, at the risk of sounding somewhat deranged. Every one of my pounds somehow feels to me to be worth more than €1.40. That is of course irrational. Anyone who thinks the true rate should be in the region of 1.25 should bite the hand off anyone who offers him 1.40 or better. Yet I didn’t want to do it; I just couldn’t bring myself to sell my shiny £1 coins in exchange for what looks like a bunch of supermarket trolley tokens. Immediate apologies to ‘le Tresorie’ at this point. I suspect that part of me is being a bit greedy looking for a Euro collapse, but would that necessarily persuade me? Potentially not. The weaker a currency becomes, the less inclined I might be to buy it. In essence, I think I’m more likely to buy Euros at 1.40 when the rate is on its way down than when it’s on the way up. I did tell you that I used to be a foreign exchange dealer; funny bunch they are.
The other hot topic at the moment is of course pensions. I know that there is a risk that you might be getting fed up of hearing this, but I am largely opposed to the ‘pension freedom’ that is just around the corner for the UK pension market. I am opposed to virtually all kinds of tax grabs, and I see this as just another example, albeit dressed up as a fabulous opportunity for the over 55’s Or maybe that opportunity is for anyone who can take advantage of the over 55’s, including conmen; salesmen, and taxmen.
For me, the writing is on the wall regarding UK based pensions. They are ‘in play’. Shedding all access restrictions is designed to provide a huge tax income boost for the UK coffers. If it doesn’t work, they will look for another way to get their hands on our savings. Even if it does work, there will come a time when more cash is needed to bale out the UK economy. Pensions will then come under more fire, and more ways will be found to raid the coffers.
I will not be a part of either process. My pension funds are safely housed away from the UK jurisdiction. They will be used as pension funds should be used; to provide an income when I retire, whenever that might be. Hopefully that won’t be any time too soon as I’m enjoying myself too much to stop, but when the time comes I won’t be relying on a UK state pension alone. That would not be an attractive proposition.
QROPS is an extremely welcome result of the European freedom of movement of capital. We should all grasp the concept and use it to ring-fence our future incomes.
Are you thinking of moving to France?
By Amanda Johnson
This article is published on: 10th March 2015
Question:
I am planning to move permanently to France but am not sure where to go for information on the differences in regulations regarding tax, inheritance and pensions between France and my current country of residence?
Answer:
Whilst there are a number of forums and websites offering opinion and suggestions regarding the differences in French taxation from where you currently live, it is worth considering the following points before you make any decisions:
What experience does the person/site/forum have in this field?
- Ensuring that the information you want is accurate, relevant to the country you will be living in and free of any personal bias and opinion, is vital in enabling you to make the right choices going forward.
Is the information you will receive regulated in the country you will be living?
- Rules and regulations in the country you are leaving will most likely be different to France. Making sure the recommendations you receive are based on what is best for you as a French resident is very important.
Has the person providing you the information personal experience of your questions?
- It is always a comfort to speak to someone who has ‘walked the walk’ and not just a casual or second hand grasp of your questions. Personal experiences can often assist people getting used to new legislations and bureaucracy.
Whether you want to register for our newsletter, attend one of our road shows, Le Tour de Finance or speak to me directly, please call or email me on the contacts below & I will be glad to help you. We do not charge for reviews, reports or recommendations we provide.
Can You Avoid Spanish Inheritance Tax?
By John Hayward
This article is published on: 27th February 2015
Savings with UK banks and investment companies could form part of a Spanish Inheritance Tax (IHT) calculation.
If you have money in a Spanish bank, the Spanish tax authorities know about it. If you have money in a UK bank, they probably know about this too due to information passed over by the UK tax authorities. Of course, if you have over €50,000 in a UK bank account you will have reported this to Spain within your Modelo 720 form.
For a Spanish tax resident inheritor, Spanish IHT is due on worldwide assets. Therefore, a Spanish resident wife, inheriting from her husband, could pay tax based on their Spanish property and other Spanish assets PLUS tax on the overseas assets.
The English Will does NOT stop the Spanish tax authorities claiming Spanish IHT (Succession Tax) on overseas assets. The Will governs the distribution of the estate, not its taxation directly.
We can help mitigate, delay and even sometimes completely avoid Spanish IHT by placing money in a Spanish compliant insurance bond based outside Spain. Suitably arranged, the bond could save many thousands of euros in inheritance tax.
Financial seminar for expats in Catalonia
By Chris Burke
This article is published on: 25th February 2015
The Spectrum IFA Group’s Chris Burke spoke at a recent financial seminar alongside Spanish Lawyer, Nuria Clavera Plana, in Llafranc. The event was attended by 30 people and was followed by a Q&A session and a chance to meet the speakers over coffee.
Chris’s presentation covered:
- Currency forecast, thoughts and ideas to implement for 2015.
- UK Government Pensioner Bonds – 2.8%-4% per annum for anyone holding a UK bank account and debit card.
- UK Pension & QROPS changes – Is your pension being managed effectively and is it in the right place?
- Spanish Life Assurance Bonds/Investment – potentially Tax efficient, historically good returns (Prudential) and potentially succession planning friendly.
Chris ran through the concept of ‘the magic bank account’ for over 65’s in the UK, and many people were surprised to find out that you do not have to live in the UK to benefit from these – you just need a UK bank account and debit card and can achieve between 2.8% to 4% per annum with the savings also government backed. He discussed predictions and thoughts on currency, which highlighted last year’s most successful currency forecaster, stating that the Euro/Dollar will be at parity at 1-1 by the end of 2015. Still just as unnerving for those living in Spain, was the prediction that the Euro would reach 1.42 by the end of 2015 against the pound, particularly if the EU have to keep printing money to solve the crisis.
The new rules on UK pensions and QROPS were also highlighted. QROPS is a UK pension that has been moved overseas to benefit from EU rules (please note your pension should be evaluated by a qualified pension evaluator before you consider doing this) and although the new UK rules give much more flexibility, everyone acknowledged that hefty tax could have to be paid to access these. Qrops still has benefits over and above leaving your pension in the UK depending upon your situation, and from April 2015 should have nearly all of the benefits a UK pension will be entitled to, and potentially more.
Tax efficiency was perhaps the most popular subject Chris presented on, with most people interested in saving money on taxes both on their savings and with succession planning. In fact, passing on their money tax efficiently was the main interest over coffee after the presentations.
Presentation From Nuria Clavera Plana (Lawyer):
- New income tax for Catalonia 2015 and what are the exemptions.
- New Capital gains Tax for 2015 in Catalonia.
- What assets need reporting.
- Pension income from sources outside of Spain Amnesty.
Nuria as ever gave a very interesting presentation on what you now have to pay in taxes throughout Catalonia, the reasons why and how this works. By far the most popular conversation was the changes to Inheritance tax rules now in Catalonia, which in essence are the same now for Spanish Nationals and Foreigners residing here. This incorporates a big reduction in tax compared to before. It was also surprisingly good news for those leaving behind assets up to €1,000,000 with potentially limited tax to pay.
There were many questions surrounding what does and doesn’t need reporting for the Modelo 720 overseas asset declaration, ranging from classic cars to items not reported before. This topic always throws up major questions as always!
This year in Spain it is now a requirement to report any overseas pension income you are receiving up until the 30th June 2015. This generally would not have been taxed in most cases in the respective overseas countries due to the amount in question. However this should be reported in Spain and could therefore be subject to Spanish tax laws. It was discussed that this new law has been brought in mainly to find those Spanish Nationals who have been receiving pensions from working abroad previously and have not been declaring them or paying the relevant tax.
Nuria as ever gave everyone detailed analysis on these changes, so everyone left the event with a better knowledge of their own personal situation.
If you would like more information on this or any other questions you may have regarding Tax advice, please do not hesitate to contact Nuria on nuriaclavera@icab.cat or Telephone 972305454.
Chris and Nuria would like to thank all the attendees for asking such pertinent questions and joining in, making the event such a success.
Chris will also be presenting at future seminars in the coming months. Please feel free to contact him on chris.burke@spectrum-ifa.com or telephone him on 936652828 if you would like to know more about these, or wish to discuss any of the above details.
[nggallery id=35]
The currency exchange rate
By Spectrum IFA
This article is published on: 17th February 2015
Time to revisit an old friend this week, the exchange rate. Long term sufferers of my monthly missives will possibly recall that in my dim and distant past I used to be an international banker, and for part of that time a foreign exchange dealer. It was so long ago that we used to have exotic currencies such as the French Franc; Italian Lire, and even the Deutschmark. Heady days indeed! By the time I escaped from the banking world in 2002 these currencies were dead or, perhaps more accurately, held in a cryogenic state, ready to be reheated if need be. The exchange rate between Sterling and the new super-currency, the Euro, was in the mid 1.60s in 2002, and had declined to the mid 1.50s when I finally got to France in 2003. By the time I bought property here in 2004, I averaged 1.45.
The trend was set, but few people were prepared for it. During the financial meltdown in 2007 and 2008 ‘la merde a vraiment frappé le ventilateur’, and the pound plummeted almost to parity with the Euro by the end of 2008. In 2009 I stupidly agreed to start a weekly column for an internet magazine, giving my predictions for the week to come. I struggled with this millstone for nearly three years. My basic message was that large F/X movements like this are always exaggerated. Parity was plainly nonsense, and the pound ought to recover to between 1.25 and 1.30. It takes some ingenuity to deliver this basic message 130 times, and in 2012, with the pound at 1.25, I called it a day. I still remember the sense of relief when I realised I wouldn’t have to sit down at 4pm on any more Fridays to write about why the previous week’s forecast had been so wrong.
It was a good time to stop, as the rate fell again during the second half of 2012 to 1.15 before slowly resuming its upward trend. Interested parties, and by that I mean all expats, probably didn’t take too much notice as we clawed our way back up through 1.20s and on to 1.25 once more. Then, at the start of November last year, a big market move started, and people began to sit up and take notice. Two months later, and as I write, we are at a shade under 1.35. So what is going on?
Politics and economics are of course the answers. They govern supply and demand, which is the final arbiter of the exchange rate. Germany, the powerhouse of Europe, now has a stagnating economy, and Greece, not the powerhouse of Europe, is stirring up political trouble. None of this bodes well for the Euro. So we can all sit back and relax. The pound is heading back to 1.60. Hundreds of thousands of Brits will be pouring into France waving their new cheap wads of Euro, buying up all the property in sight and sending up the values of our houses at the same time.
Does anyone really think that? I certainly don’t. There is no such thing as a safe bet in the currency markets. You must never forget Murphy’s law. Whenever you really want something to happen, Murphy’s law dictates that the opposite will occur.
I think that we are approaching the time when we need to think about selling Sterling. I don’t think we’re there yet, but we need to be careful. We live, after all, in the Euro zone, and thus most of the money we spend is Euros. We may have pensions or indeed other income in Sterling, but that won’t buy your morning croissant. Until you change it into Euro; it is largely useless while you live here. Of course there is nothing you can do about your UK State pension, if you are in receipt of that princely sum. You will just have to be savvy about when and how you convert it. You can however do a great deal with an occupational pension, and you can do a great deal with your savings and investments. There is no better time than now to take a long hard look at your UK pension pot. Savings and investments held in non-French tax efficient bonds are a nonsense. Come and talk to me about them now!
For years now The Spectrum IFA Group have been advising clients on pensions and investments and I have been keen to point out that clients who have Sterling assets do not need to convert them to Euro to make use of the products available to them outside the UK. Those clients who have transferred their assets in Sterling are most probably quite pleased that they did not convert, but what about now? What if we hit 1.40, or 1.45? For my money the only way is down from there, back to my preferred levels. If we do get to 1.40, I will certainly be looking long and hard at my Sterling funds, with my finger hovering over the deal button.
Financial Independence: What’s your number?
By Jonathan Goodman
This article is published on: 16th February 2015
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
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 Spectrum IFA Group Economic Forum
By Spectrum IFA
This article is published on: 2nd February 2015
We have just had our annual conference, The Spectrum Economic Forum. We had presentations from leading investment managers including BlackRock (the world’s largest investment house), J P Morgan Asset Management, Rathbones, Kames Capital, Jupiter Asset Management and Henderson Global Investors.
The conference is a great opportunity for us to hear directly from some of the investment management companies, which we recommend for the investment of our clients’ financial assets. Their collective forward-looking views on markets and key issues for 2015 provided us with a valuable insight, so that we are better able to advise our clients.
We also had presentations from several product providers, including Prudential International, Old Mutual International (formerly Skandia International), SEB Life International and Tilney Best Invest (who also provide discretionary asset management services). All companies gave interesting presentations on developments in their products, which are focused upon the needs of expatriates.
The conference is always a good opportunity to get together with colleagues from the six countries in which we operate. It’s a chance for us to exchange views and discuss issues that are common to all our clients, wherever they live.
There was agreement amongst us that one of the biggest potential ‘issues’ that the financial services industry is facing this year is the subject of pensions, as a result of the forthcoming UK pensions reform. Many Spectrum advisers expressed concern about predatory companies that are already operating, which could result in people unwisely cashing in their UK pension pots. The importance of obtaining professional advice from qualified advisers, who are regulated by the authorities in the country where the pension scheme member is living, was highlighted.
We were fortunate to have Momentum Pensions present to us, which is the first company to be able to offer a truly multi-jurisdictional pension solution for clients. Like us, Momentum has their clients’ best interests at heart and they understand that expatriates can move from one country to another. Therefore, Momentum has now added a UK Self Invested Pension Plan to their range of international pension solutions, which means that even if the client moves back to the UK, they can have a smooth transfer of the pension benefits from the overseas pension scheme back to the UK.
As can be seen from the above, we are constantly working closely with investment managers and product providers to find the best solutions for our clients, whether this is for the investment of financial capital, using tax-efficient solutions, pensions or inheritance planning. This forms an important part of our Client Charter
Planning for Le Tour de Finance 2015 is also now underway. As many people reading this know, this event is a perfect opportunity to come along and meet industry experts on financial matters that are of interest to expatriates.
We are now taking bookings for May 2015 events, please contact us here:
- Perpignan – 19th May
- Bize-Minervois – 20th May
- Montagnac – 21st May
Le Tour de Finance is an increasingly popular event and early booking is recommended. So if you would like to attend one of these events, please contact me to reserve your places.
The France Show, 23-25 January 2015
By Lorraine Chekir
This article is published on: 21st January 2015
Visit the Riviera Alliance stand (P268) at The France Show, The Olympia Exhibition Centre, 23-25 January 2015 10am-5pm
The Spectrum IFA Group is one of the founding members of the Riviera Alliance, an established network of professionals based in the south of France. Spectrum will be represented by Lorraine Chekir, one of the advisers in the Cote d’Azur region. The Riviera Alliance covers every step in the process of buying, owning, renovating, or selling real estate. Each member is a specialist in their field and will make your life in the Riviera easier.
“We are here to help you”