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Modelo 720 Reporting Time!

By Chris Burke
This article is published on: 23rd March 2017

23.03.17

Just a reminder that time is running out for submitting your Modelo 720 declaration.

All those tax residents in Spain, (those living in Spain for more than 183 days a year or where Spain is the main base for your business), should be aware that as a result of legislation passed on 29th October 2012 residents in Spain who have any assets outside of Spain with a value of €50.000 or more, are required to submit this declaration form to the Spanish authorities. (that’s €50.000 or alternative currency equivalent).

This declaration can be made online, through the Tax Office`s web page www.agenciatributaria.es where the Modelo 720 (Tax in Spain) can be located and completed. It must be filed between January 1, and March 31, of the first year of residence, to avoid being investigated or fined by the Spanish authorities. I would personally recommend speaking with your accountant / Gestoria to avoid mistakes.

The assets outside of Spain that are subject to this declaration form fall into 3 asset categories:
1. Property
2. Bank accounts (cash)
3. Investments

To warrant a declaration the total value of assets should exceed € 50.000 in each or any one of the categories; e.g. if you have 3 bank accounts and totalling up all the balances it exceeds the €50.000 limit you are subject to making the Modelo 720 declaration. However, if you have a bank account at €30.000 and say, investments valued at €30.000 then there would be no reporting requirement as they are in separate categories and each individual total value does not exceed the €50.000.

A declaration must be submitted individually, regardless of the percentage of ownership (in joint accounts). For example, if you have a joint bank account with a value exceeding €50.000, although your particular (say €25,000) share is below the threshold, each owner would still be required to submit an individual declaration based on the total value of the account.

Although this declaration of assets abroad is solely informative and no tax is charged, failure to file, late filing or false information could result in serious consequences.

For this reason, we recommend that everybody arranges to declare their assets, to avoid the imposition of fines from a minimum of €10,000 to a maximum of 150% of the value of those undeclared assets located outside Spain. Once you have made your first declaration it is not necessary to present any further declarations in subsequent years, unless any of your assets in any category increases by more than €20.000 above the initial value declared.

Changes to QROPS from 9th March 2017

By Chris Burke
This article is published on: 23rd March 2017

The UK Government announced major changes to Qrops schemes as from the above date (note this does not affect those who already have a Qrops). In essence, anyone who is resident outside of the EU/EEA or not living in the country where their Qrops is based (limited options here) will be taxed at 25% of the value of their pension, if this occurs within 5 years of starting a Qrops (i.e. becoming non UK resident).

So for example, Chris Burke moves his pension from the UK into a Qrops on the 30th March 2017 to a scheme based in Malta (one of the most popular places to hold your Qrops due to its strict regulation). In 2021 (4 years time) Chris decides he is moving to Dubai. He would be taxed 25% on the value of his Qrops.

Why is the UK doing this?

Well, there are many reasons and you would think Brexit is one (many people leaving the UK and perhaps taking their pensions with them). Qrops is also very popular due to its potentially tax efficient and security aspect of securing your UK pension (this is not the case for everybody so good advice is needed). You would also have to look at the potential taxes the Government would raise from this, there are many Qrops based schemes around the world and by limiting where you can hold your pension greatly affects those that can move it.
So to clarify, UK pension transfers to QROPS requested on or after the 9th March 2017 will be subject to a 25% tax charge, unless;
1. The QROPS is in the EEA and the Member is also resident in an EEA country.
2. The QROPS and Member are in the same country or territory. This is a limited if negligible part of the market.
3. The QROPS is an employer sponsored occupational scheme, overseas public service pension scheme or a pension scheme established by an international organisation.
Draft Guidance confirms that for the purposes of these measures, the EEA includes Gibraltar, which is considered part of the EU as a part of the UK.

Banks start plans for Brexit

By Chris Burke
This article is published on: 22nd March 2017

22.03.17

After U.K. Prime Minister Theresa May set a date to trigger the formal mechanism for quitting the EU, within weeks some of the worlds Big investment banks will begin the process of moving London-based operations into new hubs inside the European Union.

The biggest winners look likely to be Frankfurt and Dublin. Those people familiar with the plans, asking not to be named because the plans aren’t public, include the Bank of America, Standard Chartered Plc and Barclays Plc. To ensure continued access to the single market they are considering Ireland’s capital for their EU base. Meanwhile, Frankfurt is being eyed by Goldman Sachs Group Inc. and Citigroup Inc respectably others said.

Dublin shares similar laws and regulations as its U.K.neighbour and is the only other English-speaking hub in the EU. Whilst Frankfurt is a natural pick, given a financial ecosystem featuring Deutsche Bank AG, the European Central Bank and BaFin.

Executives want to have new or expanded offices up and running inside the EU before the U.K. departs in 2019. With banks increasingly expecting a so-called hard Brexit – the loss of their right to sell services freely around the EU from London.

It is thought London could lose 10,000 banking jobs and 20,000 roles in financial services as clients move 1.8 trillion euros ($1.9 trillion) of assets out of the U.K. after Brexit, according to think tank Bruegel. Other estimates range from as much as 232,000 jobs to as few as 4,000.

Avoid Bank Charges

By John Hayward
This article is published on: 20th March 2017

20.03.17

A number of banks have a variety of current accounts. It would appear that customers are not always advised by their bank what is the best account for them. For many expatriates, especially those buying and selling property, when money is paid into or from a bank account, the charges made by banks can be huge. It is quite common for charges to be made on both the money entering the account, after a sale of a property, and then again on the same money when a new property is purchased and money is transferred to another party. Some banks have accounts which do not attract fees. There will almost certainly be conditions such as a minimum deposit into the account each month. However, and for many retired expatriates, these conditions are not likely to be too difficult to satisfy. You may even be paid interest on balances or receive bonuses on direct debits. Make certain that the account you have is the best for you.

Paying too much tax on pension income

When submitting an annual tax return in Spain, there are (at least) two ways of calculating the tax due on UK sourced income. One way is to tell your accountant how many pounds you received and the accountant will convert this into euros using the exchange rate from the previous 31st December. For example, the exchange rate used for annual tax returns submitted in June 2017 will be based on the rate as at 31st December 2016. The problem is that, with fluctuating exchange rates, one could be paying tax on money that was never received. Let’s say that each month from January to November you received monthly income based on an exchange rate of 1.15 but then by 31st December it had increased to 1.20 euros to the pound. Your tax bill will be based on 1.20 even though you had only received 1.15 for 11 months. The alternative way of submitting the return is to ignore P60s etc. and simply submit evidence of exactly what euros you received through the year. If you are not certain, talk to your accountant.

Obtain proof of your current address

More and more often, financial institutions will be asking for evidence of where you live. In so many cases, all bills are put in the name of only one partner and in these days of online banking, people are no longer sent bank statements and not all companies accept printouts from the internet. Make certain you have a bill (not mobile phone) in your name or obtain an updated Padron certificate.

QROPS Pension Transfer

By Chris Webb
This article is published on: 20th March 2017

If you ever worked in the UK, no matter what your nationality, the chances are you were enrolled in a private pension scheme. The UK government continues to tweak legislative changes affecting the expat’s ability to move this pension offshore. On the surface, these changes appear to limit transfer options, but in reality they have strengthened the legal framework offering expats continuing advantages.

Background

When you leave the UK your private pension fund remains valid but is frozen, or deferred, until you reach retirement age. The pension income you then receive is taxable in the UK no matter where you are based in the world. Once you die the pension will continue in the form of a spouse’s pension if you are married; otherwise it will cease. When your spouse dies, all benefit payments come to an end.

If you take any part of your fund and then die before you fully retire, a lump sum can be paid to your spouse.
In April 2006 Her Majesty’s Revenue and Customs (HMRC) introduced pension ‘A’ day. This liberalised UK private pensions and allowed people leaving the UK to transfer them overseas, often to a new employer. In doing this the UK complied with European legislation which allows all citizens the freedom of movement of their capital. Thus ‘Qualified Recognized Overseas Pension Schemes’ (QROPS) were born.

Recent Chamges 2017

During the March UK budget there was a very unexpected announcement regarding pension transfers out of the UK. The headline was :

“HM Revenue & Customs (HMRC) has announced that Qualifying Recognised Overseas Pension Schemes (QROPS) transfers for individuals not in the European Economic Area (EAA) will be hit with a 25% tax charge”.

At first glance it sent shockwaves through all concerned with pension transfers, after a moment to digest the news it became much clearer that there were exceptions to the rule, detailed below:
1. The QROPS Trustee is in the EEA and the client/member is also resident in an EEA country (not necessarily the same EEA country);

2. The QROPS and the member is in the same country; or

3. The QROPS is an employer sponsored occupational pension scheme, overseas public service pension scheme or a pension scheme established by an International Organisation (for example, the United Nations, the EU, i.e. not just a multinational company), and the member is an employee of the entity to which the benefits are transferred to its pension scheme.

It is also important to understand that if a client was to move outside of the EEA within 5 years of the transfer then the tax rate would apply.

In most of the cases I deal with this new tax ruling will not affect the transfer. Since moving to Spain all but one of the transfers I have implemented are EU based.

Implementation

QROPS are not necessarily the right thing in every single case. In order to decide whether it would be advantageous to transfer your pension or leave it in the UK, with the intention of drawing the benefits in retirement, please contact me so that I can carry out a personalised evaluation. There may be compelling arguments, outside of the evaluation alone, which are often overlooked and may affect you in the future.

One of these is that a large number of UK schemes are currently in deficit to the point that they will be unable to pay future projected benefits. This would mean that even though it looks as though there are arguments to leave your UK pension in situ it may actually be wiser to transfer it.

In order for you to make the best decision you need to professional advice on what would be the best situation for you. This will entail seeking details of the current UK schemes, including transfer values, the types of benefits payable to you and options going forward when you get to a retirement date and when you die.

Advantages & Disadvantages of a Transfer Between a QROPS and a SIPP

Advantages

Lump Sum Benefits
QROPS – If you transfer your benefits under the QROPS provisions to a Malta provider, in accordance with the rules of this jurisdiction, you may be able to take a pension commencement lump sum of up to 30% (unless you have already taken this lump sum from the UK pension). Under the current HMR&C (Her Majesty’s Revenue and Customs) rules to qualify for the lump sum option you must be age 55 or over. Your remaining fund is then used to generate an income without having to purchase an annuity. The 30% pension commencement lump sum is only available once you have spent 5 full, consecutive tax years outside of the UK (in terms of tax residence), if you are within the first 5 years, we strongly advise you to limit the pension commencement lump sum to 25%. From 6 April 2017 this 5 year period has been extended to 10 years.

SIPP – The maximum Pension Commencement Lump sum from a SIPP would be 25%.

No Liability to UK Tax on Pension Income
QROPS – This will be paid gross and you declare the income in the country you are resident in as long as the QROPS jurisdiction has a Double Tax Treaty (DTT) with the country that you are resident in. Transferring under the QROPS provisions ensures that, if tax is due on pension income, it will only be taxable in the country of your residence.
SIPP – This should be able to be paid gross, although many clients find this to be a very awkward process to solve as the pension company does not always talk to the HMRC and therefore at least for the first year or two the pension is paid net of basic rate tax and sometimes even on an emergency tax basis. This can be reclaimed, but will involve more paperwork than that of a QROPS.

No Requirement to Purchase an Annuity
There is no longer a requirement to ever purchase an annuity with either your UK pension or in the event you make a transfer under the QROPS provisions. Therefore the rules below are the same for a QROPS and a SIPP.

With both a QROPS and a SIPP the maximum age you must start to draw an income is from age 75. The Pension commencement Lump Sum must be taken by this age or the option to take it after this age is lost.

The budget changes in the UK has meant that from April 2015 the restrictions imposed from drawing a pension income from a UK Pension Plan will be scrapped. This means that investors will be able to take the whole of their pension as a lump sum if they wish from age 55. The first 25% would be the standard Pension Commencement Lump Sum but the remaining amount would be subject to your marginal rate of income tax. The Malta QROPS have now followed these changes to allow full flexibility also.
This would not be possible with a Final Salary pension. It would need to be transferred to a SIPP or QROPS to utilise these options.

Secure Your UK Pension Pot
Some defined benefit schemes in the UK are in deficit. Since the deficit forms part of the balance sheet of the company, this can present a huge risk to your pension fund.
Transferring your UK benefits to a SIPP or QROPS provisions could enable you to have full control of these funds without worrying about the financial situation of your previous employer.

Ability to Leave Remaining Fund to Heirs
QROPS – All death benefits will be paid out from the Malta QROPS with 0% death tax no matter what age an individual is.
SIPP – The recent UK Budget has changed how death benefits will be paid to their heirs in the future. If death occurs before age 75 then any remaining balance in a pension fund can be paid tax free to any beneficiary. Otherwise if a member passes away after the age of 75 then there would be a tax charge, any lump sum benefit would be subject to the beneficiaries marginal rate of income tax.

A transfer under the QROPS provisions will allow the member to leave lump sums without deduction of tax to heirs no matter what age they pass away, so it is clear and simple. (this is not applicable to Defined Benefit schemes). The below table shows the situation more clearly.

Defined Benefit Plans

UK Pension –
(generic pension benefits)
Scenario Death Benefits
SRA Married couple 1st to pass away 50% income to Spouse
Married couple 2nd to pass away 0% of total plan
Single but with grown up children 0% of total plan
Lump sum to future heirs 0% of total plan

 

QROPS- Malta
Scenario Death benefits
SRA Married couple 1st to pass away 100% of fund value to any beneficiary
Married couple 2nd to pass away 100% of fund value to any beneficiary
Single but with grown up children 100% of fund value to any beneficiary
Lump sum to future heirs 100% of fund value to any beneficiary

SRA – Selected Retirement Age

The tables are based on the usual death benefits being taken in retirement. Some plans may have slightly different death benefits which may be higher or lower than 50% income provided on death and guaranteed periods for the first 5 years. Please check the exact benefits within your scheme for a full exact comparison.

Currency
A standard UK pension will usually only be invested and pay benefits in Sterling, which means the member runs an exchange rate risk in respect of pension income, in addition to incurring charges in converting the pension payments to the currency of their country of residence.
A transfer under the QROPS provisions means that the pension payments can be made in the local currency, thus potentially eliminating exchange rate risk.

Lifetime Allowance Charge (LTA)

QROPS – There is no LTA charge within a QROPS so transferring larger plans to a QROPS may not be caught in this reduction in the future. Careful planning will be needed with your adviser if you are close to the limit in the UK. (a transfer to a QROPS is a crystallisation event, so will be tested against the LTA at that stage, any benefits above the LTA at time of transfer will be subject to a 25% tax liability.

SIPP – This is a restriction on the total permitted value of an individual’s total accrued fund value in UK registered pensions, currently £1m. Those who exceed this value face a potential tax liability of 55% on the excess funds on retirement at any time when there is a “benefit crystallisation event” that exceeds the LTA. A benefit crystallisation event is any event which results in benefits being paid to, or on behalf of, the member and so includes transfer values paid to another pension scheme, as well as retirement benefits.

Disadvantages

Charges
QROP & SIPP If you have a pension(s) with a combined transfer value of less than £50,000 then the charges may be prohibitive.

Loss of Protected Rights
QROPS & SIPP – A transfer may result in the loss of certain protected rights, including Guaranteed Annuity Rates, Guaranteed Minimum Pension, a protected enhanced lump sum, or rights accrued under a defined benefit scheme. (These are shown in the section “Analysis of Your Existing Pensions”).

Returning to the UK
If you return to the UK, then the QROPS administrator will have to report this ‘event to HMRC and the pension scheme will become subject to UK pension regulations again.
If it is your intention to return to the UK in the near future then a transfer under the QROPS provisions is usually inappropriate. If this was the case then we can help with our UK SIPP offering which may be more appropriate.

Taxation of UK rental income in Italy

By Gareth Horsfall
This article is published on: 19th March 2017

19.03.17

Since the recent exchange of information between HMRC and the Italian tax authorities on UK rental property owners, I have been asked the question whether rental income (when taxed principally in the UK) will be taxed again in Italy as an Italian resident.

Rental income from properties is dealt with according to the law of the state where the property is situated. This means that you can deduct your expenses in the UK, in entirety and in line with UK law, and then the NET income is declared to HMRC in the UK.

When it comes to the Italian tax declaration the NET UK rental income needs to be declared, along with the tax paid in the UK.

This income is put together with any other income you may have for the year, to be declared in Italy,and a credit is given for the tax already paid in the UK, and the tax is calculated on the normal IRPEF rates (income tax rates in Italy).

In short the NET UK rental income position is what needs to be declared in Italy.

Given the recent clampdown on people who are not declaring their UK rental income in Italy, as Italian residents, this information should help to ease any thoughts of having to pay tax twice.

Of course, all this applies to properties held in other countries as well and not just the UK.

The bottom line is get your affairs ‘in regola’ because it is unlikely to cost you any more than it would in the UK, and you can sleep easy knowing you have done the right thing.

Why Financial Planning ?

By Chris Webb
This article is published on: 17th March 2017

17.03.17

Financial planning is about establishing your future financial goals
and aspirations and working out the best way to achieve them.

 

Financial planning is about having a strategy, instilling discipline
and creating a structure to your financial world.

Over the years the “financial world” has changed significantly. This is great news for the consumer as this means there is now a much wider range of solutions and products to select from. Investments platforms have risen out of nowhere, insurance products have become increasingly more competitive and the choices with what to do with your pension are numerous.

As I mentioned, this is great news for the consumer. However, this also comes with a downside. More solutions equates to more complexity, more time required to understand the options and more time to get to grips with the tax, compliance and regulatory side of things. Quite simply, for some it can be a minefield !

Not everyone has the time, expertise or confidence to get the best value from this ever changing world and for those people independent financial advice / financial planning can be extremely valuable and worthwhile.

The Spectrum IFA Group is an independent financial advisory and through our relationships with our business partners we are able to offer access to the right solutions and products for your own personal circumstances.

Once we have a thorough understanding of your circumstances and requirements, we will conduct a full analysis of your situation and provide you with a tailored plan of suitable recommendations. This may result in one solution, it may result in two or three, but the end result is that this will enable you to start making decisions which can only help you towards your financial goals.

Being independent means we can offer products from a wide range of providers, we are not tied to “selling the same box to everybody”.

We will meet with you to discuss all of our recommendations, we will make sure that they are clearly explained, fully understood and jargon-free, so that you can make informed choices about your future, based on impartial advice.

You can ask as many questions as you like and request more information at any time. We do things at our clients own pace, not our own. There is no obligation to proceed with our advice, however once you have a full understanding of why we are recommending a solution for your needs you can then make the right decision….. for you !

Spanish Succession Tax (Inheritance tax)

By Chris Webb
This article is published on: 16th March 2017

If you are a resident of Spain it is important to understand that there will be liabilities due to the Spanish government in the event of a death. Whether it’s you that is inheriting part of an estate or it’s your estate being distributed the taxman is going to want his share.

Many British nationals don’t realise that depending on the asset and its location there may also be a claim from the UK taxman. Just because you are a non UK resident it does not eliminate the requirement to settle taxes in both the UK and Spain. Spanish succession tax will be due either when the assets being inherited are located in Spain, such as a property, even if the recipient of the asset lives outside of Spain OR if the assets are based outside of Spain but the recipient lives in Spain.

For example: if you leave your Spanish property to your children who are now UK residents they will be liable to pay succession tax to the Spanish government. On the flip side if you receive an inheritance from the UK and you are a Spanish resident then again you have to pay tax in Spain.

As mentioned above, if you are a British national and are resident in Spain you could be liable to UK inheritance tax as well as Spanish succession tax. In the UK they require all worldwide assets to be declared, as you will be considered “UK domiciled” by the government. It is almost impossible to be considered as anything other than UK domiciled, even if you haven’t lived in the UK for some time.

There is no double tax treaty signed between the UK and Spain when it comes to inheritance, however if tax has been paid in the UK the amount is usually deductible against the Spanish liability.

To complicate matters further, Spain have a standard set of “State Rules” which lay down the rates and allowances for succession tax as well as individual “Autonomous rules” which means things are different from one community to another. Detailed below are these state rules:
The tax rates differ depending on the value of the amount inherited. These range from 7.65% on the first €7,933, up to 34% on €797,555 and over.
Beneficiaries are graded into four different groups and the more remote the beneficiary’s relationship is to the deceased the lower the tax allowance and the higher the tax rates. These four groups are:

  • Natural and adopted children under 21
  • Natural and adopted children aged 21 and over, grandchildren, parents, grandparents, spouses
  • in-laws and their ascendants/descendants, stepchildren, cousins, nieces, nephews, uncles, aunts
  • all others including unmarried partners

Allowances are available between husband and wife or direct line ascendants/descendants, but this is set at just short of €16.000. If an inheritor is also a direct line descendant under the age of 21, there is an additional allowance of €3,990 for each year they are under 21. The total of this additional allowance is restricted to €47,858 per child or grandchild.

For more distant relatives (e.g. cousins) the exemption is set at €7,933. There is no exemption for beneficiaries who are not related.

A main home in Spain may be virtually exempt from Spanish succession tax provided the beneficiaries are either your spouse, parents or children and they continue to own the property for ten years from the date of death.

The exemption can also apply where the beneficiary is a more distant relative over the age of 65 and they have lived with you for at least two years before death. If these conditions are met, the value of the house can be reduced by 95% in calculating the tax base liable, subject to a maximum reduction in value per inheritor of €122,606. It is important to note that this is only applies principal private residence and is owned by a Spanish resident.

Some examples of where the Autonomous rules differ from the state rules:

In Valenciana, spouses and children receive an allowance of €100,000 each. They can also benefit from a 75% reduction in the amount of succession tax payable.

In Murcia, the taxable inheritance for children under 21 is reduced by 99%, while older children and spouses get a 50% reduction.

In Andalucía, spouses and children can benefit from a 100% exemption for inheritances up to €175,000, provided they are not worth more than €402,268.

Cataluña offers a 99% allowance for spouses. Other Group I and II relatives receive a relief depending on the amount of their inheritance. Personal reductions are €100,000 for spouses and children (more for those under 21), €50,000 for other descendants, €30,000 for ascendants and €8,000 for other relatives. The 95% main home relief is up to a property value of €500,000, with the amount pro-rated among the beneficiaries (minimum €180,000 limit each). The property need only be kept five years rather than the 10 year state rule.

To summarise the key points of succession tax:

  • Tax is paid by each recipient, rather than by the estate
  • Spouses are not exempt
  • Allowances under the state rules are very low – just €15,957 for spouses, descendants over 21 and ascendants, €7,993 for other close relatives and nil for everyone else
  • Under state rules, tax is applied at progressive rates from 7.65% (for assets under €7,993) to 34% (for assets over €797,555). However, multipliers depending on the relationship between the two can increase this rate
  • If you leave assets to your spouse, who then passes them on to your children when he/she dies, succession tax will be due again on the second death
  • Succession tax also applies to pension funds
  • Tax is paid at the time of the inheritance, even if the funds are not accessed at the time. There is a six-month period to pay the tax after the death, although it is possible to apply for an extension in certain cases
  • Succession tax is governed by both state and local autonomous community rules; each community has the right to amend the state rules
  • Whether the state or the local autonomous community rules apply for each case, depends on where the beneficiary and the donor are resident and where the assets inherited/gifted are located
  • If you are UK domiciled you need to consider both the UK inheritance tax rules as well as the Spanish succession tax rules

Whilst the Spectrum IFA Group are not tax advisers, we can help to put you in touch with the right people. It is important to understand the various succession tax rules and how they apply to your situation, as well as how they affect any UK liability. You need specialist advice to understand the intricacies of the two tax regimes, and how to lower both tax liabilities and potentially save your heirs a considerable amount of tax. You can often combine your estate planning with your personal tax planning.

*Sources: Advoco, LegalforSpain, Globalpropertyguide, GovUK, AILO

When is a guarantee not a guarantee?

By Derek Winsland
This article is published on: 15th March 2017

15.03.17

On 20th February, the government issued its eagerly awaited Green Paper on reforming defined benefit occupational pensions, more commonly known as final salary pension schemes. This consultation document invites opinion from the pensions industry for giving the government powers to re-structure the benefits payable from such schemes in instances where the employer (and its pension scheme) are in financial difficulty.

For re-structure, read ‘water down’, as what the government proposes is that the scheme, with tacit government approval, can change the terms by which pensions are paid out to its pensioners.

The catalyst for this green paper is the situation surrounding Tata/British Steel, where the sticking point for any sale hinged on the deficit in the British Steel Pension Scheme. This deficit has been variously reported as between £300m and £700m and under current rules, any buyer would have to take on responsibility for addressing this shortfall. Negotiations between the trustees of The British Steel Pension Scheme, Tata and the government has resulted in the trustees amending the way pensions in payment are increased annually from Retail Price Index (RPI) to the lesser Consumer Prices Index. Experts believe this will save the pension scheme, on average £20,000 per member.

Fast forward to 20th February and the government now believes this would be beneficial for ALL schemes suffering from deficiencies in its funding to be able to water-down its benefits. But is this all bad news?

In the case of Tata/British Steel, the alternative was for The British Steel Pension Scheme, with £14 billion of assets, to enter the pension industry’s ‘safety net’ the Pension Protection Fund. If a scheme enters the PPF, its pensioners are guaranteed 100% of their pension entitlement up to a ceiling of £37,420 (at age 65), but with annual increases limited to 2.5% pa. For those members, yet to reach pension age, they are entitled to 90% of their pension.

The Tata deal gives its pension members better benefits than they would receive in PPF, and so received the approval of government and the unions.

The deal that Sir Philip Green struck with the Pensions Regulator for the BHS Scheme is structured along the same lines – the £363m that he ‘deposited’ alongside the BHS Scheme, which has entered PPF, will allow for the BHS pensioners to receive better benefits than would otherwise have been paid from the PPF. I say ‘deposited’, because it is a one-off, no-strings attached, contribution by this Knight of the Realm, to keep the Pensions Regulator happy, whilst preserving the number of yachts in his possession.

And the BHS deal adds to the uncertainty defined benefit pension scheme members must be feeling right now. Sir Philip’s ‘deposit’ has been labeled, within the industry, as a Zombie Pension Fund. In essence, it allows employers to deposit a chunk of money in a pot, separate to its pension fund, that will be called on to sweeten the pill if the scheme then enters PPF.

But why would an employer do this? Because a move such as Sir Philip Green’s puts a cap on the employer’s liabilities. If an employer can strike a deal where it can walk away from its continuing responsibilities to its pension scheme members, then it’s going to be attractive. We’re all going to hear a lot more about ‘sustainability’ of pension funds, with its open-ended responsibility and liabilities falling on the employer. This green paper is, I fear, going to open the flood-gates to more deals being struck by employers with their pension scheme trustees.

I may be wrong but I suspect Mergers and Acquisitions activity could reach unprecedented levels if the government gives the nod to these pension changes.

If you have preserved pension benefits held in a defined benefits pension scheme and would like to find out more about your pension entitlement and its funding position, then please contact me direct on the number below. You can also contact me by email at derek.winsland@spectrum-ifa.com or call our office in Limoux to make an appointment. Alternatively, I conduct a drop-in clinic most Fridays (holidays excepting), when you can pop in to speak to me.
Our office telephone number is 04 68 31 14 10.

The ABCs of Spanish taxation when investing in real estate in Spain

By Jonathan Goodman
This article is published on: 8th March 2017

08.03.17

For a long time, Spain has been considered a country of interest for real estate investors. It is a Western European country with many types of attractive properties available: residential, retail, offices, logistics, industrial, and more. And all this in a place that enjoys a stable legal system, over forty million consumers, and a great climate.

The Spanish tax system, however, is one of the most complex in the world. This being the case, it is essential to know the taxation associated to each of your investments in order to avoid surprises. We have written this guide as a quick introduction for first time investors. Nevertheless, you must consider it just an introduction since every property has its own peculiarities. We would be happy to help you make your investments a success.

This article was written by AvaLaw and first appeared on www.avalaw.es