By John Hayward
This article is published on: 13th September 2024
How to benefit from a little extra knowledge
What do the following statements have in common?
1. Fish have no memory.
2. You consume on average 8 spiders in your sleep.
3. Cracking your knuckles causes arthritis.
4. We only use 10% of our brains.
5. You have to pay into the Spanish social security system for 15 years to be eligible for a Spanish state pension.
The answer?
None of them are strictly speaking true. As I am close to clueless when it comes to biology, I will focus on the final point, state pension eligibility.
You will read on numerous websites that, in order to qualify for a Spanish state pension, you have to have paid into the Spanish system for at least 15 years and that two of these years must be within the 15-year period immediately preceding the pension claim. However, what is generally omitted from the text is the fact that years of contributions in other countries, including the UK (despite Brexit), can be added to the years in Spain. In order to pounce on any uncertainty which might be created by my statement, I will illustrate my point with an example:
– Years in the UK system – 22
– Years in the Spanish system – 10
Although 10 is less than 15, the 22 years of UK contributions takes the total number of years over 15, i.e. 32 (10 + 22). This does not mean that one claims 32 years from the UK, or even Spain, but, in this example, there will be an entitlement of 22 years’ worth of state pension from the UK and 10 years of Spanish state pension (as long as contributions were made to the Spanish system in 2 of the 15 years prior to claiming the pension).
As per the statement from La Moncloa, the office of the President of the Government of Spain, “As from 1 January 2021, the UK and Spain will retain their jurisdiction to manage Social Security benefits based on contributions made in their respective territories, under conditions of equality and non-discrimination.”
Furthermore, “The Protocol on Social Security Coordination sets forth the totalisation of contribution periods completed in the other Party for the recognition of retirement pensions”. This is not particularly friendly English but the point is there.
In order to find out more about pension entitlement, it is extremely helpful to be registered on Gateway for UK pensions and have a digital certificate to access information about the Spanish system. The digital certificate is also useful for other legal and tax enquiries, including SUMA and cadastral enquiries. It sits on your computer and allows immediate access to your information.
Although you can access projections as to your future pension entitlement, the story does not end there. Certain assumptions are made with these online facilities and you may not be provided with a completely accurate assessment of your entitlement. In the same way that accumulating years of contributions from different jurisdictions can solve the 15-year minimum term problem in Spain, it might also be the case that you can receive your Spanish state pension earlier than expected. The state retirement age in Spain in 2024 is 66 years and 6 months. This will gradually increase to 67 by 2027. However, if someone is able to show (in 2024) 38 years and 3 months of contributions, the retirement age is 65. This limit is increasing to 38 years and 6 months by 2027 and, presumably, there will be changes after that.
So let us take an example of the person who also paid for 22 years in the UK but, this time, an additional 17 years in Spain. Their default projected state retirement age is 67 in both the UK in Spain. Although the number of years paid overall will have no effect on the UK state pension age, it will do in Spain. As 22 plus 17 is 39, the person expecting to retire at 67 could actually receive their Spanish state pension at 65.
There are other rules and options with this i.e. deferring the receipt of the pension, continuing to work and receive 50% of the pension, etc., and from an income planning perspective, this could be beneficial.
We do not work for the tax office or a social security department but all of this is really important when planning ahead to determine cashflow, income, and even employment, requirements. Using tax efficient investment vehicles, and assessing existing pension arrangements, we can help you work out how much you need in retirement and how you can achieve your long-term financial and life goals.
There is so much information on the internet but not all of it is accurate. We make every effort to filter out the wheat from the chaff as we know how important it is to know the facts before committing to something. People have made bad choices in the past because they did not have all of the relevant information. The decision by the Scots to invade England during the Black Death was not one of the best.
By Charles Hutchinson
This article is published on: 12th September 2024
I was on one of Spain’s magnificent high-speed trains the other day, coming home from Madrid. We were travelling at over 300 kph across the spectacular wild scenery, a complimentary glass of white wine on my table with not a ripple on its surface.
I was lucky enough to be travelling Preferential (1st class) as Economy was full up. But the price didn’t matter because I have attained the age where I am entitled to a Gold Card which reduces train tickets by as much as 40% – I was travelling First for the price of Second!
Opposite me sat a kindly looking fellow and soon we began to chat. He was a senior airline executive with one of the Arabian Gulf airlines and was soon to retire. He was on a looksee mission as he and his wife had decided to move to Southern Spain where the climate is similar to Dubai’s, their home for over 15 years.
The thought of moving back to their native damp grey Britain was daunting.
It was a fortunate meeting as I was soon able to help him cut some corners and avoid some pitfalls which had been laid in his path by so called knowledgeable advisers in the UAE.
Relocating from Dubai to Spain can be an exciting move, but it also involves several important steps to ensure a smooth transition.
Here’s a breakdown of the key aspects you may need to consider:
Personal Finances
Taxation: I was able to present him with a copy of our Spanish Tax Guide which shows the different tax obligations and, once you become a tax resident (living here for more than 183 days), that you’ll need to pay taxes on your global income. I also advised him to check the details of the double taxation agreements between Spain and the UAE. It is very important to engage a licensed and regulated (in Spain) financial adviser to assist you with all these matters.
Spanish Bank Account: You’ll need a Spanish bank account to pay rent, utilities, and other expenses. It is also advisable to have an offshore bank account where the bulk of any cash should be kept as some Spanish institutions have the habit of raiding one’s account without permission!
Visas and Residencias
It seemed he wasn’t fully aware of the options available to him in legally securing his residency here. As a UAE resident, you’ll need to apply for a Spanish visa unless you hold citizenship of an EU country. There are several types of visas. Non-Lucrative Visa: if you plan to retire or live off savings, this visa allows you to stay without working. Golden Visa for individuals investing in property or businesses in Spain (minimum investment of €500,000). Work Visa: If you have secured a job in Spain. Student Visa if you are moving for educational purposes. Residency Permit: once you have arrived in Spain, you’ll need to apply for a residence permit, if none of the above apply.
Driving
It is important to check if you can exchange your UAE driving licence for a Spanish one, or if you’ll need to undergo a test. You have six months to drive on your foreign license once you’re a resident here.
Accommodation
Many people moving here begin by renting to see where they would like to live within a certain area. An alternative to this is to retain a Relocation Agent who will line up properties to your specification before you come over. This saves time and money and can be very rewarding. You can also use this service if you wish to rent instead.
Lawyers and Gestors (Para Legals)
It is important to retain a lawyer or Gestor who specialises in immigration or real estate to help you navigate legal requirements such as contracts, taxes, and residency permits. A good reputable relocation agent can also provide this service.
Healthcare
Spain has an excellent public healthcare system and is available once you obtain your residency permit (Residencia). Many expats opt for private health insurance and there is a wide choice here. In some cases, it is mandatory for gaining residency.
General Insurance
If your UAE general insurance company does not have an EU entity, then you will need to reinsure here. This is required for your car(s) and highly desirable for your purchased property and its contents. The easiest route is a general insurance broker (of which there are many here) and who will also organise your medical insurance, if needed.
Shipping and Moving Services
If you have furniture, cars, or other personal belongings to move, the relocation agent can arrange this as there are many excellent international removals companies with branches here. They will be familiar with customs formalities and on used personal belongings, note there is no import duty. However, on a personal vehicle, you will have to pay IVA (VAT) if you decide to keep hold of it after 6 months.
Schooling
If you have children of that age, Spain offers free public schooling but classes are conducted in Spanish. There is a wide choice of Private/International Schools which offer international or UK curriculums.
Lifestyle
The lifestyle in Spain can be quite different from Dubai’s. The pace of life tends to be more relaxed here, with emphasis on family time, meals, and socialising.
The Spanish are a very hospitable people and many speak sufficient English to make themselves clearly understood. But to make life easier and to fully appreciate the wonders of Spain, it is advisable to learn Spanish as early as possible after arrival.
On arrival in Malaga, we parted company full of bonhomie and he was now armed with sufficient information to get started quickly and effectively with his search. He also has my contact details and so he might even become a client! He certainly indicated he wanted to meet again.
If you are contemplating such a move from the Gulf or from any other jurisdiction, do please contact me for a no obligation and complimentary chat on my below details:
By Chris Burke
This article is published on: 11th September 2024
As always, I am here to help ensure that the last phrase above stays with you for life, by helping you manage your assets using highly tax efficient, well-invested methods, and offering you sound advice as the years go by.
This month I thought I would really get you thinking and organised by providing, from my experience and professional opinion, in the order of importance, a list to get you financially efficient and enable you to change your wealth and financial outcome in life. Pick out those areas that apply to you and get working on that personal financial health-check now, so that over the years you maximise your assets and wealth:
1 – Taxes
Review your tax situation, making sure all your assets are as tax efficient as possible and that any monies you have are not subject to unnecessary tax, both now and later in life. For me, this is the FIRST task to tackle with your finances, and working with a good tax adviser here in Spain is rule number one. Having a ‘leaky bucket’ where any gains you make are ‘dripping’ away to hacienda is not managing your money effectively.
2 – Debt – Review and Reduce
Pay off high-interest debt as quickly as possible, starting with credit cards and other loans with high rates. Consider refinancing options if rates drop or consolidating debts for lower rates.
3 – Prioritise Building an Emergency Fund
Aim to have at least 3 to 6 months of living expenses in a high-yield (good luck with that in euros!) savings account. With economic uncertainty, having a buffer can provide peace of mind and protect against unexpected expenses.
4 – Have short, medium and long-Term financial plans
Set clear, realistic financial goals (short, medium and long-term) to develop a comprehensive plan and achieve them. Regularly review and adjust your plan to adapt to life changes and financial circumstances.
5 – Consider Inflation
With inflation remaining a concern, explore investment options that can hedge/work against inflation, such as inflation-linked government bonds, commodities, real estate or well-designed investment portfolios.
6 – Invest your savings/spare cash consistently
To grow and increase wealth, one must invest. Nothing is guaranteed in life, however over the long term a good investment plan will work to grow your monies as opposed to a guaranteed reduction in real value with low/non-interest-bearing bank accounts.
Continue investing regularly, regardless of market fluctuations, through strategies like pound/euro cost averaging. Diversify your portfolio across different asset classes (stocks, bonds, real estate, etc.) to minimise risk.
7 – Automate your savings and investments
Set up automatic transfers to savings and investment accounts. This helps ensure you save regularly and take advantage of compounding growth without needing to remember each month.
8 – Re-evaluate insurance coverage
Review your insurance policies, including health, home, auto, and life insurance, to ensure you have adequate cover without overpaying. Consider policies like umbrella insurance if your assets have grown significantly.
9 – Maximise retirement contributions
Contribute as much as possible to a retirement plan, especially if your employer offers a matching contribution. With inflation and increasing life expectancy, building a larger nest egg is crucial.
10 – Stay informed about tax changes
Keep up with any new tax laws or changes that could affect your personal finances. Look into opportunities for tax deductions or credits, like contributing to tax relief investments or making charitable donations.
11 – Rebalance your investment/asset portfolio regularly
Review your investment portfolio at least annually to ensure it aligns with your risk tolerance, financial goals, and market conditions. Rebalancing can help maintain the desired asset allocation and also changes in your life as the years go by.
12 – Plan for major expenses in advance
If you anticipate major expenses (like buying a home, car, or funding education), start planning and saving early. This can help you avoid high-interest debt or dipping into long-term savings.
13 – leverage technology and financial tools
Use budgeting apps and financial management software to help track expenses, plan investments, and manage your portfolio efficiently.
14 – Invest in yourself
Allocate time and resources to enhance your skills and knowledge in personal finances, as this can lead to higher income potential or career advancement.
Nothing changes if nothing changes……
If you would like to discuss any of the above topics in more detail, or you would like to have an initial consultation with Chris to explore your personal situation, you can do so here.
Click here to read independent reviews on Chris and his advice.
If you would like any more information regarding any of the above, or to talk through your situation initially and receive expert, factual based advice, don’t hesitate to get in touch with Chris.
By Charles Hutchinson
This article is published on: 7th September 2024
There was a time not so long ago when the BRIC markets were the darlings of the investment world. Certainly many of our Balanced risk and Adventurous risk clients were recommended to hold funds of such renowned investment houses as HSBC and Jardine Fleming. So what has happened since?
The Brazil economy has been destroyed by poor leadership and corruption; Russia has been banished to the outer fringes of the civilised world; democratic India is developing into a first world giant economy which is forecast to match China by the mid 30’s; and China? The communist Chinese economy has certainly had its share of problems since the beginning of the ‘20s, which persistently drag its markets down. They have continued to underperform due to a combination of economic, regulatory, and geopolitical factors.
Here are some key reasons:
China’s economic recovery post-COVID-19 has been slower than expected. Domestic consumption remains sluggish, and growth in key sectors like real estate has faltered. This has weighed heavily on investor confidence.
The manufacturing sector, traditionally a pillar of China’s economy, has faced challenges due to weakened global demand and supply chain disruptions. This has further dampened economic growth, impacting market performance.
The ongoing crisis in China’s property sector, exemplified by the struggles of major developers like Evergrande, has led to significant financial instability. The property market, which constitutes a large part of China’s economy, has seen declining prices and sales, eroding wealth and further depressing consumer spending. Many property developers are heavily indebted, and their financial troubles have rippled through the economy, affecting banks and other sectors linked to real estate.
The Chinese government’s regulatory crackdown on the technology sector has created significant uncertainty.
Major tech companies have faced fines, restructuring orders and other regulatory actions which have spooked investors and led to a sell-off in these stocks. Beyond tech, the government’s broader regulatory agenda, targeting education, gaming, and other industries, has increased investor caution. The unpredictability of regulatory interventions has made both domestic and foreign investors wary.
Foreign investors have been pulling capital out of China due to concerns over economic prospects, regulatory risks, and geopolitical uncertainties. This capital flight has further weakened stock prices. Domestic investors are also hesitant, with many preferring safer assets due to uncertainty about the direction of the economy and government policies.
Lastly, ongoing geopolitical tensions, particularly with the United States, have created an overhang on the market. Issues such as trade disputes, technology bans and the delisting of Chinese companies from U.S. exchanges have all contributed to negative sentiment.
The risk of decoupling between China and the West, especially in critical sectors like technology, has raised concerns about the future growth prospects of Chinese companies, further depressing stock prices.
There seems to be little immediate relief in sight unless there are significant improvements in economic conditions, regulatory clarity and geopolitical stability. The Spectrum IFA Group, along with many other advisers, are wary of our clients holding positions in the Chinese market through collective funds. But if you are a fan of Asia and other Emerging markets or just simply want to diversify your portfolio further, then one should perhaps look at India rather more closely.
For more information on this and keeping your portfolio safe within efficient and effective tax structures, please contact me, Charles Hutchinson, via the form below.
By Katriona Murray-Platon
This article is published on: 5th September 2024
I hope you all had a good summer. I very much appreciated the fact that it wasn’t too hot over the summer. My garden is certainly in a better shape thanks to the better weather. Now it is back to school and back to work and I am looking forward to setting up appointments and meeting people again.
For those who are eligible for the energy cheque but did not receive it this spring or if you did receive it but would like to review the amount received, you can now make a claim on the website chequeenergie.gouv.fr but you must make sure you do this before 31st December 2025.
On 1st August the interest rate of the LEP savings account reduced to 4%. To be able to open one of these accounts your taxable income needs to be below €22 419 (single person) or €34 393 for a couple. This rate reduction puts the LEP at only 1% higher than the other savings accounts such as the Livret A, the LDDS and the Livret Jeune which have an interest rate of 3%, set rate until February 2025.
If you are looking to save for your children there is a new savings plan called the Plan Epargne Avenue Climate (PEAC) which is available from 1st July 2024. It is a hybrid of the Livret A and the PER retirement scheme and allows you to save up to €22,950 with any gains being free of tax and social charges. There is no fixed interest rate, any gains will depend on the investment strategy but the investments are ESG and in “green” bonds. However not many banks or insurance companies offer this savings plan as yet preferring their own versions of assurance vies.
Since 31st July and until 4th December, those taxpayers who declared their income online can correct their declaration or amend any omissions by going onto their personal account on the impots.gouv.fr website under “accéder à la correction en ligne”. However, bear in mind that if the amendment results in less tax being paid or a higher tax credit, the tax office will probably contact you for more information or documents and can refuse to amend the tax return. If they do this, you need to make a complaint via the messenger service and, if this is refused, court action will be necessary. This comes from a decision of Paris administrative court of appeal of 28th June 2024 (no 22PA04610) whereby the the Court ordered the tax office to reissue the tax statement will the requested amendments. The online correction system does not let people know that their amendments can be refused.
As from September, if the amount of tax you pay is greater or less than the previous year, your monthly payments will change from 15th September. If you owe less or the equivalent to €300, the remainder will be taken on that date. If you owe more than €300, the payment will be spread out over four payments taken on 26th September, 25th October, 25th November and 27th December.
For those with Pru assurance vies or those thinking of investing in a Pru Assurance Vie, on Tuesday 27th August 2024 the Prudential Assurance Company (PAC) board reviewed the Prufund Expected Growth Rates (EGR) as part of the quarterly review process. Prufund aims to help customers grow money over the medium to long term ( 5 to 10 years) and it protects customers from some of the short-term ups and downs of the markets by using the unique established smoothing process. The Expected Growth Rate (EGR) is the forward looking element of the Prufund smoothing process. For this quarter the EGRs of the Prufunds in our assurance vie products remained unchanged for the € and $ but the Prufund Growth GBP dropped slightly from 7.7% to 7.3% and the PruFund Cautious GBP dropped from 7% to 6.6%. The Unit Price Adjustment (UPA) part of the smoothing process, which is a backward looking element, and which is formulaic and non-discretionary are also reviewed quarterly. This quarter there was an upward UPA for the Prufund Growth USD fund of +2.19%.
September is really the beginning of the year in France, more so than January, after the long summer holidays. Referrals are very important in our business and so is our reputation with clients. Therefore we are asking clients to kindly give a review of our advisers and our business on Trustpilot. I would be very grateful if you would kindly take the time to leave a comment using the link below: https://uk.trustpilot.com/review/spectrum-ifa.com
Please do get in touch to arrange a free, no obligation phone call or video meeting to discuss any financial or tax matters that you may need advice on. I look forward to hearing from you.
By Charles Hutchinson
This article is published on: 5th September 2024
Many of my clients have expressed their worries to me in recent weeks. The axiom “When Wall Street sneezes, the world catches a cold” has never been truer than now. Fears with the US economy sent global markets cascading overnight.
This was followed by a modest recovery as investors bought in at lower levels and the debate ensued as to exactly how well founded were these fears. Markets are still down and will probably remain so until some of these fears are addressed or diminish.
Overall, the U.S. economy in 2024 is not in dire straits, but it is facing significant headwinds. While the labour market remains strong and consumer spending is resilient, high inflation, rising interest rates, and concerns about future growth present challenges.
The overall outlook is one of cautious optimism, with the potential for both recovery and further difficulties depending on how these factors evolve. Let’s look at the US economy in closer detail:
Rising Government Debt Levels: The U.S. national debt has continued to grow, raising concerns about long-term fiscal sustainability. High debt levels may limit the government’s ability to respond to future economic crises.
Rising Interest Rates: To combat inflation, the Federal Reserve has raised interest rates several times. While this is intended to cool inflation, it also increases borrowing costs for consumers and businesses, potentially slowing economic growth.
Housing Affordability Issues: High mortgage rates, combined with rising home prices, have made housing less affordable for many. This has led to a slowdown in home sales and construction, affecting related industries.
Persistent Inflation: Inflation has been a significant challenge, with the Consumer Price Index (CPI) rising at rates above the Federal Reserve’s 2% target. This has eroded purchasing power for many Americans, particularly those on fixed incomes.
Recession Fears: There is ongoing concern about a potential recession. While not inevitable, some economic indicators, such as inverted yield curves and slowing manufacturing activity, have raised alarms.
To balance these, there is some GOOD news:
Robust Corporate Earnings: Many companies, particularly in the tech sector, have reported strong earnings, driven by innovation, digital transformation, and global expansion
Resilient Consumer Spending: Despite challenges, consumer spending has held up, supported by strong job growth and wage increases. This is crucial since consumer spending drives about 70% of U.S. economic activity.
Low Unemployment: Unemployment has remained low, hovering around 3.8% as of mid-2024. Job creation continues in several sectors, reflecting a resilient labour market.
So, as a long-term investor, what should I do until markets pick up again?
Stay invested with your trusted adviser or portfolio manager to ensure that your original investment strategy is not derailed by short-term market events. He/she will also be well placed to capitalise on investment opportunities during spells of market volatility. NEVER try to time the markets with big bets on ‘buying low or selling high’ – ALWAYS stay invested through uncertain times. It has been proven time and time again that this is the safest and most effective principle for achieving long-term investment success.
For further information on discretionary managed or advised portfolios within extremely effective tax structures, please contact me, Charles Hutchinson, via the form below.
By Portugal team
This article is published on: 4th September 2024
For those relocating to or living in Portugal, exploring tax efficient investment options is crucial as taxes can run relatively high. One option that has gained attention in Portugal is the Qualifying Non-UK Pension Schemes (QNUPS). In this article, we will delve into what QNUPS are and assess their potential role in a financial strategy.
What is a QNUPS?
A QNUPS is a type of international pension plan designed for individuals based outside of the UK. Unlike the Qualifying Recognised Overseas Pension Scheme (QROPS), which is funded by transferring assets from an existing pension, QNUPS are established with personal funds, assets, or cash.
Interestingly, a QNUPS is not a specific scheme or structure per se; it a tax status deriving from UK inheritance tax legislation (IHT) introduced in 2010. The fact that QNUPS derives from IHT legislation hints at one of the key benefits of using this scheme.
Making contributions to the QNUPS
While registered pension schemes offer tax relief on contributions, QNUPS do not. However, QNUPS are not bound by the annual allowance restrictions that apply to tax-relieved pension schemes, such as the current £60,000 cap for the UK 2024/25 tax year.
Contributions can be made in cash or by transferring assets, although it’s essential to consider potential tax implications, such as capital gains tax when transferring property.
When contributions to a QNUPS are made with genuine pension planning in mind, they generally do not attract inheritance tax. However, if contributions cannot be justified as legitimate pension provision, the inheritance tax position can become uncertain.
Taking money out of a QNUPS
A QNUPS must broadly follow the same rules as UK-registered pension schemes, meaning that at some point, you will need to draw benefits from the scheme.
Most withdrawals must be taken as income, which is likely taxable in your country of residence. For Portuguese tax residents, this income is typically subject to local taxation unless you qualify for pre-April 2020 Non-Habitual Residence (NHR) status, under which pension income could be taxed at 0%.
It is crucial to note that QNUPS may not be tax efficient or appropriate in all cases, as from a tax perspective it breaks the cardinal rule – do not turn capital into income.
To fund a QNUPS you contribute capital (which has already been taxed), and any withdrawals are treated as income and taxed fully – even if you have made a loss within the pension.
Benefits of QNUPS
Inheritance tax (IHT) advantages
One of the significant benefits of QNUPS is the potential inheritance tax relief. If structured correctly, assets within a QNUPS may be excluded from your estate and therefore not subject to the 40% UK IHT charge upon death.
However, it is critical to emphasise that QNUPS must be established with genuine retirement intentions. If the primary motive appears to be inheritance tax avoidance, HMRC may challenge the arrangement.
Ongoing tax efficiency
Generally, funds within a QNUPS are not subject to capital gains tax or income tax. However, exceptions may arise, such as when income is generated from UK-based assets held within the QNUPS.
Income tax treatment in Portugal
In Portugal, pension income is typically taxed according to the scale rates of income tax.
Some individuals report income from QNUPS on an “85/15” basis which, strictly, is applicable to annuities. Under this method, 85% of the income is treated as a return of capital, with only the remaining 15% taxed as income.
However, this approach may not always be appropriate, and professional advice is recommended.
Flexible investment choice
A QNUPS offers a broader range of investment choices compared to traditional pensions, including assets like real estate, non-listed shares, and chattels. This flexibility can be appealing to those with diverse investment portfolios.
Ensuring compliance
The jurisdiction and structure of the QNUPS must meet specific requirements, aligning closely with the rules governing UK pension schemes, particularly in terms of benefit form and timing.
To safeguard against accusations of IHT avoidance or “deathbed planning”, careful consideration must be made not only in terms of the value of an estate placed into a QNUPS, but the underlying investments too. For example, while some may promote the ability to hold non-income-producing assets like fine wine collections, it is essential to consider how such investments will generate income for the mandated future withdrawals.
Summary
QNUPS can be a valuable component of a well-structured financial plan but they are not a one-size-fits-all solution. Unlike registered pension schemes, QNUPS do not offer tax relief on contributions or withdrawals, and their benefits are contingent on proper planning and compliance.
For those interested in QNUPS, consulting with a financial advisor familiar with both UK and Portuguese tax regulations is essential to ensure that this investment strategy aligns with your overall financial goals.
By Jeremy Ferguson
This article is published on: 3rd September 2024
I have recently had to deal with the passing of one of my clients, and this really brought home the importance of an article I wrote over 5 years ago now.
My client was single and read my article about making a folder containing all of the important things someone may need to deal with in the event of her demise.
We did this together, and I am so glad we did. For her heirs, dealing with Probate has been so much easier than it would have been (importantly saving a huge amount in additional legal fees) and the distribution of the estate happened very quickly.
I keep reminding people, we all spend time every year making sure the ITV for the car is sorted, house insurance and car insurance policies are up to date, tax returns are filed etc. so please put some time aside to create ‘ THE Folder’ as I like to call it?
So what is THE Folder?
It is a single file (digital or physical) where you keep all of your important personal and financial information together. It allows easy access to these documents in the event that you are no longer around to help. It is really important to have it in place when one family member takes the lead on the family finances; this includes paying bills, managing accounts and storing documents. Even if that is not the case, it is an important exercise.
So what should be in THE Folder?
All documentation that is relevant to running your household with regards to finances, such as:
THE Folder can be very simple, and I always suggest contact details for each of the relevant policies etc. should be clearly marked as well. Also, make sure that when THE Folder is complete, you sit down together and explain all of the information it contains, as it will be as useful as a chocolate tea pot if you don’t both know exactly what is there.
Is it worth the effort?
Well, I think it is worth the effort. At a time of loss it can be stressful enough, without having to try to piece together the deceased’s financial affairs. This can be a really difficult time for family members, even more so if your support network, typically children, is back home in the UK.
However, preparing THE Folder is much more than just avoiding stress; if you leave behind an administrative nightmare, you could delay access to inheritors’ funds and potentially cost a small fortune in legal fees.
To give you an example of this, the UK Department of Work and Pensions estimates that there is currently more than £400 million sitting in unclaimed pension pots in the UK.
Which is best…..physical or digital?
This comes down to personal preference. It can be done by either creating an electronic file that survivors can access in the event of death, or an actual paper file. An electronic file can be stored on your main computer, in the cloud or on an external hard drive. Make sure everyone knows how to access the computer, cloud or hard drive though!
Alternatively, if you use a physical folder to keep all of the important information together, make sure it is large enough to keep everything together. The good old shoe box has been a long time winner in this department, although a well organised file does make life a lot easier for everyone.
For what it’s worth, I find lots of people prefer paper and are happier with hard copies of everything. I personally prefer digital, which I have shared with some trusted family members. It may even be worth considering asking your legal advisers to hold the folder on your behalf (electronic is much better for this reason), so a simple visit to them if anything happens means they can assist you far more easily with everything.
Typically they will want all of the information it contains anyway, so by saving time when it becomes relevant, the small annual charge they may make for holding the information will normally be offset.
And finally…
I have already stressed this, be sure to tell someone about it! There is little point going to the effort of creating such a folder if no one knows of its existence or where to find it…..
By Amanda Johnson
This article is published on: 21st August 2024
A question I’m often asked:
“I would like to gift some money to my daughter. How can I do this and what taxes do I need to be aware of? Will I need to use a Notaire?”
First, you need to determine if this is a gift or if you are providing financial assistance to a family member. You are allowed to provide financial help (subsistence support) to family members if their income is low, and in some circumstances, you can apply for tax relief on this. They will need to declare this income on their French tax return.
If it is a gift, is it for a wedding present? Is the amount you are gifting relative to your income, and have you gifted similar amounts to other children when they got married? You are allowed to gift up to 100,000€ to each child every fifteen years tax-free, but you must declare this to the tax authorities. If you die within those fifteen years, the amount you have declared will be used towards their inheritance tax allowances.
Your daughter will need to declare this amount to the relevant tax authorities. If she lives in France, she will need to make a Déclaration de don manuel if the amount is less than €15,000, and for amounts above €15,000, a Révélation de Don Manuel. If your daughter lives outside of France, she will need to contact the tax authorities in the country she resides in to declare this gift, and any taxes due will depend on the rules of that country.
The use of a Notaire is required if the gift involves a division of family assets or the transfer of property.
If you are unsure of what needs to be declared and when, you can easily email your local centre d’impôt. Their email address is on your Avis d’impôt.
By Portugal team
This article is published on: 19th August 2024
With some stock markets falling over the past couple of weeks, it is an opportunity to review markets and risk.
We all love the feeling we get when we grab a bargain and have no hesitation in purchasing our favourite goods or services when they have a price reduction or promotion.
However, the world of investments is probably the only one in which the same price reductions are met with fear and anxiety instead of joy, however if you are a long term investor, the falls can be an opportunity.
The numbers matter
Statistics show that, over the longer term, stock markets go up approx. 70-75% of the time. In this context therefore any fall in values can be seen to be temporary setback and opportunity to buy shares at “sale” prices.
“Breaking news! Shares up over 20% in 2023!”
You will rarely, if ever, see such a headline. In the same way, you would not have seen a headline stating there “wasn’t a single casualty in the millions of commercial aviation flights in 2023”, but you probably have seen many “flight from hell” articles published in the same year.
When it comes to the world of investments, the media is not your friend in helping you make informed decisions as the focus tends to be on short-term news developments without taking into accountant the much broader and longer-term picture.
The media also tends to catastrophise events with news headlines being designed to grab attention. We see discussions of “crashes”, “crises”, “recessions” etc. and this is getting worse in the digital age with “click bait” designed to grab people’s attention. Moreover, through sophisticated algorithms, the same messages are reinforced through links to similarly anxiety inducing articles.
As a result of this, many still equate the stock market to rolling dice at the casino. An alternative and more considered and rational description of the stock market could be:
“a highly diversified selection of some of the world’s largest and financially secure companies, including such names as Apple, BP, Nestle etc. many of which have been in existence for decades if not hundreds of years, and whose return has averaged over 10% per annum over the past 50 years”.
This hardly trips of the tongue, but the emotional reaction is much different.
What is risk anyway?
It is not as clear cut as you think. When people think of investing and risk, they think about the possibility of losing all of their investment.
Whilst it is indeed possible for individual companies to fail, if you hold a diversified portfolio of, say, the top 500 shares in the US (the S&P 500 index), the only way you could lose your money would be if every one of those 500 companies were to fail.
Over a 50-year period, the S&P 500 index has increased by an average of more than 10% per annum and this is a period that has been marred with the inflation shocks of 1970s, wars, emerging market crises, 9/11, “Grexit”, “Brexit”, the great financial crisis of 2007/08 etc. Nevertheless, the market continues to increase consistently.
Does risk lie in ‘safe’ assets?
We live in a world in which costs are constantly increasing in value. If we reminisce and think about the cost of our first car or house, we can really appreciate the extent to which prices rise over time. Therefore, in order to maintain our standard of living over time, our money must at least maintain its purchasing power and ideally increase our purchasing power over time.
With that in mind, holding fixed return investments such as cash in a world in which costs are increasing is not low risk; it is high risk in the sense that you are jeopardising the value of you real wealth over the longer term.
Safety in risk?
Conversely, shares have historically demonstrated the ability to grow well in excess of the rate of inflation and therefore, as they are protecting your wealth, they can be regarded as safe investments.
Indeed statistics show that the risk of investing in high quality shares reduces to zero over a 20 year time horizon. This sounds like a long time but if we consider life expectancy statistics, a couple in their mid-60s can expect to live well into their 80s and one of the couple has a good chance of reaching 100! Furthermore, we find that many clients’ portfolios outlive them and will be handed down to children and/or grandchildren, in which case the investment period is likely to be multiple decades long.
