Case Study Spanish Tax Resident Couple
Husband 60, wife 60, married, with 2 children who are financially independent and living in the UK
By Barry Davys
This article is published on: 24th January 2023
Husband 60, wife 60, married, with 2 children who are financially independent and living in the UK
đ Pensions: ÂŁ930k
đ Investments ÂŁ60k
đ Cash Spain âŹ60k
đ House âŹ1.25 M
đ Wills – UK & Spain
đ Cash UK ÂŁ184k
Build Understanding of Pension Situation
Better returns on Non Pension monies
Forward Planning including Inheritance tax
â
Clarity for clients and children on Inheritance Tax
â
Improved return on bank accounts to 3.5% pa giving an improvement of 4,200 pa
â
Removed pensions from UK Lifetime Allowance rules
â
By providing documentary evidence from UK HMRC for Main Residence Nil Rate Band confirmed an inheritance tax saving of up to ÂŁ140,000
â
Improved widows pension by ÂŁ7,000 pa
â
Kept clients compliant with changing tax rules
â
Answered the financial question âAm I going to be OK?â with a âYesâ
If you are a resident in Spain, or are planning to become a resident and would like any information on tax, pension transfers, investment planning or general financial planning you can contact me on:
barry.davys@spectrum-ifa.com or direct on 0034 645 257 525
By Portugal team
This article is published on: 20th January 2023
What can you do in turbulent times?
With rising inflation, war, political instability and the energy crisis, 2022 thus far has been a perfect storm and markets have responded. What action do you need to take to protect your wealth?
Review your position
The single most important thing you must do is act and not bury your head in the sand. Whether you have recently made changes or have never taken any action, you should be taking a look at:
Work with experts
Taking sound advice comes with a cost but could save you a lot of money in the long run. Whether that be in income, capital gains or inheritance tax, improved investment returns or preservation in the downturns. It will also provide you and your family peace of mind.
How do you take advice safely?
With over 30 years of combined experience in the industry and over 15 in Portugal, we are best placed to provide expert, impartial and personalised advice to expatriates. Please contact us if you wish to discuss your position.
Debrah Broadfield and Mark Quinn are Chartered Financial Planners (level 6) and Tax Advisers specialising in cross-border advice for expatriates. Contact us at: +351 289 355 316 or mark.quinn@spectrum-ifa.com/debrah.broadfield@spectrum-ifa.com
By John Hayward
This article is published on: 19th January 2023
Valencia reduces allowance with more people having to pay
the Impuesto Sobre el Patrimonio
Further to my article from last week, and after consultation with our accountant associates, it appears that the main residence wealth tax allowance of up to âŹ300,000 only applies after 3 years of living in the property (habitual residence). This has been questioned but, as is often the case in Spain, getting a response from the tax office can be tricky.
The tax office words that are relevant in terms of getting around this 3-year rule are “circumstances that necessarily require the change of housing”. Moving to Spain to retire or for a change of lifestyle would not generally tick that box. If there are justifiable health reasons or similar then that appears to be acceptable in terms of applying the allowance.
To emphasise the habitual residence aspect, from JC & A Abogados in Marbella: “Please note that you must live effectively and consecutively in the property for more than 3 years, so you cannot rent the house out even for one day. In addition, you have to impute a benefit in kind for the Spanish property during the same 3 years period.”
In the words of JC & A, “The 3 year period starts counting from the purchase date as long as the dwelling is inhabited effectively and permanently within 12 months as from the purchase date.”
“…..a taxpayer who bought his main home but could not live in it because it was not suitable and had to have some works that exceeded 12 months; the conclusion is that the 3-year period starts counting from the date he moved in and not the purchase date.”
Adding salt to this potential tax wound, whilst it is not treated as your main residence (even though you live there permanently), you have to pay tax on its value as if you were a non-resident.
This all seems rather inequitable but is the law as things stand.
If you would like to discuss managing your money in these volatile and uncertain times, please do not hesitate to contact.
Visit John Hayward of The Spectrum IFA Group or complete the form below.
By Spectrum IFA
This article is published on: 17th January 2023
Each person should seek individual advice when it comes to financial planning but here, we touch on some commonly held UK assets and the main points that you should be aware of.
Bank accounts
Post-Brexit many UK banks have ceased services to non-UK residents forcing clients to seek out Sterling-based accounts elsewhere. The Channel Islands and Isle of Man are popular alternatives to the UK when it comes to banking, but these are considered âblacklisted jurisdictionsâ by Portugal and interest is punitively taxed at 35%, rather than the usual 28% or 0% under NHR (Non-Habitual Residence).
ISAs
ISAs do not retain the same tax exemptions when held by Portuguese residents and are treated in the same manner as standard investment portfolios. For NHRs, generally, interest and dividends are tax-exempt and realised gains are taxed at 28%, but if your ISA holds funds, based on the strict reading of the tax law, returns are classed as âother incomeâ and taxed at 28%. For non-NHRs, interest, dividends and gains are taxed at 28%.
Whether you retain or restructure your UK ISA will depend on your longer-term plans.
If your move to Portugal is short-term, or if you are not certain that it will be your long-term home, then there is a case for retaining your ISAs. Although you cannot add to them whilst non-UK resident you can continue to hold them, and once you return to the UK they resume their tax efficiency.
If you believe your move to Portugal is long-term (as a rule of thumb, 5 years or more) then restructuring and starting an investment vehicle that is suitable for residency in Portugal would make sense for greater tax efficiency, amongst other reasons.
A planning point you should consider is to ârebaseâ your ISA prior to leaving the UK to âwash outâ any taxable gains accrued to the point of your departure. This way, if you decided to restructure, encash, or withdraw from the ISA as a Portuguese tax resident later, the capital gains tax liability should be much lower.
Investments with UK-based Advisers
Brexit brought an end to the passporting rights that allowed UK-based advisers to advise clients across the EU and vice versa. This means that many advisory firms may not have the right permissions to continue providing advice to clients living overseas. This can be worrying for those who have worked alongside their trusted adviser for many years and understandably, many UK advisers do not want to lose their clients. But good financial planning and structures for UK residents are unlikely to be effective for those living outside of the UK.
Whilst you can continue your relationship with your UK adviser and pay their fees, without the right permissions they cannot service your accounts e.g. provide investment advice for portfolio rebalancing/fund switches, and more importantly, you might not have proper recourse if anything were to go wrong. This could not only affect your investment performance, but you will end up paying for advice that you cannot (legally) take advantage of.
Lastly, there are practical implications. Does your UK adviser understand the rules in your new country of residence? We have seen many individuals miss out on substantial tax-saving opportunities because UK advisers were not aware of the local tax rules in Portugal or the implications of the planning in place.
With over 30 years of combined experience in the industry and over 15 in Portugal, we are best placed to provide expert, impartial and personalised advice to expatriates. Please contact us if you wish to discuss your position.
By Mark Quinn
This article is published on: 13th January 2023
Please join us for our quarterly client update and 2023 outlook video call on Thursday 26th January at 11am.
After registering, you will receive a confirmation email
containing information about joining the webinar.
I will be updating you on international tax issues affecting residents in Portugal, and those looking to relocate here.
I will also be joined by two specialists to give their thoughts on investment and currency markets:
Christopher Saunders
New Horizon Co-founder and Chartered Wealth Manager
Chris co-founded New Horizon in 2008 and has focussed on developing services to IFAs, accountants and other intermediaries and works with many leading IFA groups and accountancy networks in the UK and overseas.
Steve Eakins
Currency specialist, Lumon
Steve has been working in the international payments market for nearly 15 years. Over that time he has helped clients through the market around ash clouds, hung governments, wars in Europe, Brexit and Trump.
By Sue Regan
This article is published on: 12th January 2023
Firstly, I would like to wish you all a very happy, healthy and peaceful 2023!
As we are starting a new (tax) year I thought it would be helpful to update you on some changes that may affect you in 2023, both tax related and more generally.
Unsurprisingly, the main purpose of âla Loi de Financeâ (Finance Act) for 2023, published on 31st December 2022, is to help protect households and businesses from inflation.
In order to contain the effects of inflation on the level of household taxation, the Finance Act for 2023 has increased the tax brackets of the progressive âbarĂšmeâ scale, applicable to income received in 2022, by 5.4%. That’s almost four times higher than last year. There are no changes to the rates of tax.
Increase in income tax brackets
The progressive barĂšme scale for income received in 2022 is as follows:
Income threshold for single person household | Tax rates |
Up to 10,777 ⏠| 0% |
From 10,078⏠to 27,478 ⏠| 11% |
From 27,479 ⏠to 78,570 ⏠| 30% |
From 78,571 ⏠to 168,994 ⏠| 41% |
over 168,994 ⏠| 45% |
As France pools allowances for households of more than one person, the threshold for tax-free income received in 2022 by a household of two will be in the region of 29,000âŹ.
Social charges
There have been no changes made to the rates of social charges for 2023 and they remain as follows:
Employment income | 9.7% |
Pension income | 9.1% |
Investment income | 17.2% |
The special lower rates also remain in place as follows:
Pensions
The rate of social charges on pension income is reduced to 7.4% for those households where taxable income is less than around 2,000⏠per month (or 3,000⏠per month for a couple). Holders of the EU S1 certificate, and those who are not affiliated to the French health care system, are exempt from social charges on pension income, regardless of the amount received.
Investment income
As above, for holders of the EU S1 certificate, and/or those covered under the health care system of another EU/EEA country, social charges are reduced from 17.2% to 7.5% for investment and property income.
Good news for homeowners and renters living in France! The phasing out of taxe dâhabitation which began a few years ago will come to an end in 2023, with this property related tax being scrapped for all principal homes in France. This also includes the abolition of the TV licence (contribution a lâaudiovisuel public).
However, second-home owners and owners of vacant properties are still liable to pay taxe dâhabitation on these properties.
The current threshold of 1,300,000⏠will remain in place for 2023 with no changes to the scale rates of wealth tax.
There are no changes to the taxation of assurance vie policies or their inheritance planning benefits. Thus, these popular investment âwrappersâ remain a very attractive vehicle for both personal taxation and inheritance planning.
So, what else is there to knowâŠâŠâŠâŠ
Energy prices are going up
With inflation in France at its highest in decades and global energy prices having sky-rocketed in 2022, 2023 is set to start with a series of price hikes. Firstly, the 4% cap on energy tariffs went up on 1st January, meaning a potential increase of up 15% on gas and electricity bills. In practice, this means that average household bills are likely to go up by around 20⏠a month.
Petrol subsidies come to an end
Petrol prices increase from January, with the governmentâs fuel rebate ending on December 31st. However, a fuel grant of 100⏠is available for low-income workers who rely on their car for work. Full details can be found in this link to the government website IndemnitĂ© carburant de 100 ⏠: comment ça marche ? | impots.gouv.fr
Increase in the minimum wage
Franceâs minimum wage (or SMIC) has gone up 1.8%, putting the gross monthly wage at 1,709.28⏠or 1,353⏠net. Importantly, this figure is used as the basis for calculating the sufficient funds needed for a French visa, so we can expect the required minimum income to go up accordingly.
Increase in motorway tolls
French motorway tolls are set to go up from 1st February with an average 4.75% increase.
Expected increase to savings interest rates
The interest rate on the popular tax-free savings accounts, the Livret A and the Livret de DĂ©veloppement et Solidaire (LDDS), is re-assessed every six months and it is expected that the rate will be increased to at least 3% per annum on both accounts with effect from 1st February.
France is going paperless
You will have probably already noticed that some stores are asking if you want a receipt or not, and more and more shops are offering the option for an emailed receipt. From April, this more eco-friendly practice will become standard practice at all shops. Thus, if you still require a printed receipt, you will have to specifically ask for one.
Cold call relief
Some better news if, like me, you are constantly being harrassed by cold callers – new regulations from next March mean that commercial phone calls can no longer be made on weekends, evenings after 20h00, or lunchtime from 13h00 to 14h00.
The last few years have been somewhat different to say the least. A global pandemic swiftly followed by war in Europe, both of which we havenât experienced for generations. These highly unusual events have proved very challenging for many including governments, health workers and investors. The start of a new year is always a good time to review your finances. I am here to help and I would be very happy to sit down with you for a review to ensure that your financial plan is on track to achieve your longer term objectives. Please contact me at sue.regan@spectrum-ifa.com or call me on 06 89 20 32 47.
By Sue Regan
This article is published on: 9th January 2023
I like to read articles written by my Spectrum colleagues, especially those working in France, but also those by colleagues working in other European countries as I find it interesting to read what the hot topics are in their areas and how they compare to France. I came across a very interesting one recently entitled âTHE Folderâ, written by my colleague, Gareth Horsfall, who lives and works in Italy.
The article is of universal interest and although the subject matter could be viewed as having rather depressing undertones, it includes some really useful tips on keeping our affairs in good order, not only for ourselves but, more importantly, to help those close to us who may be tasked with taking over at a time when we may not be around to/or capable of doing it ourselves. Under ânormalâ circumstances this would be a stressful and difficult time for family but potentially far more difficult for anyone trying to deal with the affairs of someone who lives/lived in a different county, with little or no knowledge of that countryâs legal or financial system and unable to speak the language.
I like to think of myself as being fairly well organised when it comes to keeping my âfilingâ in order. I say âmy filingâ because my husband sees finance and admin as my department (not surprising given my occupation) and he is more than happy to leave everything to me. Like many of you, I am sure, I have a drawer with lots of itemised dividers separating out all our important documents, statements, bills, birth & marriage certificates, etc so that I can lay my hands on everything very quickly, and I have a spreadsheet of our various bank accounts, investments and pension arrangements, etc so that I can keep track of everything.
For a while now, I have been mindful of the need to provide relatives with details of our affairs, especially as we live in France, which only further complicates matters for them if left to take over. However, on reading Garethâs article, I realised that there is so much more I should do to make things as easy as possible for them if the unthinkable were to happen. So, I have made a start on putting together âOur Folderâ based on the very comprehensive list in Garethâs article, which I have used below to share with you in the hope that it will be a useful guide for those of you who may need it.
So what is ‘THE’ folder?
It is a single file (digital or physical – preferably both) where you keep all of your important personal and financial information together. It allows easy access to these documents in the event that youâre no longer around to help. It is really important to have it in place especially where one family member takes the lead with the family finances.
It seems like a lot of work – is it worth the effort?
Yes, absolutely! A time of loss can be stressful enough without having to try and piece together the deceasedâs financial affairs. Don’t underestimate the benefit this will provide to the executors of your estate if you have one place with all your financial and legal documents in an easy to understand format. I know from experience it will be very much appreciated – my dear Dad was a stickler for record keeping and had put together his version of his and Mumâs âFolderâ which made it much easier for my Mum, my sisters and I to sort things out after he passed.
However, preparing ‘THE’ folder is more than avoiding stress – if you leave behind an administrative nightmare you could delay the accessing of funds by inheritors and the potential for racking up sizeable legal fees.
So which is bestâŠ..physical or digital?
This comes down to personal preference, but I would recommend both, if possible. Whether you choose to have a digital folder with all these documents in or not, you should at the very least have your documents scanned in case of fire or theft, and quite often companies will now accept scanned copies of documents instead of hard copies, if they can be certified or electronically signed.
A digital file can be password protected and you can give access to a trusted individual who can access it in the event of your death. (Remember they will also get access during your life, so ensure they are a ‘trusted’ individual). A Google file, for example, can be updated over time and to which you and a family member have shared access. This file can then be stored on your main computer, in the cloud or on an external hard drive. You can use a physical folder to keep hard copies of all the same information together.
I will do both when building ours, as I still like to have paper copies, and I will share the digital folder with family members.
Birth, marriage and divorce
Life insurance and retirement
Bank accounts
Assets
Liabilities
Income sources, tax and social security
Monthly expenses (so they can be continued after death or accounts closed)
Email and social media account details
Contact details
How often should ‘THEâ folder be reviewed?
Firstly, it is sensible to note the date that it was last reviewed so that anyone using it has an idea of how up-to-date the details are. Going forward, reviewing the file on an annual basis should be sufficient.
And finallyâŠ
Weâre coming into winter now â what better time to make a start? Ensuring that your papers are in order in the event of your sudden death is incredibly important when living in another country. It will provide you with peace of mind that your loved ones will not have too much difficulty in administering your estate and your family will be eternally thankful that you did it for them. Once itâs done be sure to tell someone about it. There is little point going to the effort of creating such a folder if no-one knows of its existence or where to find it!
If you need help with putting your folder together, are unsure where to start or would simply like a review of your financial situation please feel free to contact me below.
By Katriona Murray-Platon
This article is published on: 9th January 2023
Happy New Year! I wish you all a very happy, healthy and prosperous year in 2023! I hope you all had a nice Christmas. We made it to Disneyland in spite of the train strikes in France and then onto the UK for our first British Christmas since 2018! It was good festive fun!
As from 15th January 2023, the tax office will pay you a 60% advance on some tax credits and tax reductions. These include the tax credits/reductions for charitable donations, home help costs and childcare costs. This will be 60% of the amount declared in 2022.
In my last Ezine, I mentioned the fuel allowance. Now, since 22 December 2022, there is an allowance of between 50 and 200 euros for those using logs or pellets to heat their homes. This is for people with less than 2260 euros income per month for a single person or 4750 euros for a couple with 2 children. You will need to request this payment by going to this website https://chequeenergie.gouv.fr/beneficiaire/eligibilite.
Since 1st January, receipts and bank card receipts will only be printed if you specifically request them. Also, from 1st January, companies (Entreprises individuels and SCIs) can do their own formalities online on formalites.entreprises.gouv.fr
No need to throw out your equipment when it breaks down. From 15 December 2022, it is even cheaper to repair your household appliances. There is a now a government allowance of between 10 and 45 euros off the price of repair depending on the type of appliance which works out to be around 20% of the repair costs. This only applies to appliances that are no longer covered by their warranty. For more details and to find an approved repair company go to: https://www.ecosystem.eco
Finally, in Spectrum news, from 16th to 20th January I shall be joining my colleagues for our annual conferences at the Gleneagles hotel in Scotland. As you know my name is Scottish and my father and his family are from Scotland, so I am very much looking forwards to going there and celebrating Spectrumâs 20th anniversary!
After five full years in the business I am beginning to get a sense of how variable each year can be. We have had three very strange years from covid and lockdown, to coming out of lockdown and getting vaccinations and then last year the war in Ukraine and inflation. Some analysts suggest that inflation may subside in 2023 but stop short of actually predicting this. Nobody has a crystal ball but I know what I do have thatâs important which is my family, my friends and my clients. Iâve got you and youâve got me, so whatever 2023 holds, I know that we can see it through together!
All the best for 2023.
By Gareth Horsfall
This article is published on: 23rd December 2022
Well, it’s nearly that time of year again and I thought I would subject you to a last dose of Gareth’s musings before the year closes.
They say that the years pass more quickly the older you get, but I am not sure just how much quicker they can fly by based on how this one has zipped by.
So, it is with this in mind that I thought I would write something nice and Christmassy for you: Why it’s unlikely that China will invade Taiwan…..at least for the foreseeable future! What more could put our minds at rest this Christmas than a rational argument as to why China is unlikely to start another war in 2023 just when we have plenty of others to contend with.
OK, it doesn’t necessarily have a festive feel to it, I understand that, but I bought a book this year written by Louis-Vincent Gave who is one part of a company called Gavekal. They provide very high level statistical, political and economic analysis to businesses and governments around the world. They are quite famous in this area and their work is exceptional. The book is entitled ‘Avoiding the Punch: Investing in uncertain times‘. In it there is a section on exactly why China is unlikely to invade Taiwan, at least for now. Since this was a concern expressed by more than just a few clients this year (presumably given our Western media tendency to constantly be baiting us into believing that it is imminent),I thought it might make a nice E-zine to finish the year and give us some hope for 2023. As they say, knowledge is power…and I would add less angst!!! :0)
It’s all about semiconductors.
Yes, the whole business of China invading Taiwan and the USA threatening to protect the island, whatever it takes, is all about semiconductors but if, like me, you are wondering exactly what we use semiconductors for, the following should give you a quick answer:
Semiconductors are an essential component of electronic devices, enabling advances in communications, computing, healthcare, military systems, transportation, clean energy, and countless other applications.
In essence, they are now used in almost everything that we ‘need’ to run our daily lives. From your phone to computer to thermostat, clocks, TV’s, machinery in factories, the MRI machine at the hospital, wind turbines etc. We can’t live without them. So, for any nation state it is important to have access to the companies, and countries, that monopolise the manufacture of them.
Control of the market in chip making has for a long time been monopolised by the USA through the tech firm Intel. But, in July 2020, the US were taken aback when Taiwan Semiconductor Manufacturing Co (TSMC) announced that they had technologically leapfrogged Intel in the business of high-end chip making.
(The USA started a trade war with China over semiconductors in 2017/18 when they placed restrictions on the export of semiconductors to Huawei, ZTE and other Chinese companies which brought those companies to their knees).
However, like all fairy tales, there once was a time when the USA and China sort of got along with one another. The days when Taiwan made those nice little plastic toys and bicycles that they would export into the West, and no one felt threatened. However fast forward to today and they are now arch enemies just at the time when Taiwan has now surpassed Intel to become the No 1 producer of the world’s most important commodity.
So, the real battle ground is not Taiwan itself (which interestingly, the USA recognises Taiwan is a part of China, but does not recognise China’s sovereignty over the island) but for the control and continued access to the global semiconductor market.
1. If China were to invade Taiwan it would surely result in Taiwan’s semiconductor factories being damaged and/ or destroyed. Even if China invaded by sea, Taiwan would have time to self-sabotage the factories and keep hidden any secrets in the manufacture of this precious commodity. Since a third of China’s semiconductors are supplied by Taiwan, it would shut down China’s tech industry for which there would be no other supplier. China has placed significant importance on the development of its tech industry as part of its growth strategy and so this would be a backward step.
2. Military conflict with Taiwan would limit, if not cease, China’s ability to make these semiconductors at home. Factories that produce these highly specialised chips need an investment of close to $20 billion just to be functional and most of the machinery required to make them comes from Japan, the USA, the Netherlands and South Korea. All countries which would likely cease trading with China if it invaded Taiwan.
Strangely, what might speed this process along (and a potential invasion of Taiwan) is America’s continued actions to strangle China out of the semiconductor’s market. On 7th October 2022 the USA imposed new sanctions on China by restricting the supply of equipment and tools to any manufacturer of semiconductors in China. Not only, but also any US person, green card holders and foreign national of the US are prevented from going and working in a Chinese semiconductor production facility without first obtaining a licence, therefore making it virtually impossible to do so. (Strangling the ability for China to hire the talent to train their own engineers)
You might think this would slow China down, but it’s quite the opposite because as a result of these sanctions the Chinese government have now placed an even greater importance on the development of science and innovation in their economy. The US sanctions have had the adverse effect of aligning Chinese business interests with the Chinese government itself. Both are now convinced that they cannot rely on anyone but themselves and certainly must not be dependent on US (and its allies) sourced goods/materials. Hence the Chinese government and Chinese businesses are collaborating to build domestic alternatives to imported technologies.
The question of building a domestic semiconductor sector in China has moved from being a business decision to a matter of national security, and for businesses a matter of survival.
So, you might be thinking what is the time line for China becoming self-sufficient in the manufacturing and technology surrounding its own domestic market for semiconductors? The answer: around 2030 according to various sources. So, a Taiwan invasion, might be a few years off yet! All the sabre rattling between the US and China is likely to be just that for some time to come.
If you would like to discuss this or any other subject relating to how the economic, social and political events in the years ahead might affect you and your personal financial plans, then you can contact me on gareth.horsfall@spectrum-ifa.com or on cell +39 333 6492356
And on that happy note..
By Jeremy Ferguson
This article is published on: 22nd December 2022
At the beginning of this year the World started to âwobbleâ, set off by the Invasion of Ukraine, and rising murmurs about the likelihood of increased inflation, and with that the threat of rising interest rates.
Share prices in companies around the world quickly started to fall, shortly followed by the never-ending spiral of doom and gloom in the news, creating a continuously depressing stream of information showing the Worlds financial markets were taking a downturn. This all came as a bit more of a shock because of the unprecedented period of cheap money, and constantly increasing share prices everyone had become used to over the last ten years.
After the lockdowns I always maintained you couldnât just stop the world turning without it eventually to have some sort of effect. It just took a while for it to come out in the wash – and now it has. A lot of the delay between stopping economies working, (and a noticeable effect), was the false security provided by what amounted to the printing and the subsequent handing out of money in many countries, to name but one of many factors that occurred during those crazy times.
Eventually, after the factories were closed and businesses shut, supply chain issues came to light. The backlog of empty production lines had to be dealt with. That, coupled with an imbalance between limited supply and a sudden surge in demand, rising transport costs, plus the knock-on effect of the War in Ukraine, have all resulted in inflation going through the roof.
Traditionally the central banks around the globe try and control inflation with interest rates, and at the moment they are raising them at one of the fastest rates ever seen in a bid to try and stem the current surge in inflation. The worry for next year will be whether they may slow things too much, as these things tend to have a time lag. We can only wait and see. Higher interest rates are not all bad news, as savers normally benefit from interest on their bank deposits, but this isnât happening significantly to date. When they are being offered, my experience is that the bank will only allow relatively small amounts to be deposited in these savings accounts offering higher rates.
On top of everything already mentioned, other factors also came to a head this year – the UK started to feel a Brexit effect which has weakened overseas investor confidence and taken its toll on trade. Liz Trussâs infamous UK mini-budget caused UK Government Bonds to fall in value like crazy, and what is usually considered a safe haven for many clients and pension funds, took a drastic downturn.
Recessions normally have an effect on employment, but at the moment this looks ok. Interestingly however, if you look at the US, there are an estimated 4m people off work at the moment due to long covid, so figures there are certainly distorted.
So as you will already have gathered, 2022 really hasnât been a great year!
Living in Spain is such a privilege for many of us. The doom and gloom out there at the moment seems so much more acceptable when you wake up to beautiful weather almost all of the time. The cost of living has risen, but in general terms Spain is still a lot cheaper to live in than the UK.
They say itâs important to count your blessings, and if the fact we live here is one of them, then I for one am looking forward to 2023.
If you fancy an overview of your finances, even if itâs just to reconfirm your plans are all well founded in light of the ever-changing world, please do not hesitate to get in touch.