Acheter un appartement à Barcelone : bonne ou mauvaise idée ?

By Cedric Privat
This article is published on: 15th October 2019

15.10.19

Vous êtes nombreux à vous poser la question du choix entre l’investissement immobilier et le placement financier, dans l’objectif de faire croître votre patrimoine.

Investir dans la pierre est souvent considéré comme une valeur sure, mais est-ce toujours le cas malgré la flambée des prix des dernières années?
Faire un placement financier permet de conserver une liquidité et bénéficier d’une imposition avantageuse, mais avec les taux fixes au plus bas et l’inflation actuelle il est désormais impératif de prendre un certain risque

Avant toute décision, il sera important de comprendre les avantages et inconvénients de ces deux options. Nous étudierons dans un premier temps via cet article l’achat immobilier à Barcelone.

Depuis les jeux olympiques de 1992, Barcelone est devenue une des villes les plus attractives d’Europe: à visiter, y vivre, y travailler et pourquoi pas investir?
La ville plaît beaucoup aux français, plus de 20 000 d’entre eux y vivent toute l’année et on ne compte plus les milliers de touristes quotidiens qui affluent de toutes parts.

À seulement 150 km de la frontière, la ville attire par son soleil, ses plages, ses montagnes proches, sa qualité de vie, sa culture, sa population cosmopolite, sa bonne connexion TGV/avion, etc.
Cet engouement comporte néanmoins certains revers dont tout futur investisseur doit tenir compte; notamment une insécurité croissante ces dernières années, une situation politique instable et des lois souvent en faveur du locataire (voir même okupas/squatteurs) en cas de conflit avec le propriétaire. La crise du marché immobilier de 2008 a également inquiété de nombreux particuliers projetant un achat à Barcelone.

Première question: achat perso (pour y vivre) ou achat locatif ?

Si vous comptez rester à Barcelone pour le long terme, un achat personnel s’avère souvent être la meilleure solution. Finis les loyers, vous serez enfin chez vous et pourrez potentiellement faire une plus-value si vous gardez ce bien assez longtemps. Mais attention au marché en haut de cycle; des études démontrent qu’actuellement une acquisition ne sera financièrement avantageuse par rapport à une location que si on garde le bien au moins 10 ans. Une revente rapide sera synonyme de moins-value; une stabilité professionnelle et familiale est donc indispensable
Pour un achat locatif vous devrez dans un premier temps évaluer le taux de rentabilité brut (diviser le revenu locatif annuel par le prix total du bien), si le résultat est inférieur à 6 % brut alors le rendement n’est pas suffisant (voir le paragraphe “Les coûts” ci-dessous pour avoir une estimation du résultat net). Aucun achat ne doit être fait sans une étude et un calcul précis

Il sera important de ne pas diaboliser le fait de rester en location. L’expression “jeter ses loyers par la fenêtre” est dépassée car nombreuses villes se sont avérées à une certaine période être plus rentables en location qu’à l’achat. Vous gardez ainsi votre liberté, vivez dans une superficie plus grande et n’avez pas à supporter les coûts et impôts d’un propriétaire. Nous aspirons pour la plupart à être propriétaire un jour, attention néanmoins à ne pas se précipiter.

La situation du marché ?
Le prix du marché doit ensuite être étudié, il vaut bien entendu toujours mieux acheter quand les prix sont bas.

Le marché à Barcelone est haut même s’il n’a pas encore atteint les chiffres de 2007, les prévisions annoncent une stabilité pour 2019/2020.

Crédit bancaire en Espagne: comment ça marche ?
Si vous êtes résident fiscal en Espagne vous devrez certainement passer par une banque locale pour votre prêt (peu de banques françaises vous accompagneront, à moins d’avoir un bien en France).

Un maximum de 80 % du prix du bien peut vous être prêté (70 % si non-résident), pour une durée maximum de 30 ans (jusqu’à l’âge limite de 70 ans). Il vous faudra donc un apport de 20 %.

Les espagnols sont habitués aux taux variables (très faibles ces dernières années), ce qui signifie que vous êtes dépendants de l’Euribor (taux de référence du marché monétaire de la zone euro), mais en cas de hausse de celui-ci vous risqueriez de voir vos mensualités fortement augmenter. Nombreux sont ceux qui ont perdu leur bien pour cette raison il y a 10 ans.

Depuis quelques années les banques espagnoles proposent de plus en plus un taux fixe comme le font le plus souvent les banques françaises. Vos mensualités resteront donc inchangées sur l’ensemble de votre prêt bancaire. Les taux sont plus élevés qu’en France, actuellement comptez entre 2.2 et 2.7 % pour un prêt sur 30 ans en Espagne

Quels sont les coûts ?
L’imposition sur un achat immobilier en Catalogne s’élève à 10 % du prix d’achat (11 % à partir de € 1 million). À cela s’ajoute les frais de notaire et frais divers liés à l’achat: comptez entre 3 et 4 %.

Comme évoqué précédemment, un apport de 20 % étant demandé par les banques en Espagne, l’apport global nécessaire est donc de 34 %.

Cas pratique: pour un appartement vendu € 300 000: le nouveau propriétaire doit donc s’assurer de posséder une liquidité de € 102 000 (impôt € 42 000 et apport € 60 000).

Être propriétaire vous impose également des coûts annuels qui viennent s’ajouter à vos mensualités bancaires:

IBI (Impuesto sobre Bienes Inmuebles), équivalent de la taxe foncière française
Assurances et impôts divers (tels ordures ménagères)
Charges de copropriété
Travaux d’entretien, maintenance, remplacement des gros équipements, rénovation (votés lors des réunions de copropriété ou obligatoire telle la rénovation énergétique)
Si vous louez ce bien, vous devrez éventuellement ajouter les frais d’agence (surtout si vous n’habitez pas à Barcelone) et le coût lorsque l’appartement n’est pas loué. Sans vouloir être négatif; il ne faut pas occulter les éventuels frais de justice ou d’expulsion si vos locataires s’avèrent être mauvais payeurs ou insolvables.
Et bien entendu le coût d’un prêt bancaire qui varie selon le coût d’achat, les années et le taux négocié
Concrètement, en s’appuyant sur l’exemple ci-dessus, l’achat d’un bien de € 300 000, le prêt sollicité sera de € 240 000 (maximum 80 %)
Supposons que la banque vous accorde un taux fixe sur 30 ans à 2.5 %, vos mensualités s’élèveront alors à € 948.29 soit un remboursement total de € 341 384.
La banque vous facturera donc € 101 384 pour un prêt de € 240 000

En conclusion, il n’y a pas de réponse évidente à la question: “Acheter un appartement à Barcelone : bonne ou mauvaise idée?” car l’équation a souvent plusieurs inconnues et de nombreux paramètres sont à prendre en compte. Acquérir un bien immobilier est une décision importante, un engagement, qui peut correspondre parfaitement à certains particuliers, mais peut vite devenir un gouffre économique pour d’autres.

Comme toute décision importante il est indispensable de planifier, calculer et comparer les options disponibles. L’immobilier a constitué un excellent investissement pour la génération des baby boomers, mais il ne doit pas être une obligation ni une logique. Obtenir une plus-value n’est plus systématique et comme tout investissement un achat immobilier implique un risque: rien n’est garanti (“sauf la mort et les impôts” disait Benjamin Franklin).

Spectrum conseille à ses clients de toujours diversifier leurs investissements et garder un équilibre dans son patrimoine entre l’achat immobilier et le placement financier. Des alternatives d’investissement existent en France et en Espagne telles l’assurance-vie (2ème placement préféré des Français après l’immobilier) ou les SCPI (Société Civile en Placement Immobilier).

Nous nous proposons de vous guider en nous adaptant à votre situation, chiffrer les différentes alternatives et vous présenter l’ensemble des options disponibles sur le marché.

En Espagne comme en France, Spectrum possède également une section “courtier en prêt immobilier”. A votre demande, nos conseillers sont à votre disposition pour effectuer les recherches nécessaires auprès des banques. Ils sauront vous guider, négocier en votre nom et vous permettre d’obtenir un meilleur taux à moindre coût sans frais de remboursement anticipé.

N’hésitez pas à me contacter. En tant que consultant chez Spectrum, je me tiens à votre entière disposition pour étudier toutes demandes ou répondre à vos questions.

Inheritance Tax in Catalonia

By Chris Burke
This article is published on: 11th October 2019

11.10.19

*There have been recent updates of 1st January 2020 – please click here for the new rates

In the circle of life, it’s an unfortunate occurrence that parents or relatives pass on from this world we live in and leave an inheritance, whether that is property, money, investments or other assets. The value of this inheritance may or may not be the kind you are used to having or looking after, and that is where we/ I come in, to make sure this your inheritance is safe and looked after, taking into account your life situation both now, and in the future.

How is this inheritance taxed in Catalonia though? I hear many stories or ideas among people I meet but no one seems to know for sure, or get it right anyway. One of the reasons for this is that it depends on where the money comes from, i.e. which country and what asset is being received. Many of my clients are from the UK, how does it also work there? In the UK it is usually very simple, if someone dies being resident in the UK and leaves you assets up to £325,000,there is usually no Inheritance Tax (Paid by the estate); anything over this is taxed at 40%. However, in Catalonia it is not that simple (Surprise surprise, I hear you say!) and alongside what is declared and maybe tax payable in the UK, you must also declare and pay the relevant tax here

Firstly, Inheritance tax in Catalunya is paid for by the receive, not the estate, and very importantly, you have 6 months to declare this inheritance, EVEN if you haven’t received it yet (this is from the date of decease) or you will be fined the following way, on the amount of tax you are liable to pay:

5% in the following 3 months (i.e. months 6-9 since death)
10% from 3 months to 6 months
15% from 6 months to 12 months
20% plus interests after 12 months

The good news is that there are discounts on inheritance tax in Catalonia, and most people are surprised by the amount of tax they have to pay, in a good way. To start with, there is usually no tax to pay on the first €100,000 being received if you are a child or spouse of the deceased. If you are a parent of the deceased, the allowance is €30,000 and any other relative receives a €50,000 nil tax amount including grandchildren.

From this point on, there are further reductions between 97-99% and there are also other factors to be taken into account, such as are the children under 21, disabled or if from a family business. The quickest and simplest way, I feel, to give you an idea of what tax you would pay is if I use the most common example, of a parent living outside of Spain, leaving their child whom is living in Catalonia an amount of money/asset not including property (there would potentially be extra tax deductions for receiving this):

Example (guideline) of someone tax resident in Catalonia, inheriting from a parent in the UK:

Amount to be inherited	Tax due in Catalonia
€100,000	€0
€250,000	€383.82
€500,000	€4,300.05
€750,000	€16,866.68
€1,000,000	€40,473.29

These are approximate and we always suggest getting in touch to confirm exactly what the amount would be, and for help declaring it. For the assets themselves, it is worth knowing that many assets overseas are not always efficient to have while living in Catalonia. For example, investments or Isas in the UK are declarable and tax payable on any gain in Spain annually, EVEN if you do not take any of the money, unlike in the UK. This is where we help our clients to get organised efficiently and manage the assets if needed.

If you have any questions relating to any of these points, or anything similar, don’t hesitate to get in touch.

Click here to receive important Financial/Tax related updates

How to invest – Rebalance Your Investments

By Spectrum IFA
This article is published on: 9th October 2019

09.10.19

I previously discussed how asset allocation is an investment strategy that can limit your exposure to risk. As you get further along your journey of being an investor, you need to understand how to rebalance your portfolio to keep it in line with your investment objectives.

Rebalancing is bringing your portfolio back to your original asset allocation mix. This may be necessary because over time, some of your investments may become out of alignment with your investment objectives. By rebalancing, you will ensure that your portfolio has not become overexposed to one asset class and you will return your portfolio to a comfortable and more acceptable level of risk.

For example, let’s say that your risk tolerance determined that equities should represent 60% of your portfolio. However, after recent market fluctuations, equities now represent 75% of your portfolio. To re-establish your original asset allocation mix, you will either need to sell some of your funds or invest in other asset classes.

There are three ways you can rebalance your portfolio:

1. You can sell investments where your holdings are overexposed and use the proceeds to buy investments for other asset classes. With this strategy, you are essentially taking the profits that you have made and reinvesting it into a more cautious fund.

2. You can buy new investments for other asset categories.

3. If you are continuing to add to your investments, you can alter your contributions so that more goes to the other asset classes until your portfolio is back into balance.

Before we rebalance your portfolio, we would consider whether the method of rebalancing we agree to use would entail transaction fees or tax consequences for you.

Depending on who you speak to, some financial experts advise rebalancing at regular intervals, such as every six or 12 months. Others would recommend rebalancing when your holdings of an asset class increase or decrease more than a certain preset percentage. In either case, rebalancing tends to work best when done on a relatively infrequent basis.

Shifting money away from an asset class when it is doing well in favour of an asset category that is doing poorly may not be easy. But it can be a wise move. By cutting back on current strong performers and adding more under performers, rebalancing forces you to buy low and sell high.

To discuss further how rebalancing can help your existing investments, please contact me either by email emeka.ajogbe@spectrum-ifa.com or phone: +32 494 90 71 72.

The attack on cash in Italy

By Gareth Horsfall
This article is published on: 8th October 2019

08.10.19

There are 17 different regulations for the use of cash in Italy, from the €15000 limit on shopping for foreign tourists to a €1000 limit on money transfers. 20 years of regulations of cash in a country where it is estimated that 86% of transactions are completed with the use of cash.

But changes may be afoot if this coalition gets its way.

THE PROPOSED CHANGES
The M5S and PD government are, like any good Italian government, looking at ways to rebuild this country’s coffers and balance the books. I say this with a modicum of tongue in cheek, because although that is all they ever seem to talk about, whether they ever get the chance to do anything about it before the coalition falls apart and another set of politicians comes in and changes the proposals yet again is anyone’s guess. But let’s give them the benefit of the doubt this time round.

The following proposals are ones which might seriously affect the way you do business or conduct your life in Italy.

The Italian coalition government are looking at how they can incentivise the use of traceable means of payment, i.e. bancomat, credit cards and bonifico, and increase their usage in line with other Northern European countries. To do this they are looking at monetary incentives in the way of a discount in the rate of IVA (VAT) on products and services or imposing penalties on high levels of cash withdrawals at the ATM.

Under the proposals, if you pay by electronic means instead of paying by cash then you could be eligible for a discount of 2% on IVA. However, if you pay by cash then the IVA will increase by 1%.

Using the example of paying cash in a restaurant, you would get an IVA discount of 2% on the 10% normally charged if you paid by card i.e. 8%, or alternatively an IVA rate of 11% if you paid in cash. A nifty move, if it ever comes into force, and one which could certainly catch many people out. If these proposals are implemented by this government or any other, then it might be time to review how you make and/or receive payments to think about benefitting from this discount.

ATM WITHDRAWALS
The second way that they propose to fight the black market of cash payments is to apply a tax on monthly cash withdrawals from ATM’s, or the sportello, where withdrawals exceed €1500 per month. A 2% tax would be applied if you superseded this limit. Equally, the proposal seeks to reward those who use electronic means of payment with a 2% tax credit directly into their account. How they will calculate this is still being disputed.

It remains to be seen how the proposals with be implemented, but both are currently being considered seriously with a view to adding an amendment to the recently approved raft of measures in the Legge di Bilancio 2019. Don’t get caught out if they come into force!

These proposals and rules are changing almost daily at the moment and just this morning I have seen another, which should come into force, and which will allow deductions for income tax purposes, e.g. scontrini at the farmacia or the Ecobonuses for house renovations, ONLY if they are paid by bancomat, credit card or bonifico.

In short, they are trying to disincentivise the use of cash as much as possible. This comes with a promise that if sufficient revenue is generated for the state, then the rate of IVA will not increase in 2020 and 2021 (as is proposed) and they will also look at tax deductions for individuals and families. The mind boggles.

Tax breaks in Italy

By Gareth Horsfall
This article is published on: 7th October 2019

I have been writing these articles for 10 years this year, after sending out my first one in 2009. Looking back at the very first one just the other day, I saw how it had developed and how the concepts I discuss have changed dramatically. This got me thinking about the way that the world has changed as well during this time. Last Friday I joined the Global Climate Strike in Rome. There were about 250,000 students, protesters and concerned people; marching to spread our concern for how we treat the world we live in. It certainly got me thinking about how politics is going to have to change significantly in the coming years to meet the needs and desires of these disgruntled voters.

Which leads us nicely to the new coalition government in Italy and their changes in the Legge di Bilancio which were approved on the 30th September. In the Legge there are many new rules that will come into force from 2020, some eco based (but not enough) and a number which may affect you. Below I have selected a few of the changes in the tax law which might interest you.

1. If you are in the market for a new car, then incentives will be given, up to €6000 for purchasing a new electric, hybrid, small gas or small diesel car.

2. BUT, if you buy an SUV or an ‘auto lusso’, then you will taxed up to €3000.

3. Anyone who is working online might be caught in the trap set to try to tackle evasive tax practices by the big tech companies. Italy is following the French lead and introducing a tax of 3% on web based business revenues generated in Italy.

4. The flat tax of 7% for retirees moving to, and getting residency in Italy is fully approved from January 2019. The main caveat is that you must move to a village of no more than 20,000 inhabitants in any of the following regions:

Sardinia, Molise, Abruzzo, Puglia, Basilicata, Calabria, Sicilia

Other terms and conditions apply, so check carefully before assuming you automatically qualify.

5. Income tax deductions will be available for anyone who carries out invoiced home renovation, purchases eco domestic appliances, completes seismic work on their house, purchases sun curtains for balconies or buys mosquito blocks for doors, amongst other property related deductions. The following article (in Italian) provides a nice summary (once again conditions apply, so make sure you check the small print or speak with a commercialista before going ahead).

https://www.theitaliantimes.it/economia/proroga-bonus-ristrutturazioni-mobili-verde-ecobonus-legge-di-bilancio_011019/

However, please remember that this work must be ‘invoiced’ work and paid for by electronic means. If you pay for it in the black or in cash (even if invoiced), then it is not deductable. Although paying in the black is illegal, it will often mean you can negotiate a discount on the full price. Whilst this might make paying in cash may seem attractive, it won’t afford you any income tax deduction so may turn out to be more disadvantageous.

6. The canone RAI (TV licence fee) has been reconfirmed as €90 per annum. No price increase will be applied, at least for this year.

7. And the pièce de résistance … if you thought that IMU and TASI were hard enough to get your head around, the latest news is that they are going to be unified. No prizes for anyone who can come up with the new acronym. TASIMU???

Interest rate outlook and what it means for your investments

By Barry Davys
This article is published on: 1st October 2019

01.10.19

I had a very nice dinner a few days ago with an investment manager I have known for 12 years. We meet regularly and he is one of the investment managers in London that we, as a company, use for some of our clients. So we know each other professionally quite well and one of us always acts as devil’s advocate to the other one’s position in discussions. It is a great way of getting your point of view tested. Yes, we did talk about Brexit, but the more important issue was the fact that long term interest rates are likely to stay low for a very long time in Spain and in Europe. So here are some thoughts about what these low interest rates mean for our savings and investing.

First, Brexit. Brexit is on everyone’s lips and quite understandably so. Whether you love it or hate it, no one seems to be able to work out what is going to happen. I admit to not being able to work out where it will end. The Brexit outcome is incredibly important to us as individuals and businesses. Yet what about for our savings? Britain is the sixth largest economy in the World. Sounds important. According to the World Bank, the World economy is $86 Trillion. Britain’s economy is $2.8 Trillion. So Britain represents just 3.26% of the World economy. Which means we still have 96.74% of the World economy where we can invest!!!

Perhaps the more important story for savings and investments is the impact of very low interest rates that could stay low for decades. My dinner guest gave good insight into the future of low interest rates. This insight is important to us as individuals with savings and investments.

In October 2007, interest rates in the UK fell from 5.5% to 0.5% in May 2009. Interest rates in Europe followed a similar path. The ECB in July 2007 cut its interest rate from 5.25% to 0.75% in May 2009. The ECB rate has now fallen to just 0.25%.

Will low interest rates stimulate the economy? Yes, it will, but not enough to get economies back on track. Mario Draghi, the current President of the ECB, says central banks changing interest rates will help, but Governments have to spend more too for sufficient economic growth to happen. As an example, Germany has been taking a lot of stick because it has not been spending. The amount it collects in taxes etc is equal to the amount it spends.

This is the German Government policy. This is a sensible policy unless parts of the country break down and need repairs. Two items that need repair in Germany are the military and the transport infrastructure.

The military, if the stories are to be believed, did not have one single usable helicopter earlier this year. Roads in Germany need repairs, including bridges. Spending money on these road repairs not only give jobs to workers and their companies but also helps the German transport system to run smoothly. This helps the logistics chain in the economy and gives a boost to the economy. These are two examples of where government spending is helpful and supportive of low interest rates. To offset a recession there has been some suggestion of Germany spending €50 Billion on infrastructure spending. As a comparison, Spain already is spending more than it gets in on taxes.

The Bank of England Monetary Policy Committee is responsible for setting interest rates in the UK. It has said that due to the Brexit uncertainty, the next UK interest rate move is likely to be down. The UK official interest rate is only 0.5% now, which gives an indication of the outlook for interest rates: near zero for a long time.

JP Morgan is the sixth largest bank in the World with assets of $2.73 TRILLION. Bob Michele, Global Head of Fixed Income at JP Morgan, has gone even further than the Bank of England in predicting the European interest rates. His analysis shows that Europe will have negative interest rates for the next eight years. Mario Draghi has also said that European economic growth will be very low for seven years, which is another indicator for low interest rates. Indeed for both the UK and the EU there are many forecasts of very long term, low interest rates.

On the bright side, borrowing costs are much reduced as a result of low interest rates. Monthly mortgage payments are much smaller than normal. Businesses and Governments can borrow at much lower rates. On the dark side, we get little, or indeed no, interest on our savings. How low can interest rates go? Rates are negative in Switzerland and Denmark for people living outside the country. These non resident account holders actually have to pay the bank to take their money. When interest rates on savings are very, very low, what do we do with our savings?

If we have savings should we consider paying off our mortgage? Mortgage rates in Spain around 1.63% fixed for 20 years (via Spectrum Mortgage Services, email me if you require details). It can be better to invest than pay off a mortgage at this rate. If we have other loans you should look to pay off the loan from savings if the interest rate on the loan is greater than you can achieve by investing. A good benchmark figure to use is if the loan rate is greater than 5% per annum you should consider paying it off from savings.

Despite these low rates it is essential that we keep some money readily available, probably in a bank, as an emergency fund. Yet, with these historically low interest rates, it is also essential we do not leave more than we need in the bank. Inflation, even low inflation, eats into the buying power of money left in the bank. It is an insidious effect we often don’t notice until we come to buy our next big purchase. It is at this point we realise that we can’t buy what we thought we could buy because we have had interest on our savings that was smaller than the rate of inflation. When this happens, buying power falls. Instead of being able to buy the sports version of a car we find we can only afford the base model.

We need to use other types of savings and investing strategies during times like these. There are many other options, but most alternatives come with some investment risk. What does investment risk look like?

You may not have realised, but since the market collapsed in 2009 there have been corrections of -16.0%, -19.4%, -12.4%, -13.3%, and -10.2% in the S&P 500!

What is the investment return on the S&P 500 since bank interest rates hit their lows in 2009? INCLUDING the falls above, it may surprise you that the return has been 219%.

This is just one index based on shares in one country and is used to highlight volatility in a market. To reduce the impact of this volatility our savings should be in diversified pots. A fair question for you to ask me is “With these low interest rates, what pots do you invest in?” The answer is I have a mix. I have some very steady, some would say old fashioned, funds. Others are with a mix of investments managed by a fund manager, including some investments in the S&P 500. I have some UK Premium Bonds for my emergency fund as they are easily accessible. I have income producing investments in my pension. Index linked funds give me some protection against inflation (just in case we get an unexpected event). I have some forward looking funds that invest in India and China. And then… well I have three small holdings in UK private companies making new technologies and an Exchange Traded Fund (ETF) for Artificial Intelligence and Robotics.

There is diversity across types of investments, e.g. shares, funds, regions and bonds. Within the higher risk parts there is balancing of risk. The three individual shareholdings in tech companies are very high risk because the value of the shares in each company depends on the results of that company alone. Balance is provided because the ETF performance which depends on the 41 companies it tracks. If one company does badly, there are 40 others to take up the slack. It was sensible for me to diversify from an investment being dependent on the results of one company, to something which is dependent on the results of 41 companies. Especially as I am not a researcher in the fields of AI and robotics.

This is my mix of investments, but it may not be right for you depending on what return you want and how much risk you are prepared to take. Do I also choose superb investments and do these investments avoid market falls? I admit it, no they don’t. But my diversification does.

Tax is also relevant to the good husbandry of your savings at all times, not just when rates are low. With money in the bank and interest rates so low, it is not much more than adding insult to injury when the taxman takes 19% to 21% of your interest. However, it is important that having moved your savings from a bank account you make the investment tax efficient. How to do this will depend upon your situation and requires individual advice.

This brief note gives an example of what we need to do now as we are faced with low interest rates for a long period. What is right for you will depend on your circumstances. Is it worth taking some risk? Yes, especially if you use several different types of investments; investments in different types of assets and different geographical areas. Putting your savings in different pots can help to reduce the investment risk.

As is often the case, what looks like a disadvantage, the low interest rates, means opportunities appear elsewhere!

How to invest – What Is Asset Allocation?

By Spectrum IFA
This article is published on: 30th September 2019

30.09.19

If you read my previous article, I discussed the importance of diversification in your portfolio and how it is a strategy that can limit your exposure to risk. Another strategy is through asset allocation.

Asset allocation involves dividing an investment portfolio among different asset categories, such as equities, bonds, property, commodities and cash. The process of determining which mix of assets to hold in your portfolio is a very personal one. The asset allocation that works best for you at any given point in your life will depend largely on your time horizon and your ability to tolerate risk.

TIME HORIZON
Your time horizon is the expected number of months, years, or decades you will be investing to achieve a particular financial goal. If you have a longer time horizon, you may feel more comfortable taking on a riskier or more volatile investment, because you can wait out slow economic cycles and the inevitable ups and downs of the markets. However, if you are saving for a property or a car, you are less likely to want to take on risk as you have a shorter time horizon.

TOLERATE RISK
I have spoken in more detail about risk, here. However, to summarise, risk tolerance is your ability and willingness to lose some (or all) of your original investment for greater potential returns. More adventurous clients, or those with a high tolerance for risk, are more likely to risk losing money in order to get better returns. My more cautious clients, or those with a low-risk tolerance for risk, are more likely to prefer investments that will preserve the value of their original investment.

THE IMPORTANCE OF ASSET ALLOCATION
By including asset categories with investment returns that move up and down under different market conditions within a portfolio, you can protect against significant losses. Historically, the returns of the three major asset classes (cash, equities and bonds) have not moved up and down at the same time. Market conditions that cause one asset class to do well often cause another asset class to have average or poor returns. By investing in more than one class, you will reduce the risk that you will lose money and your portfolio’s overall investment will have a smoother gradient. If the return in one asset class falls, you could be in a position to counteract your losses with better performance in another asset class.

If you are looking to start investing or review the asset allocation in your existing investments, please contact me either by email emeka.ajogbe@spectrum-ifa.com or phone: +32 494 90 71 72

Tax Advice in Spain for Expats

By Chris Burke
This article is published on: 24th September 2019

24.09.19

Whenever someone gets in touch with me, the first, most important thing I suggest they do is to make themselves and their family as tax efficient as possible, i.e. tax planning. There is no point having a ‘leaky bucket’: their money earning interest but more than needs to is pouring through the ‘tax holes’ they haven’t plugged or planned for.

So, apart from the obvious reason of minimising the current tax you pay, why is it important to review your tax situation? It is to make sure you are aware of ‘stealth taxes’. Stealth taxes are those which are not easy to detect and that many people are not aware of.

If you are a government, you want to win as many votes as possible to be elected (or re-elected). You need money to spend, but raising taxes on the upper echelons will damage your votes, raising taxes on the working classes will also damage you votes, and both will be very vocal. Therefore, what has become increasingly popular with governments is to increase taxes that won’t necessarily hurt voters’ pockets on a day to day basis, but which could do in the future.

A good example of this is something called the lifetime allowance. This is the ‘ceiling’ under which the value of your UK private pension will be in the regular tax bands. However, if your pension pot overshoots this limit, you will pay increased tax of up to 55% on anything over that ceiling. Never heard of this tax? Well, I can assure you there are some very normal, everyday, hard-working people who are not in the upper echelons of society and who, due to long pension contributions and having good investment advice, will reach this limit in their lifetime.

To explain this a little more, the lifetime allowance ceiling was introduced in 2006 and was £1,800,000 at its maximum. Over time, it has been reduced and reduced to its present rate of £1,055,000. During that same time inflation has increased, people’s earnings have increased, contributions to pensions have increased; so why should the ceiling go down? Stealth tax.

Moving forward, stealth taxes are likely to be the most popular way for governments to increase their income without the majority of people noticing.

Let’s think about this. What else could the government do along these lines to increase revenue? How about tax those British people living outside of the UK more? They don’t live there, they don’t have the same rights as everyone that does, so are they not an easier target? So, what could they do? Tax UK state pensions (currently they do not tax non-UK residents, although they are taxable in Spain)? Or how about tax those with UK private pensions a ‘non-resident tax’? Or tax those who move their UK pensions outside of the UK and not into a place where the UK government has an agreement with? In fact, the last one they do already!

What can you do? Well its quite simple really; plan now so that should any of the above or anything like this happen, your assets or monies are arranged to be as tax efficient as possible to mitigate these circumstances. If your assets are working just as effectively as they are now, but are much more tax efficient, it could save you and your family a lot of money in taxes in the future.

Perfect preparation prevents P*** P*** performance I believe is the phrase!

Spanish Resident Services

By Jeremy Ferguson
This article is published on: 10th September 2019

10.09.19

I was recently with someone whom I have known for quite a while, having met him regularly at business events in and around where I live. I knew what he did for a living (chef) and he knew what I did for a living, or at least I thought he did!

Over dinner one evening, I was asked “Jeremy, I know you are a Financial Adviser, but what exactly do you do?”

It actually took me by surprise, thinking everyone would know what I did if I had told them my job title. The discussion continued; “ I would get it if you said you were a chef, you cook food; if you were a car mechanic, you repair cars; if you were a pilot, you fly planes; but what exactly do you do as a Financial Adviser?”

Wow! My answer actually took a little longer than I thought, explaining all of the different aspects I deal with. That got me thinking, I do need to explain a little more about what I do, but not bore people to death.

With that in mind, I put together a small ‘flyer’ showing the areas I deal with, which then pushed me to write this article with the objective of giving people a little more detail around all of the areas I can help with.

So this is what I do for people who live here in Spain:

Retirement Planning / Pension Management
If you haven’t got to that age yet, have you tucked enough away to get you through retirement? Is what you have saved so far suitably invested now things are changing? If you have got to that age, is what you have expensive and suitable for your current lifestyle? We can review your plans and help with managing your finances in retirement.

Pension Transfer Advice
QROPS is a complicated area. What does it even mean? Qualifying (it qualifies as a pension) Recognised (it is recognised by HMRC in the UK) Overseas (it is outside of the UK) Pension Scheme. It simply means it may make sense to move your pension away from the UK to gain more control, for example to choose Euros instead of Sterling. Quite often it makes no sense to move it. What is important is that we can provide you with all of the information you need to make an informed decision. Brexit may mean there is a limited time to do this.

Tax Efficient Investments
If you have ISA’s you will be taxed on these in Spain. Are you invested in policies you bought in the UK holding UK funds that are being taxed on the profit? We can take a look at what you have and see if there are better options out there for living in Spain from a cost, tax and administrative perspective.

General Financial Overviews
Savings in banks in the UK and here, ISA’s, personal pensions, state pensions, general investments, shares, and the list goes on. Are all of these suitable now things have changed and you have retired in Spain? Do you know where all your monies are? Have you forgotten a small pension you may have paid into when working for a company many years ago in the UK? Are you being charged too much for what you have? Is everything all kept together in one place? We can help manage all of this.

Cash Flow Planning / Long Term Plans
How long are you going to live? (I’m afraid we cannot answer that one). How long will what you have last? What effect is inflation having on everything. Can you reduce your outgoings? We can help you take some time to look at all of these things in detail and maybe tweak things to help your money go a little further.

Succession Planning
Who do you plan to leave your assets to when you pass away? (Please don’t say the Taxman!) Where are the likely beneficiaries living? Where are your assets based and is everything in place to make sure things go as smoothly as possible when the unthinkable happens? We can help you with all of this and give guidance on wills, taxes and everything associated with succession plans.

Mortgages
Are you looking to buy a property here in Spain but worried about the poor exchange rate when you have sterling to pay for it. Have you considered borrowing as much as you can in Euros so you can keep your pounds and maybe exchange in years to come if the rate has improved? Mortgages are at all time lows with regard to interest rates at the moment, so maybe now is the time to take advantage and lock those low rates in? Do you understand the mortgage offer you have from the bank? We can help expats with mortgages and all of these questions through our mortgage division.

So now you can understand why my friend needed a little more explanation about what I do. I hope this has given you an insight into all of the areas I can help people with and if all has gone to plan, next time someone asks me exactly what I do, my answer will certainly be a little more polished!

Pension Transfer from the EU Institutions

By Spectrum IFA
This article is published on: 31st August 2019

31.08.19

The EU Pension Scheme is what is known as a defined benefit/final salary scheme. This means that when you retire, the organisation guarantees you a monthly payment (defined benefit) until you die. When you pass away, your partner will receive a reduced monthly payment, known as a Survivor’s Pension, until they die. It is an extremely good scheme, however, you only qualify for it if you have worked at the institutions for at least ten years (not necessarily continuously).

If you are coming or have come to the end of your contract, have worked there for less than ten years, then you will be entitled to transfer out your accumulated EU Pension Rights, or what is known as a severance grant. There are two very important reasons why you should take this with you when you leave:

1. You Will Lose It, Eventually
Let’s say that you have worked at the EU Institutions for about eight years and accumulated ap-proximately €200,000 in EU Pension Rights. The day you leave, that accumulated money will re-main there, only rising in line with inflation to keep the present value. You cannot add to it or in-vest it in funds that could possibly attract stronger growth. If you do leave it until your pension-able age (66 or more), in a strategy of ‘safekeeping’, then you will lose it completely. This is even more important to consider if you are not far from your pensionable age when you leave and do not have much time to protect your retirement. Therefore, it makes sense to transfer it as soon as you can, to maximise potential growth and protect your financial future.

An added benefit to this is that if you decide to return to the EU Institutions at some point, you can transfer your pension back in and (if you are there long enough), make up the ten years.

2. No Death Benefits
All pensions come with death benefits. This ensures that in the event of your passing, your bene-ficiaries, be they your spouse, children, or your extended family, will be provided with an income. In some cases, this sum can be greatly reduced, yet it will still be something. Unless you have worked for the qualifying ten years, your acquired EU Pension Rights is not a pension; it is a pot of money that you have accumulated through working at the EU Institutions. Therefore, it has no death benefits. In the event of your passing, your family will not benefit from what you have ac-cumulated and it will be absorbed back into the EU. By transferring it out, you ensure that the full amount of what is left (you may or may not have taken an income) is passed onto your beneficiar-ies to provide them with an income, and that the money is not lost.

What Are The Next Steps?
If this is something that you wish to consider, we will conduct an evaluation of your situation and the value of your pension rights at the EU. Once we have agreed and confirmed with you that transferring out is the right option, we will work with an approved provider who complies with the transfer out requirements, and who will help set up your new pension. Then, as part of our ongo-ing service, we will review your pension and personal circumstances every quarter to ensure that you are always updated with the latest information. Even if you move countries, our service will continue.

So, if you have come to the end of your contract at the EU Institutions, have less than 10 years of service and you don’t like losing large sums of money, wish to protect your financial future and potentially provide for your dependents/beneficiaries, then contact me either by email: emeka.ajogbe@spectrum-ifa.com or phone: +32 494 90 71 72.