Risk – Simply a Box of Chocolates?

By Jonathan Goodman
This article is published on: 7th January 2015

07.01.15

What is financial risk, and is it all down to chance?

Whether you are investing for your retirement or for more immediate financial needs, there are three factors that could keep you from achieving your goals: inflation, taxes, and risk. It is easy to plan for inflation and to reduce taxes, but risk is another matter as it is so unpredictable.

Types of financial risk to watch out for include:

Investment Specific Risk:

Risk that affects a very small number of assets.

Geopolitical Risk:

Risk of one country’s foreign policy unduly influencing or upsetting domestic political and social stability in another country or region.

Credit Risk:

Risk that a borrower will default on any type of debt by failing to make required payments.

Interest Rate Risk:

Risk that arises for bond owners from fluctuating interest rates. How much interest rate risk a bond has depends on how sensitive its price is to interest rate changes in the market.

Inflationary Risk:

The possibility that the value of assets or income will decrease as inflation shrinks the purchasing power of a currency.

Currency Risk:

Risk that stems from the changes in the valuation of currency exchanges. Fluctuations result from unpredictable gains and losses incurred when profits from foreign investments are converted from foreign currencies.

Volatility:

Risk of a change of price of a portfolio as a result of changes in the volatility of a risk factor. Usually applies to portfolios of derivatives instruments, where volatility is a major influencer of prices.

Liquidity Risk:

Risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit).

Diversification Risk:

Allocation of proportional risk to all parties to a contract, usually through a risk premium.

Leverage:

The use of various financial instruments or borrowed capital, such as margin, to increase the potential return of an investment.

Counterparty Risk:

The risk to each party of a contract that the counterparty will not live up to its contractual obligations.

Overcoming Risk: Prudential & Smoothing

Prudential Multi-Asset funds work by spreading your money across a number of different types of assets. Funds are designed to deliver smoothed growth through a number of investment options, such as company shares, fixed interest bonds, cash and property, balancing the risk being taken. So if one asset is falling in value, another may be increasing.

Risk: Simply a Box of Chocolates?

Understanding the importance of risk is a central pillar of financial planning. Risk can be measured and assessed; it can be managed. Learning how to do this is an invaluable aspect of becoming a successful investor.

Risk may be uncertain but it’s no box of chocolates. If you prepare for the uncertainty – do your research and seek relevant and informed advice – you can be fairly confident of what you’re going to get. It’s not all down to chance.

French Tax Changes 2015

By Spectrum IFA
This article is published on: 5th January 2015

05.01.15

During December, the following legislation has entered into force:

the Loi de Finances 2015;
the Loi de Finances Rectificative 2014(I); and
the Loi de Financement de la Sécurité Sociale 2015.

Shown below is a summary of our understanding of the principle changes.

INCOME TAX (Impôt sur le Revenu)

The barème scale, which is applicable to the taxation of income and gains from financial assets, has been revised as follows:

Income	Tax Rate
Up to €9,690	0%
€9,691 to €26,764	14%
€26,765 to €71,754	30%
€71,755 to €151,956	41%
€150,957 and over	45%

The above will apply in 2015 in respect of the taxation of 2014 income and gains from financial assets.

WEALTH TAX (Impôt de Solidarité sur la Fortune)

There are no changes to wealth tax. Therefore, taxpayers with net assets of at least €1.3 million will continue to be subject to wealth tax on assets exceeding €800,000, as follows:

Fraction of Taxable Assets	Tax Rate
Up to €800,000	0%
€800,001 to €1,300,000	0.50%
€1,300,001 to €2,570,000	0.70%
€2,570,001 to € 5,000,000	1%
€5,000,001 to €10,000,000	1.25%
Greater than €10,000,000	1.5%

CAPITAL GAINS TAX – Financial Assets (Plus Value Mobilières)

There are no changes in respect of the taxation of capital gains arising from financial assets. Therefore, gains arising from the disposal of financial assets will continue to be added to other taxable income and then taxed in accordance with the new progressive rates of tax outlined in the barème scale above.

However, the system of ‘taper relief’ still applies for the capital gains tax (but not for social contributions), in recognition of the period of ownership of any company shares, as follows:

50% for a holding period from two years to less than eight years; and
65% for a holding period of at least eight years.

This relief also applies to gains arising from the sale of shares in ‘collective investments’, for example, investment funds and unit trusts, providing that at least 75% of the fund is invested in shares of companies.

In order to encourage investment in new small and medium enterprises, the higher allowances against capital gains for investments in such companies are also still provided, as follows:

50% for a holding period from one year to less than four years;
65% for a holding period from four years to less than eight years; and
85% for a holding period of at least eight years.

The above provisions apply in 2015 in respect of the taxation of gains made in 2014.

CAPITAL GAINS TAX – Property (Plus Value Immobilières)

With effect from 1^st September 2014, the taper relief applicable to gains arising from the sale of building land has been brought in line with that applicable to other property gains, as follows:

6% for each year of ownership from the sixth year to the twenty-first year, inclusive; and;
4% for the twenty-second year.

Thus, the gain will become free of capital gains tax after twenty-two years of ownership.

However, for social contributions (which remain at 15.5%), a different scale of taper relief applies, as follows:

1.65% for each year of ownership from the sixth year to the twenty-first year, inclusive;
1.6% for the twenty-second year; and
9% for each year of ownership beyond the twenty-second year.

Thus, the gain will become free of social contributions after thirty years of ownership.

An exceptional reduction of 30% of the taxable capital gain, arising from the sale of building land only, has also been introduced, subject to the following double condition that:

a compromis de vente has been signed between 1^st September 2014 and 31^st December 2015; and
the completion of the sale of the land must take place by 31^st December of the second year following the signing of the compromis de vente.

The exceptional reduction applies for both the capital gains tax and the social contributions liabilities. However, it is not available for land transferred between spouses and PACS partners, nor to ascendants or descendants.

It should also be remembered that there is still an additional tax applicable for property sales, when the gain exceeds €50,000, as follows:

Amount of Gain	Tax Rate
€50,001 – €100,000	2%
€100,001 – €150,000	3%
€150,001 to €200,000	4%
€200,001 to €250,000	5%
€250,001 and over	6%

Where the gain is within the first €10,000 of the lower level of the band, a smoothing mechanism applies to reduce the amount of the tax liability.

The above taxes are also payable by non-residents selling a property or building land in France. However, at some point during 2015, the European Court of Justice (ECJ) will most likely rule on the outcome of the European Commission’s infringement procedures against France, regarding the application of social contributions on income and gains arising in France for non-residents. Following the delivery of the legal opinion of France’s Advocat General to the ECJ, it is widely expected that non-residents will become exempt from social charges on gains and income arising from French property.

One other point worth mentioning concerns the rate of capital gains tax for non-residents. To date, this has been at the rate of 19% for residents of EU/EEA countries and at 33.33% for non-residents of other countries, except for those of ‘non-cooperative territories’, who have been liable to a 75% capital gains tax rate.

In October 2014, the French Conseil d’Etat, which is the highest court in France for tax matters, decided that the higher rate of capital gains tax for non-residents is illegal, in certain circumstances. The basis for its decision was that it considered this to be a disincentive for non-residents from outside of the EU/EAA to purchase property in France. As such, the court considered this was a restriction on the free movement of capital and thus, contrary to EU law.

Arising out of this decision, the government proposed to harmonise the capital gains tax rate at 19%, but not for those residents of ‘non-cooperative’ States, for whom it decided that the 75% rate should be maintained. However, when considering the proposed legislative changes, the Constitutional Council ruled that a capital gains tax rate of 75% is excessive, when taken into account with the social contributions of 15.5% and so ruled that this is contrary to France’s Constitution.

The Constitutional Council’s decision is somewhat of a surprise, since the 75% tax rate plus social contributions has already been the practice. One assumes, therefore, that as and when France is instructed not to apply social contributions to gains arising for non-residents, then the 75% capital gains tax rate will no longer be considered unconstitutional!

Finally, one other good point for some non-residents is that for those who are resident in the EU (and in some cases in the EEA), it will no longer be necessary to appoint a tax representative in France to deal with the calculation of the capital gains tax, when the property is sold.

GIFT TAX (Droits de Mutation à Titre Gratuit)

In order to promote the release of building land and revive housing construction, a temporary exemption from gift tax has been introduced for donations made in the following situations:

for full transfers of building land (i.e. the donor cannot retain life use), for which the acte authentique is signed between 1^st January and 31^st December 2015, on the condition that the recipient builds a new property destined for housing, within four years of the date of receiving the gift.
for full transfers of new residential properties, for which a building permit is granted between 1^st September 2014 and 31^st December 2016, on the condition that the deed evidencing the gift must be signed no later than three years of the date of the building permit and that the building has never been used or occupied at the time the gift is made.

In both of the above situations, the following exonerations from gift tax will be given, limited to the declared value of the asset:

€100,000 for transfers between descendants or ascendants in direct line, or between spouses and PACS partners;
€45,000 between siblings; and
€35,000 between any other person

It is also indicated that the total of the donations made by the same donor cannot exceed €100,000. However, what is not clear from the drafting of the legislation is whether or not this limit applies separately for each of the above situations or if this limit is applied globally. Therefore, we will have to wait for further precision on this.

Other Changes:

Charitable Donations & Bequests:

France exempts from inheritance duties donations and bequests made to certain charities that are registered in France. However, charities established in other States of the EU are generally subject to a 60% tax (after an allowance of €1,594) on the value of the gift or bequest received.

The European Commission considers the above to be an unjustified obstacle to the free movement of capital and so referred France to the European Court of Justice (ECJ) in July 2014. Anticipating a condemnation by the ECJ to be almost inevitable, France has changed its law so that there is no discrimination between the charities registered in France and those in the rest of the EU/EEA.

Additional Tax on Second Homes:

With the objective of reducing the housing shortage in areas where there is a marked imbalance between supply and demand, provision has been made within the law for an additional tax on ‘second homes’, i.e. for furnished properties not designated as a principal residence.

The decision as to whether or not the tax will be applied will be made by the municipal council of the municipality concerned. The rate has been fixed as 20% of the municipality’s share of the taxe d’habitation and the revenue from the additional tax will be allocated to the municipality.

Tax relief should be given from the additional tax in the following situations:

by those who need a second dwelling near to their place of work because their principal residence is too far away; and
if the owner is living permanently in a nursing home or other care facility and the property was their former principal residence.

Others may also receive the tax relief where they can no longer designate the property as their principal residence for circumstances outside of their control.

EU Directive on Administrative Cooperation in the Field of Direct Taxation:

Although not directly related to France’s tax changes, it is worth mentioning that with effect from 1^st January 2015, under the terms of the above EU Directive, there will be automatic exchange of information between the tax authorities of Member States for five additional categories of income and capital. These include income from employment, director’s fees, life insurance products, pensions and ownership of and income from immoveable property. The Directive also provides for a possible extension of this list to dividends, capital gains and royalties.

2^nd January 2015

This outline is provided for information purposes only. It does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action to mitigate the effects of any potential changes in French tax legislation.

UK Pensions Reform Overview

By David Odonoghue
This article is published on: 31st December 2014

This year brings about major changes in UK pension rules. Under the reform of ‘Freedom and Choice in Pensions’, people will be provided with more choice about how and when they can take their benefits from certain types of pension arrangements.

Following proposals first made in March last year, subsequent consultation resulted in the Pensions Taxation Bill being published in August, with further amendments being made in October. Additionally, some provisions were clarified in last month’s UK Autumn Budget Statement. Therefore, subject to there not being any further changes before the eventual enactment of the legislation, we can be reasonably certain of the new rules.

To understand the reform, you need to understand the two main different types of pensions. The first is the defined benefit pension (DBP), where your employer basically promises to pay you a certain amount of pension, which is calculated by reference to your service and your earnings. DBPs are a rare breed now, as employers have found this type of arrangement too costly to maintain. This is because the liability for financing the scheme falls upon the employer (after anything that the individual is required to contribute) and if there is any shortfall in assets to meet the liabilities – perhaps because of poor investment returns – the employer must put more money into the scheme.

The second type of pension is what is known as a money purchase plan (MPP). You put money into an MPP, perhaps your employer does/did also, as well as the government in the form of tax rebates and in the past, national insurance contribution rebates. Maybe your ‘MPP’ was not through an employer at all and you just set up something directly yourself with an insurance company. They are several different types of MPP arrangements, but they all result in the same basic outcome, i.e. the amount of the pension that you get depends on the value of your ‘pension pot’ at retirement and so the investment risk rests with you. There is no promise from anyone and therefore, no certainty of what you might receive.

The proposed reform is all about the MPP, although there is nothing to stop a person from transferring their private DBP to a MPP, if they have left the service of the former employer.

The majority of the changes will be effective from 6^th April 2015 and these will apply to ‘money purchase’ pension arrangements only. Therefore, people with deferred pension benefits in funded defined benefit plans, who wish to avail themselves of the changes, must first of all transfer their benefits to a money purchase scheme. Members of unfunded public sector pension schemes will not be allowed to have such a transfer.

Under the new rules, people will be able to take all of their ‘pension pot’ as a one-off lump sum or as several separate lump sum payments. For UK resident taxpayers, 25% of each amount will be paid tax-free and the balance will be subject to income tax at the marginal rate (the highest tax rate being 45%).

Alternatively, it will be possible to take 25% of the total fund as a cash payment (again, tax-free for UK residents) and then draw an income from the remaining fund (taxed at marginal rate). The commencement of income withdrawal can be deferred for as long as the person wishes. Furthermore, there will be no minimum or maximum amount imposed on the amount that can be withdrawn in any year.

The Annual Allowance, which is the amount of tax-relieved pension contributions that can be paid into a pension fund, is currently £40,000 per annum. For anyone who flexibly accesses their pension funds in one of the above ways, the Annual Allowance will be reduced to £10,000 for further amounts contributed to a money purchase arrangement.

However, the full Annual Allowance of up to £40,000 (depending upon the value of new money purchase pension savings) will be retained for further defined benefit pension savings.

The ‘small pots’ rules will still apply for pension pots valued at less than £10,000. People will be allowed to take up to three small pots from non-occupational schemes and there is no limit of the number of small pot lump sums that may be paid from occupational schemes. 25% of the pot will be tax-free for a UK resident. Accessing small pension pots will not affect the Annual Allowance applicable to other pension savings.

The required minimum pension age from which people can start to draw upon their pension funds will be set as age 55, in all circumstances (except in cases of ill-health, when it may be possible to access the funds earlier). However, this will progressively change to age 57 from 2028; subsequently, it will be set as 10 years below the State Pension Age.

The widely reported removal of the 55% ‘Death Tax’ on UK pension funds has been clarified. Thus, whether or not any retirement benefits have already been paid from the money purchase fund (including any tax-free lump sum), the following will apply from 6^th April 2015:

In the event of the pension member’s death before age 75, the remaining pension fund will pass to any nominated beneficiary and the beneficiary will not have any UK tax liability; this is whether the fund is taken as a single lump sum or accessed as income drawdown; or
If the pension member is over age 75 at death, the beneficiary will be taxed at their marginal rate of income tax on any income drawn from the fund, or at the rate of 45% if the whole of the fund is taken as a lump sum. From April 2016, lump sum payments will be taxed at a beneficiary’s marginal tax rate.

There will be more flexibility for annuities purchased after 6^th April 2015. For example it will be possible to have an annuity that decreases, which could be beneficial to bridge an income gap, perhaps before State pension benefits begin. In addition, there will no longer be a limit on the guarantee period, which is currently set at a maximum of 10 years.

French residents can take advantage of the new flexibility and providing that you are registered in the French income tax system, it is possible to claim exemption from UK tax under the terms of the Double Taxation Treaty between the UK and France. However, there are French tax implications to be considered, as follows:

you will be liable to French income tax on the payments received, although in certain strict conditions, it may be possible for any lump sum benefits to be taxed at a fixed prélèvement rate;
if France is responsible for the cost of your French health cover, you will also be liable for social charges (CSG & CDRS) of 7.1% on the amounts received;
the former pension assets will become part of your estate for French inheritance purposes, as well as becoming potentially liable for wealth tax (i.e. if your net taxable assets exceed the wealth tax entry level).

Therefore, as a French resident, it is essential to seek independent financial advice from a professional who is well versed in both the UK pension rules and the French tax rules before taking any action. Such advice should also include examining whether or not a transfer of your pension benefits to a Qualifying Recognised Overseas Pension Scheme (QROPS) could be in your best interest.

Note, that for those expats who already have transferred pensions to a QROPS or are thinking of doing so? the Pension Taxation Bill makes provision for the proposed UK pension reform to follow through to such schemes.

However, a complication exisits, due to the fact that the separate UK QROPS Regulations do not necessarily allow people to fully cash in their pesion funds in all circumstances.

The Pensions Taxation Bill does already make some provision for the proposed UK pension reform to follow through to Qualifying Recognised Overseas Pension Schemes (QROPS). However, a complication exists, due to the fact that the separate UK QROPS Regulations do not necessarily allow people to fully cash in their pension funds, in all circumstances.

Therefore, before the new flexible rules could apply to QROPS, the UK Regulations must be amended and it is understood that there is on-going work in this regard. Whether this work will be completed before 5^th April 2015 is not known.

However, even if the UK does amend the QROPS Regulations, it will then fall to individual QROPS jurisdictions to make the necessary changes to their own internal pension law. For the well-regulated jurisdictions, it cannot be ruled out that their own Regulators may not agree entirely with the UK’s ideas of flexibility! In effect, there could be a preference to ensure that pension funds are used only for the purpose of providing retirement income for life, with the possibility of income continuing to a member’s dependants.

In any event, the taxation outcome of someone fully cashing-in their pension fund (whether whilst still in a UK pension arrangement or if later allowed, from a QROPS) is likely to be a sufficient practical deterrent for anyone actually wanting to do this. Therefore, for someone who has left the UK, a QROPS should continue to be a viable alternative to retaining UK pension benefits, particularly since the advantages of a QROPS have not changed. However, everyone’s situation is unique and this is why seeking advice from a competent professional is essential.

Saving for Retirement in Spain

By Chris Burke
This article is published on: 28th December 2014

How do you save for retirement in Spain and what are the best options for expats?

These days there are quite a few choices on how to receive your pension as a British expat and, if you qualify for a UK state pension, you can claim it no matter where you live. The money can be paid into a UK bank or directly into an overseas account in the local currency. If you move to Spain before retirement and work there for a number of years, it may also be possible to receive a state pension from more than one country.

If you’ve qualified for a state pension from the UK, it will be paid (and taxed) in Spain but uprated every year in the same way as the UK. The personal tax allowance in Spain is €6,069 (£4,923) compared with £10,000 in the UK. The basic rate of tax is also higher, at around 24% compared to 20% in the UK. And in Spain there is no 25% tax free lump sum available when retiring, and any Isa’s you have in the UK will be liable for tax if you become resident in Spain.

A lot to consider…

Saving for Retirement: Tips

Plan Ahead: Pay off debts and take advantage of tax free personal allowances.

Do Your Homework: Before sitting down with an independent financial adviser, make sure you have a clear picture of your current finances and what you need to consider in order to achieve the lifestyle you want over the years ahead.

Consider Your Saving Options: The recent Budget announced radical changes to pension schemes – good news for savers. From April 2015, individuals may withdraw as much or as little from their pension fund in any year with 25 per cent being withdrawn free of tax.

Regularly Review Investment and Retirement Plans: Review your investment and retirement plans every six months to ensure any advice received is up to date and relevant.

Prudential: Flexible Savings for Retirement

The Prudential Flexible Retirement Plan gives access to a range of flexible retirement and investment solutions to suit your changing needs and priorities. Whether you are approaching retirement or some way off, the flexibility provides an easy transition from saving for retirement, through to approaching retirement and then taking an income.

Professional Advice for Expats

The earlier you get your financial planning in order, the better. Make a mistake with your pension, and you could end up paying for it for the rest of your life.

A pensions expert will be able to point you in the right direction. You will need to take Spanish rules into consideration, so taking advice from an adviser conversant with both UK and Spanish pension and tax rules is essential.

Finding a Financial Adviser in Barcelona

By Chris Burke
This article is published on: 27th December 2014

The number of British people moving abroad is rising, with about one in 10 British people now living overseas.

Despite its obvious economic difficulties, Spain continues to be one of the most popular destinations for British expatriates, as the laid-back lifestyle and improved transport links with the UK gives it an allure that is hard to resist.

However, setting up residence in a Spanish city, such as Barcelona, involves a great deal of upheaval, both on a personal and practical level, and it’s a sad reality that expats can be particularly vulnerable to poor financial advice.

How to Choose a Financial Adviser

In practical terms, one of the most important things to get right as an expat is your finances, and having the right banking arrangements is a fundamental part of life overseas. Banking services should ideally meet at least two main criteria: flexibility (money should be easy to access and transfer between countries); and financial security (in a reputable bank that complies with international financial regulations and has a solid capital base).

But what other factors should you take into consideration when searching for a Financial Adviser in Barcelona?

Are they regulated? Do your research, visit websites, and confirm registration with the IFA before choosing an adviser.
Qualifications: Every nation has different rules relating to how qualified a financial adviser needs to be to gain authorisation, but the UK is a world leader in terms of required qualifications. So if you’re speaking to a British adviser abroad, you can gauge their industry education based on the British qualifications they have.
Experience: You can ask your adviser how long they’ve been qualified and giving advice, and you can research the brokerage to see how long they’ve been in business.
Are they independent? Ensure that your adviser is independent rather than tied to one financial institution, so that they are able to advise you on suitable products from the entire financial market place.
Testimonials: If your IFA is good at their job, they are highly likely to have a list of satisfied clients, from whom you can request a testimonial.

The Spectrum IFA Group

At The Spectrum IFA Group, we provide financial advice to expats on all aspects of living, moving and working in Spain. From calculating the cost of living to choosing a good school for your children, our guides to money management and family finances will help you prepare for the challenges of living and working abroad – so you can make the most of your expat experience.

We provide Insurance Intermediation advice and assist clients in their choice of Investment Management Institution. Mutual respect is earned by working together, looking after your best interests and by adding value to your financial planning through qualifications, experience and enthusiasm.

UK Pension Transfers – Update for Expats

By Chris Burke
This article is published on: 24th December 2014

The rapidly changing landscape of pension schemes in the UK has led to a great deal of confusion, and it’s not just UK pensioners who are affected: the rule changes also impact expats living outside the UK, especially those considering the benefits of a Qualifying Recognised Overseas Pension Scheme.

As an expat, it’s hard to know which route to take. Should you transfer to a QROPS or leave your pension in the UK? What are the benefits and drawbacks? What impact have recent changes had on your options?

Let’s look at the facts…

Reasons to transfer

● Pension Commencement Lump Sum of 30% of the fund. This is tax-free if UK resident but could be taxable if resident outside of the UK.

● No pension death tax, regardless of age, in Gibraltar and Malta

● Greater investment freedom, including a choice of currencies

● Retirement from age 50 (Malta), and 55 in Gibraltar and Isle of Man

● Income paid gross from Malta (with an effective DTT), and only 2.5% withholding tax in Gibraltar

● Removal of assets from the UK may help in establishing a Domicile outside of the UK (influences UK inheritance tax liability)

What will happen if you leave your personal pension in the UK

● On death over the age of 75, a tax of 45% on a lump sum pay-out.

● Income tax to be paid when receiving the pension, with up to 45% tax due, likely deducted at source,

● Registration with HMRC and the assignment of a tax code.

● Proposed removal of personal income pension allowance for non-residents. Although this is still on the agenda, it has been confirmed that there will be no change to non-residents’ entitlement to personal allowance until at least April 2017.

● Any amounts withdrawn will be moved into the client’s estate for IHT purposes, if this is retained and not spent.

● As the client will be able to have access to the funds as a lump sum, these could potentially be included as an asset for care home fees/bankruptcy etc.

● No opportunity to transfer from many Civil Service pension schemes from April 2015 (Only five months remain for public sector workers to review their pension and then make their own informed decision)

What Does All This Mean?

Regardless of the proposed legislation amendments, transferring to a QROPS still provides certain benefits that the UK equivalent would not be able to offer, although it’s fair to say that both still hold a valid place in expatriate financial planning. The answer to which pension is more suitable for you will ultimately depend on your individual circumstances and long term intentions.

GIVEWATTS and The Spectrum IFA Group

By Spectrum IFA
This article is published on: 17th December 2014

17.12.14

Please see below an open letter sent to The Spectrum IFA Group
by GIVEWATTS

Dearest Christine and Chris,

I hope you are well indeed! You have a big place in my heart, part of my secure base. Thank you for everything you have done and for always being there!

I can’t thank you and Spectrum enough for the support to GIVEWATTS over the years! It has meant a great deal, both in terms of funding (see attached project update), but also morally. You joined us at an early stage, taking a chance on something you believed in. I am happy to say that it is really working now, and it also has a great deal of impact.

It has been a very good year for GIVEWATTS. Our partnership with Spectrum has been a key component in our being able to scale up during the year. We have grown into 649 schools across Kenya, and we are starting in Tanzania early next year, and DRC a month after that. More reasons for you to come and visit again!

The school calendar has all the kids in Christmas recess now, and we are waiting for the final grades for the last term in January 2015. In the current report the improvement is at 7%, and this reflects the changes between a county wide diagnostics test and the national exam. After that we will update those numbers, as well as the changes in school ranking. You should expect a change of around 20%, which is the average change across our Kenyan schools between two national exams.

You will be pleased to see that 107 lamps have been paid off. The balance of lamps have been signed up for and are being paid for now. The total savings for the households is almost CHF 40K, and using the most conservative measures available (100 kg of Co2 per replaced kerosene lamp) so far the project has offset a total of about 17 tonnes of Co2. This calculation is based on number of total days lamps have been replaced. For comparison, for the total 265 lamps in the project, the saved emissions will be 26,5 tonnes per year. As the number of lamps increase, this number will go up.

I also include two impact videos. Short and concise for busy Spectrumers. We are also changing our project page on the website again, to make it more interactive. The local web developer we are using says that this will be done early next week. As soon as we have it, I will send you a note.

I hope to make it to Lausanne in the first quarter of 2015, and I will so very much take you out for a meal to celebrate our joint success! And just to have a curry with some great people!

A very Happy New Year!!

Jesper Hörnberg

To download the full report please click here

Pension workshops in 2015 – Deux-Sèvres

By Amanda Johnson
This article is published on: 14th December 2014

In November 2014, I was invited by Micala Wilkins of the “Ladies in Business in France” Facebook group to present a pension workshop to those within the group who have moved to France, are working here and wanted to know more about planning for their retirements. Choosing a small venue so that I could focus on the individuals present, we covered the following areas:

What pension am I likely to receive from the UK when I retire?
How is the French state pension calculated?
What income will I require when I retire?
How can I make up any difference between what I would like to receive and what I can expect to receive?

The delegates all found the information very useful and informative, as you can see from these event testimonials:

“It was a really useful meeting, thanks for organising it – Amanda Johnson gave us some interesting information and plenty to think about:)”

“It was a great session and certainly gave lots of food for thought!”

“An informative session on how, as expats, we can find out what our UK pension entitlement is, how we can maximise our full UK pensions and the steps we can take to get as much of a French pension as possible”

Subject to sufficient interest, I will be happy to conduct more workshops covering pensions, or any other areas of financial planning that readers of The Deux–Sèvres Monthly magazine or any others may want. If you email me your name, postcode and area of interest, I will endeavour to arrange local events throughout 2015.

Whether you want to register for our newsletter, attend one of our road shows or speak to me directly, please call or email me on the contacts below and I will be glad to help you. We do not charge for reviews, reports or recommendations we provide.

Looking forward to 2015

By Spectrum IFA
This article is published on: 9th December 2014

The end of the year is always a good time for reflection and this year we have had much to think about for our clients. However, as well as managing current financial risks for our clients, we are also forward looking. So I thought it would be a good time to do a quick review of some of the things that are on the horizon for 2015.

The UK Pensions Reform is big and we now have a reasonable amount of certainty of the changes taking place in April and it is unlikely that there will be any more changes of substance between now and then. The reform brings more flexibility, which is good, but the reality is that for many, the taxation outcome will be a deterrent against fully cashing in pension pots. This is likely to be even more so in France, where it is not just the personal tax and possible social contributions that are an issue, but also whatever you have left of the pot will then be taken into account in valuing your assets for wealth tax, as well as being potentially liable for French inheritance taxes.

The EU Succession Rules will come into effect in August. While the EU thinking behind this is good, i.e. to come up with a common EU-wide system to deal with cross-border succession, the practical effects will still have issues. The biggest issue for French residents is, of course, French inheritance taxes. Therefore, it may not necessarily be the case that the already tried and tested French ways of protecting the survivor and keeping the potential inheritance taxes low for your beneficiaries should be given up in favour of selecting the inheritance rules of your country of nationality. More information on the ‘French way’ can be found in my article at https://spectrum-ifa.com/inheritance-planning-in-france/ and on the EU Succession Regulations at https://spectrum-ifa.com/eu-succession-regulations-the-perfect-solution/

There is the UK General Election in May and who knows whether or not that will actually be followed at some point by a referendum on the UK’s membership of the EU. Nor do we know what the outcome of such a referendum would be and so there is really no point in speculating, at this stage.

For UK non-residents, we are expecting the introduction of UK capital gains tax on gains arising from UK property sales from April, subject to there not being any changes in the next budget. We had also expected that non-residents would lose their UK personal allowance entitlement for income arising in the UK, but we now know that this will not happen next year. The Autumn Statement confirmed that it is a complicated issue and if there are to be any changes in the future, these will not take place before 2017. Of course, there could be a change in government and so it might be back on the agenda sooner!

We will also have the usual round of French tax changes, although this year the expected changes are much less extensive than in previous years. The French budget is still winding its way through the parliamentary process and I will provide an update on this next month.

Turning to investment markets, my personal opinion is that the main factor that will have an impact in 2015 is central bank monetary policy. Whether this results in tighter or looser policy from one country to another, remains to be seen. What is clear is that the prospect of deflation in the Eurozone remains a real threat and not only needs to be stopped, but also needs to be turned around with the aim of eventually reaching the target of being at or just below 2%. Other central banks around the world have a similar target and in areas where recovery is clearly underway, the rate of price inflation and wage inflation also needs to increase before we are likely to see the start or interest rate movements in the right direction.

Last but not least, with effect from 1^st January 2015, under the terms of the EU Directive on administrative cooperation in the field of direct taxation, there will be automatic exchange of information between the tax authorities of Member States for five categories of income and capital. These include income from employment, director’s fees, life insurance products, pensions and ownership of and income from immoveable property. The Directive also provides for a possible extension of this list to dividends, capital gains and royalties.

The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or on the mitigation of taxes.

If you are affected by any of the above and would like to have a confidential discussion about your situation or any other aspect of financial planning, please contact me using the details or form below.

Certainty and Predictability for your Investments

By Jonathan Goodman
This article is published on: 1st December 2014

01.12.14

The PruFund range of funds are designed to spread investment risk by investing in a range of different assets, such as company shares, fixed interest bonds, cash and property – from both the UK and abroad.

Prufunds are managed by Prudential Portfolio Management Group Ltd (PMG), dedicated multi-asset fund managers with a team of over 30 economists, investment strategists, analysts and mathematicians, specialising in different areas of the investment world.

How PMG Manage Your Money

PMG believes that investment success should be built on clear philosophy, demonstrable processes and a team based approach. They believe that this will not only deliver superior returns, but also provide greater continuity and dependability.

They believe in the importance of asset allocation and the key role that multi-asset funds play as an investment solution for many investors. They also believe that asset allocation is a specialist skill which should, to avoid conflicts of interest, exist separately from the other investment activities in any fund.

PMG takes many factors into consideration when managing your money.

They focus on:

Minimising reliance on economic forecasting
Looking for irrational behaviour
Taking a long-term approach
Fund management
Asset-liability management

PruFund Growth Providing Smoothed Returns

PruFunds offer a unique smoothing process designed to help protect an investment from some of the daily ups and downs associated with direct investments, providing less volatile and more stable returns over the medium to long-term, in line with each fund’s objective and allowable equity parameters.

The Prudential PruFund smoothing process has two elements:

Expected Growth Rates (EGR) applicable to each of the funds, normally applied on a daily basis. The EGR is the annualised rate that is normally used to increase the value of your unit price each day, and they are set quarterly by the Prudential Directors having regard to the expected long-term investment return on the underlying assets of the funds.
Upwards and downwards pre-defined unit price adjustments are applied in line with fully transparent process requirements.

For more information on PMG and the PruFund range of funds or to contact one of our Financial Advisors to arrange a full financial review of your current situation please use the contact form below.