Living in Spain after BREXIT

By Chris Burke
This article is published on: 27th August 2020

27.08.20

After the results from the UK’s General Election, it seems we are closer to Brexit than ever before, so are you prepared for it living in Spain?

Documentation to remain in Spain

There are many rumours among non-Spanish people of what you need to do to stay in Spain should Brexit happen. The response from the Council recently has been, should you hold a NIE and an Empadronamiento, you are proving you are resident in Spain, so for now these should suffice. However, if Brexit does go ahead, Spain could draw a ‘Stay in Spain’ line in the sand which would then need adhering to. In the worst case scenario, a renewable 90-day tourist visa would give you time to adhere to whatever the new rules are. Spain has said publicly it will reciprocate what the UK does, and the UK knows there are far more British people living in Spain than the other way around in the UK.

UK Private and Corporate Pensions

The current HMRC rules state that if you take advantage of moving your UK pension abroad it must be to either where you are resident OR in the EU (due to the UK being in the EU). If this is not the case, you would have to pay 25% tax on the pension amount. Therefore, it is very likely that as the UK would be leaving the EU, these rules would not be met and the 25% tax charge would start to apply to pension movements outside of the UK. This could be the last chance to evaluate whether it’s better for you to move your pension or not and take advantage of the potential benefits, including being outside of UK law and taxes.

National Insurance Contributions

If you were to start receiving your State pension now, you would approach the Spanish authorities and they would contact the UK for their part of the contribution, taking both into account. Before the UK joined the EU, you would contact each country individually and receive what they were due to pay you. If this becomes the case again, for many British people the UK part of their State pension would potentially be more important, as it is likely to be the bulk of what you receive. We don’t know how Spain will act with regard to state pension benefits to foreigners; therefore it would make sense to manage the UK element well if this is your largest subscription.

I recommend two things here; firstly check what you have in the UK so you know where you are. You can do that here:

https://www.gov.uk/check-national-insurance-record

You can contact the HMRC about contributing overseas voluntary contributions at a greatly discounted rate, from £11 a month: you can even buy ‘years’ to catch up:

https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions

I have mentioned this in Newsletters before, but it really is a great thing to do, both mathematically and for peace of mind. Many people I meet living away from the UK have ‘broken’ years of contributions which is leaving themselves open to problems in retirement.

TIP: If you have an NI number, you do not necessarily have to be British to do this.

Investments/stocks/shares/savings

Time apportionment relief

Statistically, in 75% of British expat couples living abroad, at least one of them will return to live in the UK. It remains to be seen whether this changes if the UK leaves the EU, however, you can easily save yourself some serious tax if you have this in your plan of eventualities.

You can, in effect, give yourself 5% tax relief for every year you spend outside the UK by positioning your investments/savings correctly. Then, upon your return, you can take this tax relief when you are ready, such as in the following example:

Mr and Mrs Brown invested £200,000 ten years ago when they were living in Spain.
After this time, it is now worth £300,000
They returned to the UK and have been resident there for the last year (365 days)

They decide, after being back in the UK for 1 year (365 days) to cash in the investment, taking advantage of ‘Time Apportionment Relief’ which will be calculated the following way:

£100,000 (total gain)
multiplied by the number of days in the UK (365)
divided by total number of days the investments have been running i.e. 10 years (3650 days)

Resulting in a £10,000 chargeable gain (that is what you declare, not the tax you pay).

There are other potential tax savings as well, but they depend on other circumstances. If you have your savings/investments set up the right way you can take advantage of this.

If you have any questions or would like to book a financial review, don’t hesitate to get in touch.

Tax break for pensioners moving to Italy

By Andrew Lawford
This article is published on: 14th August 2020

Anyone like the sound of living in Italy and paying only 7% tax?

Generally speaking, if you are contemplating the move to Italy you will be thinking about many things, but saving on your tax probably isn’t one of them. So let me give you a nice surprise: if you are in the happy situation of being a pensioner considering moving to Italy, 7% tax on your income is possible, subject to a few rules, for the first 10 years of your residency in the bel paese.

This all came about in 2019’s budget and had the aim of encouraging people to move to underpopulated areas of Italy. Initially, the rules were that you had to take up residency in a town with fewer than 20,000 inhabitants in one of the following regions: Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia or Sicily. Subsequently, the criteria were extended to include towns in the regions of Lazio, Le Marche and Umbria that had suffered earthquake damage and which have fewer than 3,000 inhabitants.

Of course, being Italy, something had to be difficult in all of this, and indeed the law makes reference not to a list of towns but instead tells you to look at ISTAT data (ISTAT is the Italian statistical institute) for the population levels on 1st January in the year prior to when you first exercise the option.

Given the difficulty in finding out exactly which towns would be covered by this rule, I delved into the ISTAT data and also dug out the relevant references to earthquake-struck towns with fewer than 3,000 inhabitants in the other regions mentioned above. I have put all of this in an Excel file which gives a list of towns eligible for the

pensioners’ tax break in Italy divided by region and then further by province, so that you have a rough geographical guide as to the areas you could consider moving to Italy.

As I was sifting through the ISTAT data it suddenly dawned on me that if the cut-off is 20,000 inhabitants, then almost the whole of Southern Italy is eligible for this 7% regime, and you can include in that some truly delightful places such as Vieste in the Gargano (Puglia), or even the island of Pantelleria. This is possible because Italy is divided up into municipal areas that sometimes have more feline than human inhabitants. Obviously, if you are looking for raucous nightlife then you are likely to be disappointed by what is on offer, but if, on the other hand, you like the idea of not having too many people around, then you could do worse than the town of Castelverrino in Molise (population 102) or Carapelle Calvisio in Abruzzo (population 85). Perhaps one day you could even become mayor.

Flat Tax Regime

This new flat-tax regime comes amid a move by a number of European countries to attract pensioners to their shores. Portugal offered a period of exemption on income tax for foreigners (the benefits of which they are now reducing) and Greece has recently announced the intention to offer a 7% flat tax on foreign-source income for pensioners (I wonder where they got that idea from?), which is also promised for 10 years. There is some discussion about the fact that the EU is not generally well-disposed towards these preferential tax regimes, which could lead to them being phased out in a relatively short period of time – so for those looking to make the most of them, time could truly be of the essence.

The great thing is that the 7% rule applies not only to your pension income, but can be applied across the board to any foreign-source income and there is also a substantial reduction in the complexity of the tax declarations that must be made. There are further tax-planning opportunities in all of this, because much will depend on whether you are planning on being a short-term or long-term resident of Italy.

As always, the devil is in the detail as far as tax and residency planning is concerned, and the year of transition when you first establish residency in Italy is key to setting yourself up in the most efficient manner.

So if the above sounds interesting, please get in touch and I would be happy to send you the list of eligible towns and discuss how the rules of the regime apply to your situation.

The folder…

By Chris Webb
This article is published on: 10th August 2020

10.08.20

I´ve been playing around with this article during the past few days, trying to fill in some spare time during the weeks of this long hot summer we have here in Spain. I realised quite quickly that writing things that will be of genuine interest could be quite hard so for this article I´ve decided to share with you what I personally am doing at home right now.

Considering some limitations of movement right now it would be a great time to give this some thought.

One piece of advice I always give to my clients is to prepare “THE FOLDER”. You´re immediately wondering what I´m going on about, let me enlighten you to what it is and why you should do it.

For me personally I am reviewing my folder and checking its updated. Interestingly I needed to refer to my folder yesterday and realised I still had some older information on there which isn’t relevant anymore, so tonight’s job is to review and update.

There are many scenarios where you´ll be thankful for making the folder. When I moved house two years ago I went straight to the folder and had all of the companies contact information as well as policies or account details which made informing them all much easier, on the flip side I´ve also lost a family member where finding their folder reduced the stress in dealing with their estate.

In moments of stress you find yourself trawling through endless pieces of paperwork to ascertain assets and account details, then you get that lightbulb moment…….. why wasn’t it all documented.

What is THE folder?
It is a single file (digital or physical) where you keep all your important personal and financial information together. It allows easy access to these documents if you’re no longer around to help. It is even more important to have it in place where one family member takes the lead on the family finances. That includes paying bills, managing accounts and storing documents.

As a family we decided to do both a physical folder and a digital folder. The digital folder is password protected, both me and the wife have access to this, and we have shared the password with close friends should anything happen to us. In the digital folder we have shared as much information as possible for all our assets.

For the physical folder it is vital to only list information that would not create a problem should that folder end up in the wrong hands. So, we have only listed the names, telephone numbers, policy / account numbers of all our assets in this folder. It would give enough information for someone to be able to deal with our affairs with minimum hassle.

Is it worth the effort?
Well, I think it is worth the effort. A time of loss can be stressful enough without having to try and piece together the deceased’s financial affairs. This can be a really difficult time for family members.

However, preparing THE folder is much more than avoiding stress; if you leave behind an administrative nightmare you could delay access to inheritors’ access to funds and potentially cost a small fortune in legal fees.

To give you an example of this, the UK Department of Work and Pensions estimate that there is currently more than £400 million sitting in unclaimed pensions pots in the UK. Imagine trying to find out if you have one.

Which is best physical or digital?
As I mentioned, we have done both and I believe most people would do the same. Some people still love to have information in physical form, something you can get your hands on. The younger generation tend to rely solely on digital devices. I don’t think it matters which way you do it, as long as you do it.

What goes in the folder?
Its essential to list what assets you have, where they are and important contact information for each asset. Keep copies of any insurance policy documents, pension statements etc. I have put a small list below which would help most of you, but you do need to look at all your assets individually to make sure the list is right!

Life insurance policy documents
Personal pension documents
Employer pension details
Details of any entitlement to state pensions
List of bank accounts with account numbers, login details, passwords etc
Details of any credit cards
Property, land and cemetery deeds
Proof of loans made
Vehicle ownership documents
Stock certificates, brokerage accounts, investment platform details, online investment account details
Details of holdings of premium bonds, government bonds, investment bonds
Partnership and corporate operating/ownership agreements (including offshore companies)

How often should ‘THE’ folder be reviewed?
I would recommend reviewing the folder on an annual basis, but if you’re extra diligent with it you should review and update every time something changes. For example, if you change insurance companies then add the new details and delete the old. This is a continuous job, its not something you do once and never look at again.

Finally…
Tell someone about your folder. Someone needs to know you have made one and whether it´s digital or physical. There is very little point going to all this effort if know body knows it exists.

Now I´m off to review my own folder, and it needs reviewing. I noticed yesterday that whilst my financial assets are up to date, I haven’t updated our vehicle details and a few other things which had gone unnoticed. Lets do this!

If you have any questions about creating your own folder feel free to reach out!

UK Inheritance Tax and Spanish Succession Tax

By Charles Hutchinson
This article is published on: 5th August 2020

Much has been written and said on this subject, particularly in many of a 19th hole. There is a fundamental difference between the two:

The UK Inheritance Tax is upon the deceased’s estate
The Spanish Succession Tax version is upon the inheritors

UK Inheritance Tax Liability is on the worldwide estate of the deceased and all global assets are assessed and ‘gathered together’ for the purpose of probate. Once fully quantified and valued, the tax is levied at a (current) rate of 40%. There is a nil rate band of (currently) £325,000 estate value below which no tax is payable. The tax has to be paid BEFORE the estate is distributed.

Spanish Succession Tax is payable on EITHER assets being located in Spain OR on global assets if the inheritor is a resident of Spain. If neither is the case, then there is no liability. If one or both is the case, then Spanish Succession Tax is payable by the inheritor(s) whether they be a resident or non resident of Spain.

There are some essential measures one can take to either mitigate or avoid these liabilities.

One of the best and most effective is the use of (Spanish compliant) investment bonds. In Spain for example, Succession Tax is payable on assets passing between spouses (this is unlike the UK where assets can pass between them untaxed). Where an investment bond is jointly owned, the deceased’s half can pass to the spouse untaxed.

An even greater advantage is that the bond can pass down the generations with the possibility of continuing investment growth free of both UK Inheritance Tax and Spanish Succession Tax. For as long as the policy holders and lives assured continue to be appointed, the bond will continue and each generation of policy holders can enjoy capital withdrawals on both a regular or intermittent basis. Thus all inheritance tax is avoided by an unlimited number of generations.

Furthermore, should a Spanish resident bond owner pass away and their beneficiaries are non residents of Spain, there would be no liability to Spanish Succession Tax because the bond is also domiciled outside of Spain (e.g. Dublin).

For the moment, Spanish Succession Tax in the region where I live (Andalucia) is virtually non existent. There is a €1m allowance between close family members, providing their individual existing wealth does not exceed that figure. The remaining assets are also liable to a 99% exemption.

These two taxes are the only ones not included in the UK/Spain Double Tax Treaty. However, there is an unwritten rule that if it has been paid in one country, then it will not be charged again by the other. To my certain knowledge, this informal agreement has always been observed.

For information and assistance with your inheritance planning, please contact me by completing the form below of email/call:
charles.hutchinson@spectrum-ifa.com
Tel:(+34) 952 79 79 23
Mobile: 605 903 472

How to avoid Spanish taxes on your UK property and investments

By John Hayward
This article is published on: 30th July 2020

30.07.20

Being tax resident in Spain is not your choice
once you have made the initial decision to move to Spain.

Generally, once you have spent 183 days (not necessarily consecutive) in Spain, you are deemed to be tax resident and have to declare income and assets to the Spanish tax office. The tax year in Spain runs from 1st January to 31st December. Unlike the UK, which works on a part tax year basis when someone leaves the UK, in Spain you are either tax resident for the whole year or you are not.

As soon as you know that you will be taking the step to eventually become tax resident in Spain, it is extremely important to make certain that you have arranged your investments and property(ies) in a way that isn´t going to open you up to unnecessary Spanish taxes.

A lot of people will be looking to become resident in Spain before Brexit on 31st December 2020, in case the process becomes more complicated after. However, for those who are worried that applying for a residence card will automatically make them tax resident, let me dispel this fear. It does not. Therefore, you have the opportunity to apply for a residence card whilst taking action to protect your assets free from Spanish tax for 2020, becoming tax resident in Spain in 2021.

UK Property & Tax in Spain

As a tax resident in Spain, a person has to declare all of their overseas assets (over certain levels) as well as the income from these assets. Anything sold, such as a property or investments (ISAs, shares, bonds, etc.), and even a lump sum from a pension which would be tax free in the UK, will be taxable in Spain and this is where there is a potential tax nightmare.

Our advice is usually to sell before becoming tax resident in Spain, if selling is feasible and practical. If you are eligible to take a tax free lump sum, do so before becoming tax resident in Spain. ISAs are also taxable in Spain and although there are ways to legally avoid taxes whilst holding this type of investment, things can become very complicated.

Let me make this clearer with examples of someone who has a UK property and sells it after becoming tax resident in Spain.

Example 1 – Property Purchase 1986

You move to Spain and become a permanent resident, and thus a tax resident, in Spain.
You own a property in the UK which has been your primary residence since you bought it in 1986.
As you have now moved to Spain, it is now a secondary property.
You bought it for £48,000. You are selling it for £600,000. As this is no longer your primary residence, Spanish capital gains tax is due on the sale.
Even with indexation (which only applies to pre-1994 purchases), the tax bill is over €50,000.

Example 2 – Property Purchase 2004

- You bought a property in the UK in 2004 for £150,000 and are selling it now for £250,000.
- The Spanish capital gains tax on the sale would be over €20,000.
- Unlike the UK, there are no capital gains tax allowances in Spain.

The same principle applies to shares, investment bonds, and ISAs.
You have to pay Spanish capital gains tax on the difference between what you paid for them and what you sell them for, again with some indexation for pre-1994 purchases.

Plan early: Before you move to Spain to help avoid Spanish Tax

You need to draw a line under your asset values now so that you can take advantage of the more beneficial capital gains and property tax rules in the UK and start afresh in Spain without the fear of unavoidable Spanish taxes in the future.

Contact me today to find out how we can help you make more from your money, protecting your income streams against inflation and low interest rates, or for any other financial and tax planning information, at john.hayward@spectrum-ifa.com or call or WhatsApp (+34) 618 204 731.

UK State Pension & Voluntary Contributions

By Paul Roberts
This article is published on: 24th July 2020

This guide is compiled to help you find out more about your UK state pension entitlement and explain how you can top-up your entitlement by making voluntary contributions.

Most of the leg-work can be done on-line using the HMRC sites.

The sites are a joy to navigate, so don’t be fearful! Let’s go.

• To get some general information about UK state pension entitlement / the amounts you will receive and how to claim it etc, click onto the following link;
https://www.gov.uk/new-state-pension

• To check when you will be entitled to receive your UK state pension, click onto the following link;
https://www.gov.uk/state-pension-age

• To check how much UK state pension you will get , you need to click onto the following link, https://www.tax.service.gov.uk/check-your-state-pension but before you can get onto that link; you need to open up a “government gateway account” by clicking on this link and following the instructions;
https://www.access.service.gov.uk/registration/email

….and to set up the government gateway above you will need your National insurance number, your mobile phone and your passport to hand. It is a straightforward process. Once you are set-up you will be given a password, a user ID which in conjunction with an access number, given via your mobile phone, allows you to access your HMRC data and check your state pension entitlements by clicking onto;
https://www.tax.service.gov.uk/check-your-state-pension

• If you can’t remember what your National Insurance Number is then click on the following link;
https://www.gov.uk/lost-national-insurance-number

Your UK Pension entitlement depends on how many years of national contributions you have made

To see the exact number of years that you have contributed, click here;
https://www.gov.uk/check-national-insurance-record

If you want to investigate how to fill in the gaps by making voluntary national contributions (and this is the interesting bit) then click onto the following link;

https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions

You can make top up by paying Class 2 NIC’s very inexpensively; provided you meet the conditions:

If you scroll down on https://www.gov.uk/voluntary-national-insurance-contributions/who-can-pay-voluntary-contributions – to living and working abroad you will see the following information;

Voluntary_National_Insurance__Eligibility_

If you qualify, this is the one to go for:

You can check out the following (excellent) site for a well written account of what you might get and who might be entitled to get it.
https://www.healthplanspain.com/blog/expat-tips/318-paying-uk-national-insurance-when-living-in-spain.html

To pay Class 2 NIC’s go to the following link and click on PAY NOW and follow the instructions
https://www.gov.uk/pay-class-2-national-insurance

There is a bit of form filling to do but the benefits are well worth the effort, or at least that was very much my case where I was able to backdate my contributions by 7 years at a cost of around 1000 GBP. These 7 years contributions entitle me to around 7/35 of the state pension which is something of the order of 175 GBP a week from the age of 66 in my case. If one assumes that I get there and live to be an average age, then I’ll pass away age 85ish.

So, what will I gain?
Investment 1000 GBP. Average benefits 7/35 x 175 GBP x (85-66) x52= 34,580 GBP. Wow! And that is all indexed linked. AND, apart from backdating you can set up an annual payment and keep making contributions easily and automatically by direct debit. All well worth looking at .

Good luck with it all and let me know how you get on.

Investments in the current climate

By Occitanie
This article is published on: 13th July 2020

13.07.20

Welcome to the fourth edition of our newsletter ‘Spectrum in Occitanie, Finance in Focus’.

Last month we focused on the important area of inheritance planning and wills, outlining the value of careful planning, including mitigation of French inheritance tax using the Assurance Vie. This month, to follow on from that, we take a broader look at what options are available for generating a financial return on savings and investments in the current environment of such low interest rates globally.

As a reminder, we are Philip Oxley, Sue Regan, Rob Heskethand Derek Winsland. Together we form Spectrum’s team in the Occitanie.

What are current interest rates?
Most of us in developed economies have lived in a low interest rate environment for over 11 years. In the UK, for example, the base rate was 5.25% in March 2008. One year later, after the start of the global financial crisis, it was 0.5% and remained so for over seven years before a further post-Brexit vote reduction to 0.25% in August 2016. Recent years have seen small incremental increases to 0.75% before the impact of Coronavirus resulted in the rate being slashed to 0.1%. It has been a similar story in the US and the Eurozone, where the ECB base rate is currently 0%.

Why have interest rates been so low for so long?
There are numerous reasons. These include the cutting of rates following the global financial crisis of 2008/9 in an effort by central banks to stimulate economic growth (the same reason rates have been reduced during the Coronavirus pandemic). Beyond these economic shocks, there also seems to be evidence that central banks’ firm commitment to maintaining low and stable inflation has been successful. The primary tool central banks use when inflation threatens to take flight is to increase interest rates. In most developed countries, there has been little sign of this threat and therefore inflation and interest rates have remained at low levels.

Who has benefitted from this low interest rate environment?
In a word – borrowers! Consumers with mortgages, credit card debt or car loans, businesses (many of which rely on borrowings for investment or just day to day cash-flow requirements) and finally, governments, who typically rely on the credit markets to some extent to finance their spending.

Conversely, savers have suffered hugely during this low-interest rate environment, working hard to find some level of return on their funds. It has been particularly hard for those who rely on savings for their income, such as the retired and elderly. Similarly, risk averse consumers who avoid stock market investments, preferring a more cautious strategy to nurturing their savings, have been heavily penalised for this careful approach. And worse, there is no sign of any significant increase in rates in the foreseeable future.

In the search for financial returns, many in the UK have invested in tax-efficient products such as ISAs, Premium Bonds and other NS&I products, EISs and VCTs. But for those who have subsequently become a tax resident in France, it is important to understand that all these products are taxable here.

How can you achieve a better rate of return on your savings as a French resident?
One product stands clearly above all others, which is the insurance-based investment called an Assurance Vie (AV). The AV is a French compliant life assurance bond which provides numerous tax concessions on investment growth, income and capital withdrawals and significant advantages when it comes to estate planning (which was covered in detail in our last Newsletter).The advantages of this product are numerous and include the following:
• Shelter from tax on all income and gains, and social contributions, whilst funds remain inside the AV. At the point of withdrawing funds, only the gain element is potentially subject to tax and social contributions.
• Access to capital at all times, although as AVs are designed for longer term investment, withdrawals in the early years will reduce tax efficiency and (depending on amounts withdrawn), may incur exit penalties. The tax efficiency increases over time as compound returns accumulate tax free, with the additional advantage after eight years of an annual tax-free withdrawal allowance of (currently) €9,200 for a married couple and €4,600 for a single person.
• The ‘tax clock’ to full tax efficiency starts on day one of the policy and funds added later benefit from this original start date.
• Estate planning flexibility in the form of protection from forced heirship succession law, allowing nomination of beneficiaries in accordance with personal wishes. Proceeds from an AV policy can be distributed between any number of beneficiaries, each of whom can receive €152,500 free of succession tax (so long as the policy was established and funded before the age of 70), with amounts in excess of €152,500 liable at 20% (and at 31.25% for amounts exceeding €700,000).
• Investment flexibility to match individual objectives, risk profile and currency preference (options including Sterling, Euro and US Dollar) and simplified tax reporting and annual declarations.

This tax efficiency is significant, with two simplified examples below illustrating what a valuable product the AV can be as a future source of income:

Example No. 1:
Fran is 52 years old and invests €120,000 into an AV
• 10 years later the fund is valued at €180,000
• Fran is now 62 years old and wants to draw an annual income of €12,000 per year (€1,000 per month)
• The gain on the investment is €180,000 – €120,000 = €60,000. As a proportion of the fund that is €60,000/€180,000 = 33.3%
• The gain element of €12,000 pa is 33.3%, i.e. €4,000
• Because Fran has held this AV for more than 8 years, the effective tax-free allowance for single people applies and is €4,600 per year. The gain element of drawing €12,000 pa is €4,000 (less than the €4,600) and therefore Fran will pay no income tax on drawing €12,000 per year from the AV.

Example No. 2:
Sam and Chris are 60 years old and invest €300,000 into an AV
• 8 years later the fund is valued at €400,000
• They are now 68 years old and want to draw an annual income from the AV of €25,000 per year (€2,083.33 per month)
• The gain on the investment is €400,000 – €300,000 = €100,000. As a proportion of the fund that is €100,000/€400,000 = 25%
• The gain element of €25,000 pa is 25%, i.e. €6,250
• Because Sam and Chris have held this AV for more than 8 years, as a couple their effective tax-free allowance is €9,200 per year. The gain element of drawing €25,000 pa is €6,250 (less than €9,200) and therefore they will pay no income tax on drawing an income of €25,000 per year from their AV.

Social charges apply to the gain element of withdrawals, at either 17.2% if France is responsible for the cost of your healthcare, or 7.5% if you hold an S1 certificate.

To produce a tax-efficient income stream later in life (including to supplement pension income in retirement), and to provide significant estate planning benefits (including protection from forced heirship laws), the Assurance Vie should for most people be a central feature of their financial planning strategy.

Finally, as a short-term solution for holding cash tax efficiently, there are three types of French bank accounts to consider. For general guidance, it is advisable to hold six months of your average monthly outgoings as a contingency fund for unexpected expenses. These accounts are detailed below:

➢the Livret A, available to both residents and non-residents, in which you can deposit up to €22,950 and earn interest of 0.5% per annum.
➢the Livret Développement Durable, available to French resident taxpayers only for deposits up to €12,000, also earning interest of 0.5%.
➢the Livret Epargne Populaire, available to French resident taxpayers only, paying an extra 0.5% interest for deposits up to €7,700 if your income does not exceed a certain threshold.

WHAT NEXT?

If you would like to discuss anything we have covered in this month’s newsletter, please do get in touch at Occitanie@spectrum-ifa.com
Next month we are going to focus on pensions, including the subject of drawdowns and portfolio structuring.
The Spectrum IFA Group – Occitainie
occitainie@spectrum-ifa.com

What type of recovery do we foresee?

By Katriona Murray-Platon
This article is published on: 29th June 2020

29.06.20

The days are long and sunny and lots of people are looking forward to beginning their life in France! June is a very busy month here in France because with the school holidays starting on 1st July and lasting until the end of August, June is the last few weeks to get everything done before most people go on holiday.

June has felt like a very busy month for me, with lots of meetings with future clients on the telephone, Zoom meetings and webinars. On 12th June I attended the Tilney Women’s Panel Event hosted by Tilney with guest speakers Emma Sterland (Tilney), Zahra Pabani (Irwin Mitchell LLP), Marcie Shaoul (Rolling Stone Coaching) and Charlotte Broadbent (Charlotte Loves), which was a great way to end the week listening to other women’s experiences of lockdown. Then, on 17th June, I took part in a seminar examining financial planning solutions for American expatriates, which was very interesting.

I finally got back on the road again on 18th June to visit a few clients, which was lovely. Whilst the weather wasn’t as great as I might have hoped, I was very happy to see the in-real-life faces of my clients, whilst keeping a respectable social distance during the meetings.

During what has become a monthly Zoom meeting with colleagues this month, we were joined by Rob Walker from Rathbones who gave us an interesting view on the three possible scenarios that Rathbones are envisaging:

1) that there will a V shaped recovery
2) that there will be a progressive recovery but no second wave of the virus
3) that there will be a second wave and a second lockdown.

When asked to vote on which of these three scenarios seemed the most likely, about half of us suggested the second scenario and the other half opted for the third scenario. Rob told us that there has been a bias towards “stay at home stocks” with Amazon and eBay doing very well, if not for any other reason than people could not get to the supermarket during the lockdown so tended to favour ordering online. Cleaning products stocks have done very well as one can imagine. National Grid has also done very well and in addition is increasing its attention on renewable energy, which is unsurprising given widespread and growing interest in Environmental, Social & Governance (ESG) investing. Then there are the “Go back to work” sectors, such as retail, commercial property and tourism, which can only thrive if people do in fact go back to work.

In a possible indication of what lies ahead, Berkshire Hathaway (the company founded by renowned and highly successful investor Warren Buffet) has massively sold its holdings in airline companies. If a vaccine is found then these companies will see a rebound, but given the timing for a workable approved vaccine, this may not happen any time soon. Whilst US tech stocks are doing very well and have done very well during lockdown, Rob’s position is “Be defensive. This is no time to be heroic”.

There is no consensus on the way forward. The question is, do we want to go back to working the way we did before? For many workers going to work involves lengthy commutes on packed trains and buses, whereas the last few months have shown that many

of us can do our jobs from the comfort of our homes.

If this is a work revolution and companies decide to change their business models and allow employees to work more from home, what will be the consequences for commercial property ?

During the second part of the year the focus is going to be on Brexit and the US elections. Donald Trump is desperate to be re-elected. However, has the BLM movement hurt his chances? Will this encourage black voters to go out and vote to put Joe Biden in the Whitehouse? And in the UK, once the situation with Covid19 improves, the focus will be back on Brexit and what kind of deal the Prime Minister can agree with the European Union, if at all. The next six months are going to be interesting.

In France, a month after lockdown restrictions started being eased, the number of cases in the south west of the country still remains low. Schools have gone back with so far very few consequences.

Whilst July is a summer month, I will continue to work as normal (new normal). My children will continue to go to a holiday club two days a week. Like many of you, I am waiting to see whether a trip back to the UK to visit family will be possible in August which will determine our summer plans. I will not do a newsletter at the end of July but will probably do one at the end of August/beginning of September.

So for now, I wish you all a pleasant summer and look forward to getting back on the road to see even more clients in September!

Are we going to change?

By Gareth Horsfall
This article is published on: 25th June 2020

25.06.20

Any change, even a change for the better, is always accompanied by drawbacks and discomforts

– Arnold Bennett –

Will things change for the better post Covid 19?
Nearly everyone I speak with at the moment keeps asking, will the world get better and will we care more for the world and each other as a result of Covid? Have we learned our lesson about sustainability, ecological damage and the lifestyles we lead?

It’s a good question and not one I would like to put a bet one (I am afraid that I am a sceptic when it comes to human nature and don’t believe that many are inclined to change behaviour so easily). That being said I could be being proven wrong, because after speaking with some of our asset manager partners recently (Tilney, Rathbones, Jupiter, Janus Henderson, to name a few), they pointed out that there are some notable positive trends that are emerging from the lockdown during the Covid crisis. These trends could seriously affect the way we lead our lives and also hence how we invest our money and so are worth a mention here.

I will touch on 4 trends which could have legs and are great dinner party conversation if you are bored of Covid talk and talk of house prices!

1. Smart working
Let’s just get the pronunciation correct for Italy before we start. It is ‘smat’ whirr-king’ Now that is out of the way, we can talk about the impact of smart-working on the workplace.

The best way to explain this is to give the example of a friend in Rome. Our kids go to school together and he works as a director at the energy company ENEL. He was informed, not long after the lockdown, that smart working arrangements would become permanent with immediate effect and that from January 2021 they will impose a global 3 day smart working, 2 days in the office, working week. This will apply to all global managerial staff.

What is interesting about this is that ENEL are not alone in this decision. There are numerous other large firms taking the same decision. Enel have understood during lockdown that as a company they can perform all their normal activites online: conference calls, video meetings etc. For the days in the office the work place will be arranged into a number of generic work stations with connection capabilities and which will have to be booked in advance to ensure a place on your work day.

As a result of this ENEL are not going to renew 1500 contracts (which was to be expected!) but more interestingly they are going to be closing a significant amout of office space which will go onto the property/rental market. With many other firms taking similar decisions, what is the impact going to be on the commercial and residential property market? Could this lead to a surplus of property and push prices in cities down? Equally, what about people working from home, is the space they have sufficient? These thought leads nicely onto Trend No 2

2. Nesting
I always thought that nesting was the time when a young couple met, starting dating seriously and before long started making plans to buy a house, settle down and maybe think about planning a family.

Nesting is now the termed also used for property owners who are looking to either sell up and move from a urban area to a rural one, or others who are looking to purchase a second home in a rural/countryside area.

Data is coming out at the moment to show that the professional classes (who are the main beneficiaries of smart working) are taking steps to rethink their lives in light of the lockdown crisis. In the USA and also the UK data is showing that there has been a surge in requests for information about countryside properties or periphery areas to live, equally homes in urban areas with a garden and/or near an outdoor space such woods or lakes. In London, searches for houses with gardens are up 42% on last year. Is this a long term trend or something that we will see more of? At the moment it is likely to be a knee jerk reaction to the lockdown and is predominantly something that the professional classes have the fortune of being able to take advantage of, but it is not beyond imagination that this is a trend that is here to stay because, like my friend who works for ENEL who is also considering his current living arrangements (he will need an office space at home) alot of people who will now have the option to work from home, will want to do so in a non-polluted, potentially more creative space with perhaps contact with nature or at a minimum another room in the house which they can turn into a work space.

And it’s not just the property market that this could affect because if the trend could affect the provision of public services and utilities. Things like health services, schools and also the distribution of retail outlets as a way of servicing more spread populations may need to be rethought. It would present some real challenges but create some great opportuntities as well. What will be interesting is to see how bailout money from the EU is allocated and what, if any, conditions are attached to it because the talk is that significant demands will be made for EU states to invest in green infrastructure, show significant contribution to climate change goals and the provision of health services to citizens everywhere, to be eligible for Covid 19 bailout money.

Interestingly, in Italy, I saw a news article a week or so ago with a Sindaco in Umbria who said that he was looking to get funding to get the medeival town connected up to high speed internet, with the idea to re-populate the area with younger professionals who want to work from more beautiful places and not be confined to cities. I have been saying the same things for years. Without high speed internet connection the most beautiful towns, cities and villages in Italy are going to be inhospitable to anyone, not just the younger generation. To reverse the brain drain first you need to provide high speed internet connection to your citizens. High speed internet has become a utility just like gas, water, and electricity. So, let’s hope they manage to do something about it and attract human capital away from the cities and back into more creative and beautiful parts of the country.

3. The return of the family meal
This is a nice new trend for whoever yearns for the old days of sitting around the family meal table and enjoying quiet time together. Apparently during the quarantena the habit was on the increase and the latest research is showing that families who had traditionally not eaten together because of professional parents returning home at different times in the evening, or otherwise being busy, were being forced together and taking advantage of this time to immerse themselves in the culture of the traditonal family meal.

What might this mean in terms of changing trends? Well, it appears that during the lockdown, those same people who were returning to the family dinner table, were also purchasing more expensive food and more of it. (I can attest to this because, I also thought that since we were locked at home with no way of escape, then we should at least eat well). If people eat at home more frequently and can enjoy family meals more frequently, then might they be more inclined to buy more expensive food, but also more expensive wine? and more of it? That may also mean that people also demand more takeaway / delivery services (think Deliveroo, Just Eat, Glovo etc). And lastly what kind of long lasting impact could it have on the hospitality sector, restaurants and hotels?.

These are trends which money managers are watching closely, less because of the habit itself, but more the reaction of big food and drinks firms. To give you an example the big drinks firms Diageo has carried out a survey and found that 80% of its sales are for use in the home, not for consumption in bars etc. This may come as no surprise but it does beg the question for a firm like Diageo – why are they selling through third party channels like supermarkets and other distribution channels when most people today are used to receiving deliveries at home? Could they cut costs by selling directly? This brings me to point No 4 and a story about everyone’s favourite sportswear compnay Nike.

4. Cutting out the middleman
During the lockdown, I like many other people, watched quite a bit more Netflix than I am accustomed to. One of the series which I watched and thoroughly enjoyed was ‘The Last Dance’, a documentary about Micheal Jordan and the story of the Chicago Bulls during their record breaking 6 times NBL championship wins. A great one to watch if only to watch the acrobatic magnificence of Micheal Jordan in his prime. Why am I mentioning this?

Nike created the line ‘Jordan’ on the back of the sporting genius of Micheal Jordan and it has been a success ever since. What has been notable is that that the brand’ Nike Jordan’ during his time at the top was built on the back of traditional advertising/marketing and retail outlets. But times have changed. Now, younger people are communicating through different social media channels, the latest being TickTock, and these are changing consumer patterns of behaviour. People are less inclined to spend their time trawling retail outlets to try and find that special pair of Nike trainers when they can see their sporting heroes wearing them on videos and also order them easily with a few clicks on their phone.

So this brought Nike to a change in strategy a few years ago. A focus towards selling more directly to clients, and in much the same way as the revolution with food and drinks manufacturers as I explained above, Nike have been experimenting with direct consumer channels for years and are looking to expand this.

By direct consumer channels I mean selling directly from their own website and/or from a Nike store. Nike stores in themselves are an interesting experience. There are a number in Rome and I went into one about a year ago. They are a less a store, but more of an experience. This experience feeds into their brand and message around ‘Just do it’. It is very impressive and in this way they don’t dliute their brand or their profits through 3rd party distribution channels.

This trend which Nike has been developing for years now, is a trend which we could see grow after Covid as shopping habits change even more. As an example I know a couple in Rome in their 50’s who had never used Amazon before the lockdown because they thought it was unsafe. During lockdown they decided to sign up and use it. They are hooked and cannot believe how easy it is and how much choice they have. We already know that retail is being revolutionised but this could take it further.

Can we imagine a future where we have one login for all retail outlets, supermarkets etc, and when we order from any one of them a delivery is made to a locker installed in or near our home that deliveries which can be accessed with a secure code. A Utopian (or Dystopian future?).

If just a 20% shift is created in consumer behaviour as a result of this crisis, a 20% in the way we live and work, this could create an equally tectonic shift in the corporate sector and the way they engage with us. For our money it will create opportunties and also there will be failures. More importantly we are likely to see an even greater shift to companies who have a strong focus on the enviornment, social protections and good governance of their companies.

More than ever our money managers need to be on top of a changing world. Thankfully they are.

If you would like to have a health check on your money for the future,
then you can get in touch by contacting me on
gareth.horsfall@spectrum-ifa.com
or call/whatsapp on +39 333 649 2356

Lockdown lessons learnt?

By David Hattersley
This article is published on: 17th June 2020

17.06.20

Now as we enter phase 3,are we just beginning to get back to a different version of normality? We all have realised that we need to be around other human beings. Just going to a bar for a coffee with family,sitting outside, spending time talking with each other and people-watching has become a simple treasured pleasure as our world gets back on its feet.

LESSONS

Self -isolation & working from home.
An element of self discipline regarding work has had to take priority, but within limits as if we were at an office. Early research from New York has already shown the following:

a) People miss the interaction of an office environment that creates a positive energy and greater productivity, with the ability to expand upon and share ideas. Whilst Video Conferencing provides a two dimensional picture, it doesn’t pick up the nuances of a face to face physical meeting.

b) The morning rush hour can be a drag, it does provide time to set the day up with a sense of purpose. The evening journey creates a buffer to reflect on the day’s events or relax before you get home. Ensure that the family are aware of a disciplined time period whereby non work related issues have to be deferred until family time/free time. After all, working from home without the commute, will give you more family time and free time. Use it wisely, have breakfast and lunch with family, or more free time to carry out your own interests. Bucket Lists are no good if they aren’t followed through, or if you die before doing them.

c) Dress as if you are going to a physical meeting. One wouldn’t wear jeans or shorts to a meeting ! Learn to control technology and not let it control you, e.g. work e-mails should only be read during work-time. Avoid instant response, set time to consider and reflect on that response, but not in your downtime. Remember when you went on holiday and left your place of work for 2 weeks. Take time out to “Sharpen your blade”.

Environmental challenges.
The world is not ours by right.
With pollution in major urban areas falling rapidly, this a chance to re-evaluate our lives and the impact on our planet that we share with other forms of life. Living on the edge of a national protected park has given us the time to enjoy and observe the animals that co-exist with us, ranging

from the evening watering hole (drinking from the pool) to the raising of a variety of families of birds and mammals that return each year to breed, some of which we have never seen before e.g. a cockatiel. Dolphins now have begun to swim in our local harbours, wild boar are prevalent and discussions are under-way to reintroduce a mating couple of Iberian Lynx in our area. Speaking to a client in the UK, deer have appeared at the end of their garden.

As we have got used to only buy essentials, has this lead us to question consumerism? Do we really need to buy the latest gadget or fashion? Can we make do and mend? Repair and fix, rather than discard? In our own household, because we have strict recycling rules, why go to a shopping mall when we can “swap or gift”via a charity shop? We now use local facilities to support the small family businesses vs major groups e.g. the local hardware store. We now buy food that is locally sourced within Spain as much as possible, so in season food has become a key factor in our purchases.

Travel has also been bought into question. Having driven a Jeep V6 petrol engined car for many years (I never believed in diesel) I am now driving around in Skoda 1.2 petrol engine. There is a balance, a yin & yan: what needs to be addressed the social interaction vs unwarranted trips.So careful planning has to be considered. As for flying to the UK to see family is not something remotely worth thinking about, alternatives need to be considered. Travelling by car seems a more sensible approach because survival instinct kicks in. Plane/public Transport or your own personal self isolated vehicle!

I hope that in the biggest challenge that I have ever encountered throughout my career in financial services, I have met and satisfied my clients expectations of the service that I have provided in these difficult times.

But one word can sum up all the above…
BALANCED

It may seem ironic, but the fund managers we use endorse the same principals; they use their extensive collective resources and knowledge to create a number of funds and investments.

Even they are not sure of the short term future, so they are “hedging” their bets and not taking too much short term risk. Balance helps you to take advantage of opportunities, while limiting downside risk. If you would like to dsicuss how we can help improve the balance in your portfolio, please contact me for a meeting with my details outlined below.