Viewing posts categorised under: Spain

How safe is your UK pension?

By Chris Webb - Topics: Madrid, spain, UK Pensions, United Kingdom

09.02.18

In days gone by the UK’s private pension schemes were the envy of the world, considered superior to other nations’ schemes. Alas, those days of world class company pension schemes are gone…………..

It is surprising just how many people are still members of their final salary or defined benefit schemes. Considered a “golden pension”, these schemes offer the best retirement promise, a promise to pay you the benefits that are defined in their pension schedule. Not a personal pension wholly dependant on the investments made, but a “fixed in stone” promise.

But how many of these people should be worried about how safe the promises are?

We recently witnessed the collapse of Carillion, a construction and outsourcing company with over 40,000 employees. They were just the latest in a high profile list of companies that have brought the subject of “pension safety” to the fore.

What happens to their workforce who are members of their pension scheme? The chairman of trustees of Carillion’s pension scheme, Robin Ellison, has suggested in a letter to a committee of MPs that there was a funding shortfall of around £990m with Carillion’s defined benefit pension scheme*. YES, £990 MILLION !!!

Many of the UK’s largest companies are running pension deficits that would bring a tear to the eye. The exact amount of pension deficit is hard to ascertain, but sources claim these numbers to be around £103 BILLION* with over 3,700 schemes in deficit compared to 1,800 in surplus.

Many household names find themselves in the same situation with their pension schemes. Names like BAE, Royal Dutch Shell, The Royal Mail and British Telecom to name a few. It is only a matter of time before one of these names, or another “big player” joins the list of collapsing pensions.

So, if you’re in a pension that is in deficit is that a problem? Well, there are close to 11 MILLION people holding defined benefit pensions. Out of that number they estimate that 3 MILLION (3) will encounter problems and potentially have only a 50% chance of receiving their promised pension.

The UK Government runs a special fund aptly called The Pension Protection Fund, the aim being to bail out companies with a pension crisis. The Pension Protection Fund (PPF) was set up on 6 April 2005 to protect members who had defined benefits (i.e. final salary type benefits) in a workplace pension scheme, where the employer became insolvent on or after this date and the pension scheme could not afford to pay those benefits promised to members on wind up.

Many smaller UK defined benefit pension schemes have already fallen into their basket, as well as some larger organisations. BHS and British Steel are two of the largest organisations to be in the pot. You can view all of the companies listed at the PPF website; it makes for horrid reading when you see the true amount of company pensions that have already owned up to and admitted they can’t afford to pay their promises………

The Pension protection fund isn’t exactly a guaranteed scheme anyway, whilst it runs within its parameters it can provide its own level of promises (below what the original pension company was offering), however if too many large company pension schemes start running to it for protection, it will put the protection fund under its own strain……

So what can you do about it?
Well, here at The Spectrum IFA Group we work closely with some of the worlds leading pension providers and can not only offer you completely independent advice but we can also provide you with a technical analysis on your pension. We can advise whether your pension is in deficit or surplus, we can advise on the pro’s and con’s of your existing pension provision and furnish you with sufficient information to actually understand what you may receive. We can also compare that information to the alternative options available to you, whether that be a transfer out of your scheme to a QROPS or an International SIPP option. This service is available for defined benefit and defined contribution (personal) pension plans.

It’s better to be aware of all the options available to you, it’s your retirement and it’s your choice to decide what the best option for your circumstances is.

*Sources: BBC News January 2018.

Modelo 720 Reporting

By Chris Webb - Topics: Madrid, Modelo 720, spain

01.02.18

Modelo 720 – WHAT’S IT ALL ABOUT?
In 2013, the Spanish Government launched an “anti-fraud” plan to prevent tax evasion. Although aimed at discovering assets bought by Spanish nationals with irregular money, it also affects members of the international community living in Spain that hold assets abroad.

It is important that you don’t ‘bury your heads in the sand’ regarding this requirement, hoping that you won’t get caught………because eventually you will.

The Modelo 720 reporting requirement is based on tax residency; if you are deemed to be a tax resident in Spain, then this requirement affects you. In general, you will be deemed tax resident if you are in living/working in Spain for more than 183 days a year, and remember that the onus is on you, the individual, to be able to prove otherwise to the authorities, should they decide to investigate. The reality is that in most cases, it would be very difficult to demonstrate this to the Spanish Tax Authorities and so most people would be deemed Spanish tax resident by them.

WHO HAS TO REPORT?
Any person, permanent establishment or company who is tax resident in Spain and is the owner, titleholder, representative, authorised person, beneficiary, or has disposal powers of assets located outside of Spain worth more than €50 000 (see assets below), must report the value of these assets. Any assets held in other currencies must have that value converted to Euros to gauge whether it exceeds the Euro limit imposed.

WHEN DO YOU REPORT?
Between 1 January and 31 March of each tax year, you must submit details of assets from the previous year. If you have previously reported your external assets on the Modelo 720, then there is no need to resubmit a report every year unless the value of any of the asset classes has increased by €20 000 or more.

WHICH ASSETS MUST BE REPORTED?
There are three main asset classes that need to be reported if the total value of each class is over the €50 000 limit:

  1. Bank/Building Society accounts located outside of Spain – It is important to note that if you hold several bank accounts and THE TOTAL amount held exceeds the €50 000 limit, then ALL the accounts need to be reported, regardless of whether each one is under the limit.
  2. Investments / Life or disability insurance policies – If you are the owner or policyholder of an investment or insurance policy then these will need to be declared if they exceed €50 000. Again, there is a requirement if you have multiple investments or policies, that if the total value exceeds the limit then they will all need reporting.If you are holding Life Insurance Bonds, then the surrender value of the policy is deemed as the value. If you hold “pure life” policies that only pay out a benefit in the event of death and have no physical surrender value these do not have to be reported.Interestingly if you are holding what we describe as Spanish compliant Life Insurance Bonds, then the onus of reporting on the Modelo falls to the institution themselves. They have their own version of the Modelo to comply with meaning they do not necessarily have to go on your individual report.
  3. Property – Owners or part owners of an overseas property where the value exceeds the limit must report these properties.


WHAT IF YOU DON’T REPORT IN TIME / CORRECTLY?

The Spanish Tax Authority has implemented a series of penalties for those who do not comply with this regulation. These penalties can be imposed for late filing, incomplete/inaccurate filing and even for presenting the information to them in a way not deemed acceptable; basically, it must be done online. These are considered very serious offenses and the penalties in these cases are fixed, generally to an amount of €5 000 per item or “set of data” on the same asset, with a minimum of €10 000. The amount is reduced to €100 (with a minimum of €1 500) if the information is filed late without prior notification from the government. Speaking to some accountants and Gestors, they believe and have seen fines to be around €150 if you file late without any notification, but the law states differently so in reality the exact fine is questionable.

WHAT IF YOU DON’T REPORT AT ALL?
Should the Spanish Tax Authorities discover that you have assets with a cumulative value over €50 000 in any of the above asset classes and deem that you have wilfully not disclosed this information, penalties are imposed. In some cases the fines issued are as high as 150% of the value of the undeclared assets!!!! It is also important to note that there is no statute of limitations when it comes to the Modelo 720 so there is no limit to how far back they can go…………

There have been numerous complaints about the unfairness of the Modelo 720 and the fines being imposed. The European commission has been in discussion with the Spanish Tax Authority to reduce the fines. The latest I have heard is that the 150% penalty of undisclosed assets would not stand and would be reduced to the lower fine levels, providing the assets were reported voluntarily, which just means it falls from the undisclosed category to the late reporting category and doesn’t help those caught not declaring. The Tax Authority is pushing for people to report their assets voluntarily, maybe there will be softer sanctions in the future but for now, this is how it stands.

If you want to discuss how to report the Modelo 720 please feel free to get in touch. I work closely with a qualified accountant in Madrid who can file on your behalf if there is a requirement to do so.

Are you legally here in Spain?

By Pauline Bowden - Topics: residence, Residency, spain

29.01.18

In order to be considered as fully resident in Spain, you must have registered on the Padron i.e be on the electoral register. Being on the Padron means a lot more than being able to vote in local elections.

Many benefits in Spain are based on years on the Padron. Usually a minimum of 5 years is required in order to claim disability benefit and other help as a carer etc. Remember to register your children too. Even though they cannot vote until age 18, they might in the future need to claim a benefit and if not registered as soon as they arrive in Spain they might have to wait to get something they are entitled to.

Citizen’s Advice Spain is very helpful when dealing with specific cases and could help you apply for a historical Padron ( getting your Padron back dated, though this is not easy to do).

With Brexit on the horizon it is even more important to be fully registered as living in Spain. Residencia, annual tax return, 720 tax return, which is due before the end of March. All of these things matter if you want to be “legally” here in Spain.

The ‘Flip side’ of Demographics; a Revolution in the Making?

By David Hattersley - Topics: Financial Planning, spain

22.01.18

As a “baby boomer” born in the ‘50s, with clients aged between 27 and 93, I have had both the fortune and misfortune of being born slap bang in the middle of a seismic generational gap. It does appear that at the moment there is a greater emphasis and concern placed on an aging population and less attention paid to the “millennial” and “X“ generations and their futures.

Having grown up and experienced a revolution as a teenager in the ‘60s and ‘70s, I was heavily influenced by the contemporary music of that time. The global impact of Dylan, The Beatles, The Rolling Stones and The Who, of whom the latter’s recordings of “My Generation” and “Won’t Get Fooled Again” seemed to represent many of our generations’ feelings and desire for change, helped fuel that revolution. It seems like the recordings and lyrics of the aforementioned, even today, still ring true for the younger generation.

Just as much as music influenced us, so too did Hollywood, with films such as Easy Rider, The Graduate, Soldier Blue and Bonnie & Clyde springing to mind. These films came to represent a counterculture generation increasingly disillusioned with its government, as well as the government’s effects on the world at large, and the Establishment in general. It led to the questioning of “old fashioned values” based on a previous generation’s views. Shortly after, Shaft came to represent a genre, with the actor Richard Rowntree creating a lead role not seen before.

I sense from observations, and from discussions with other parents of varying ages and with the younger generation, the same sense of a growing dissatisfaction and concern with the current status quo.

So the simple question is, are we now at a stage where another “people’s revolution” is in the making? In the next few articles I will try to explain, albeit briefly, a potentially disenfranchised generation, the impact of this position on them, their reaction, and how this may impact the future as we know it.

As an adviser I need to keep up with change. Along with my own research, I also have access to the major resources of the fund managers that we use, their view being that change is happening already.

Spectrum sponsored Arts Society de la Frontera

By Charles Hutchinson - Topics: Costa del Sol, Events, spain

04.01.18

The Spectrum IFA Group again co-sponsored an excellent Arts Society de la Frontera lecture on 13th December at the San Roque Golf & Country Club on the Costa del Sol.

We were represented by one of our local and long-serving Advisers, Charles Hutchinson and Jonathan Goodman, who attended along with our co-sponsors Richard Brown and Lewis Cohen from Tilney Investment Management. Tilney also very kindly hosted a lunch afterwards for the committee, the DFAS Chairman and the Lecturer.

The Arts Society is a leading international Arts charity which opens up the world of the arts through a network of local societies (such as here in the Costa del Sol) and national events throughout the world.

With inspiring monthly lectures given by some of the country’s top experts, together with days of special interest, educational visits and cultural holidays, it is a great way to learn, have fun and make new and lasting friendships.

At this event, around 110 attendees were entertained by a talk on the art of Leonard da Vinci and the Mona Lisa entitled “The Woman who ate her Husband” by Nicole Mezey who is one of the UK’s top experts in this field. She was excellent and kept the audience gripped and entertained with her knowledge and humour.

The talk was followed by a drinks reception which included a free raffle for prizes including CH produced Champagne, mince pies and a Christmas pudding, together with a fully illustrated book on Leornardo. Tilney as usual excelled themselves by providing the top prize of a wooden set of candle holders designed and beautifully crafted by Viscount Linley, the Queen’s nephew, which caused a further stir after their last two years’ prizes!

All in all, a great turnout and a very successful event at a wonderful venue. The Spectrum IFA Group were very proud to be involved with such a fantastic organisation and we hope to have the opportunity to do so again in 2018.

Are you Positioned for the Innovation Revolution?

By Pauline Bowden - Topics: spain

14.12.17

I am perfectly serious when I suggest a world in which we can be in instant contact with each other wherever we may be, where we can contact our friends anywhere on earth, even if we don’t know their actual physical location. It will be possible in that age, perhaps only 50 years from now, for a man to conduct his business from Haiti or Bali just as well as he could from London

Arthur C Clarke, Science fiction writer and Futurist. BBC Horizon in 1964

There’s no chance that the iPhone is going to get any significant market share, no chance

Steve Ballmer, CEO Microsoft, 2007

Technology is important to the world’s future, so should part of your portfolio recognise this?

Are you participating in the world’s future?

If you would like to discuss this or any other financial matter in more detail call Pauline Bowden on 616 743 108 or email: pauline.bowden@spectrum-ifa.com

The EU – a Financial success or not?

By Chris Burke - Topics: Barcelona, Catalonia, Catalunya, eu citizens, europe-news, spain, The EU

31.10.17
Chris Burke | Spectrum IFA Barcelona

What better subject to discuss, than one closest to the heart of someone living and studying in Europe.

Geneva Business School (GBS) in Barcelona, is a leading Business School providing cutting edge, innovative, Swiss quality education on a global scale. Part of their curriculum is to invite guest speakers along to hold a forum/debate on a topical subject, to enhance their knowledge, practice what they are learning and increase their debating skills.

So, where better to format the debate on discussing what the original reasons were for the EU being formed. Easy I hear you say. Ok, well we started discussing putting all the countries together and how that could make them stronger under one currency, against other economies. It was soon apparent that although this seems a sensible idea, did this work for everyone? Greece was debated as already being financially in trouble before it joined the EU, and has continued down that path, but why? When we looked at the Government debt of each country before joining the EU and present day, it’s clear many of the country’s debt has doubled; The UK, Greece, Italy, France to name but a few, but why haven’t others? No one was surprised Germany’s hadn’t, but why hadn’t it? We discussed Germany’s manufacturing capability compared to the other countries; this could well be a valid reason. There was mention of ‘black’ money still prevalent in certain countries, mainly Italy and Greece where in some places you still couldn’t pay by card, only cash. It was well known a few years back the Greek underground had been losing money hand over fist due to passengers not paying. Was there a cultural issue here that was denying the government, in those countries, of more revenue from tax?

Freedom of movement was on everyone’s lips as another good reason for the EU being born. Freedom to move elsewhere, find work, perhaps a new life, career. It was quickly pointed out this didn’t work for everyone, an Italian farmer (highlighted by an Italian student) would not agree this had worked well for him. Of course, you cannot please everyone and there are countries in the EU whose farmers receive subsidies to help.

Access to the common market, so trading made easier for countries in the EU, cheaper and more direct for them to sell within. This making them potentially more competitive than those outside it. This was a strong reason for the EU to be formed.

So there was one more, major reason, that after we discussed what it was, agreed that perhaps this could be the biggest reason for the EU being formed, but is hardly ever brought up. We discussed that during the Brexit negotiations this was hardly ever mentioned as a reason to remain, if it was its press headlines were minimal. When you are part of a team, whether it be a sports team or any other, you have a common reason/goal to make it work. You may have disagreements, but because you all want the same outcome, which benefits you all, you work hard to find a solution. Differences can be put aside, or debated, and there may be a skirmish occasionally but in general, conflict is usually avoided or at least minimal. Stopping wars and keeping the peace was one of the founding reasons for forming the EU, yet it hardly ever gets the status it should deserve.

So, taking all this into account, did we think the EU has been a financial success? Certainly not to everyone, but if you were a consultant brought in to investigate and make a decision, the debaters at Geneva Business School voted marginally it had. Wars cost money, however they can also generate it……

Other key questions asked were:

Where are we economically in the world?
We are in the second longest Bull Run in the history of the stock markets, we certainly aren’t on the bottom run of the ladder in terms of its upward curve, probably not in the middle, how long there is to go is anyone’s guess, but we are probably in the final third.

Government debt are at the highest rates ever, can it be repaid?
No. Even if we had ten more fantastic years on the stock markets, which is highly unlikely, it’s my belief it’s almost impossible to repay these. Looking at debt clocks is frightening and best not to be done!

Bitcoin, good investment or not?

The jury is still out on this, it continues to provide itself as an investment choice. Will it last? Do the bank’s want it to last? Will it be here tomorrow? For the high risk takers it’s a choice, for everyone else it’s too early to tell.

Property, a good investment in Barcelona?
Simply, if you are intending on holding it for a decade or so, and being able to fix the mortgage interest rate for life, it’s hard to advise against it. For anything less, you wouldn’t want all your investments in one asset class.

So, our final thoughts were, on Maslow’s Conscious Competence Model, where did we rate the EU? And the overwhelming answer was:

Conscious Incompetent – that is to say, the EU knows it isn’t working, and is arguably trying to fix it although isn’t sure how. But how much we wonder…….

Saving tax is a good policy

By John Hayward - Topics: Bonds, insurance bond, Investments, Saving, spain

09.10.17

Having recently written about the benefits of using a well-established investment or insurance company to manage your savings, within a Spanish compliant insurance bond, with the benefit of your money growing by more than inflation and far more than any bank has offered in recent years, I want now to explain how brilliantly tax efficient a Spanish compliant insurance bond is. I will do this by telling stories of two married couples. Mr and Mrs Justgetby and Mr and Mrs Happywithlife. Both couples are retired and tax resident in Spain. Also, both couples have two adult children in the UK.

Story 1 – Mr and Mrs Justgetby
Mr and Mrs Justgetby have lived in Spain for 10 years. They had sold up in the UK in 2007 and bought a property on the Costa Blanca (Valencian Community). This is valued at €300,000 and owned jointly. They each receive pensions from the UK in the form of State pensions and both have small company pensions. These cover their expenses but do not allow them to do much more. From the sale of their property in the UK, they were left with £200,000. They exchanged £50,000 before moving to Spain when the exchange rate was 1.45 euros to the pound. This gave them €72,500. They have had to eat into this because they needed a new car, they have done a bit of work on their house, and they have had to supplement their pension income. The exchange rate has also gone against them by about 20%. They are now left with €50,000 in their joint Spanish bank account. This does not pay any interest. The remaining £150,000 is in the UK in a variety of investments made up of premium bonds, ISAs, and fixed term savings accounts. The accounts have been split so that each holds exactly the same in individual accounts so that they each hold £75,000.

INCOME/SAVINGS TAX
“ISAs and premium bonds are…..not tax free for Spanish residents”!
Whilst no interest is being paid on their Spanish bank account, at least there is not a tax concern there. However, some of the money in the UK is in tax free accounts. ISAs and premium bonds are tax free for UK tax residents but are not tax free for Spanish residents. Therefore, any income or gains from these investments should be declared to Spain. Mr and Mrs Justgetby have not been declaring any of the prizes they have received from neither the premium bonds nor the interest from the ISAs believing this not to be necessary. With automatic exchange of information that has come into force, Mr and Mrs Justgetby may be in for a nasty shock for unintentionally evading tax.

INHERITANCE TAX
On the death of either Mr or Mrs Justgetby, there are some significant tax issues. As they are tax resident in Spain, the surviving spouse will be liable to Spanish inheritance tax (known as succession tax in Spain) on 50% of both the property value and the bank account as well as 100% of the assets owned by the deceased in the UK. The inherited amount in euro terms, based on an exchange rate of 1.13 euros to the pound, is €150,000 (property), €25,000 (bank account), and €84.750 (UK investments). This totals €259,750. The Spanish inheritance tax on this, after allowances, could be around €11,500.

On the death of the other spouse, the children in the UK would have a liability of around €5,000 each based on current rules and on the assumption that their pre-existing wealth is not over certain limits.

Story 2 – Mr and Mrs Happywithlife
By coincidence, Mr and Mrs Happywithlife were in the exactly same position as Mr and Mrs Justgetby in terms of when they sold their UK property and they had exactly the same amount of money as Mr and Mrs Justgetby in cash. They also have a property in Spain worth €300,000. Instead of investing in ISAs, premium bonds, and deposit accounts in the UK, from the £200,000 property sale proceeds, they put £175,000 into a Spanish compliant insurance bond in joint names. The policy will pay out on the request of Mr and Mrs Happywithlife or when the second of them dies. They felt that it would not be necessary to hold so many euros in a low or no interest bank account in Spain. They kept £5,000 in a UK bank account to cover the times that they pop back to the UK to see their children and the remaining £20,000 they exchanged into euros and deposited almost €30,000 with their local bank.

INCOME/SAVINGS TAX
“……tax is only due when withdrawals are made.”
Once again, the interest in the bank account in Spain has paid little interest and so has not created a tax problem. However, the Spanish compliant insurance bond has increased in value but has not created a tax liability to date. This is because tax is only due when withdrawals are made and then only on the gain part of the withdrawal. This has allowed the plan to increase on a compound basis as tax has not been chipping away at the growth. They have decided to take regular amounts from the bond now. Each time the money is paid out, the insurance company deducts the appropriate amount of tax and pays this to Spain. As mentioned, the amount of the tax will be determined by the gain portion. In the early years, this is generally little or nothing due to the special tax treatment afforded to these types of savings plans. Longer term, the tax payable is likely to be a fraction of that payable by those who own non-compliant investments.

“….tax that they saved has gone towards a cruise….”!

Unlike Mr & Mrs Justgetby who would have had to pay €1,980 on the €10,000 gains they made, Mr and Mrs Happywithlife would not have had to pay anything. Instead, the €1,980 tax that they saved has gone towards a cruise they are going on next year.

INHERITANCE TAX
On the death of either Mr or Mrs Happywithlife, using the same assumptions as with Mr and Mrs Justgetby, the surviving spouse will inherit 50% of the property value (€150,000), 50% of the Spanish bank account (€15,000) and 50% of the UK bank account (€2,825). This totals £167,825. The Spanish inheritance tax on this, after allowances, could be around €3,500, €8,000 less than Mr and Mrs Justgetby´s position.

On the death of the other spouse, the children in the UK would have a tax liability of closer to €4,500 each as their parents had less money in the Spanish bank than Mr and Mrs Justgetby.

The difference the Spanish compliant bond makes
As the bond was set up on a joint-life, last survivor (second death) basis, there is no “chargeable event”, as it is known, on the death of the first spouse. Nothing is paid out on the first death as the insurance bond was taken out to pay out when the second party dies. This will have saved either Mr or Mrs Happywithlife thousands of euros in tax.

Words of warning
Tax rules change regularly and the figures quoted are estimates based on our knowledge at this time. The allowances assumed are those applying to the Valencian Community at the time of writing.

Brexit could have an effect on the benefits received by the children in the above cases. Allowances apply currently to the children as they live in the UK and are part of the EU. The allowances may not be there after Brexit.

There are a number of other ways to reduce taxes by distributing wealth appropriately. Everyone is an individual and we all have different needs. Therefore, a financial review is the first part of the solution.

It is vital, from a compliance point of view, to take a look at all our financial arrangements and more importantly to review them on a regular basis. What we may have once bought many years ago, and which complied then, may now have become obsolete and could cause tax questions later.

Reviewing existing contracts and investment arrangements has become much more important with the open border tax sharing arrangement, the Common Reporting Standard’ which has now been fully implemented.

It might just be the right time to start looking at your existing arrangements to ensure they comply before anyone starts looking.

Fun Financial Fact
The Latin for head is caput. In ancient times, cattle were used as a form of money and each head of cattle was a caput. Therefore, someone with a lot of cattle had lots of caput or capital

Potential Catalan Issues

By Chris Burke - Topics: Banking, Barcelona, Catalonia, Currencies, Elections, Investments, spain

05.10.17

It seems Catalonia and Spain are continuing their loggerheads and head jutting, but what most people are starting to consider are their OWN assets and issues being a resident here, particularly if you are not Catalan. I have received many emails this week from worried clients and contacts, about having their money here and what they can/shouldn’t do.

See below my 5 TOP FINANCE TIPS for the current predicament and indeed some of the areas we help people with.

Spain’s stock market has taken a severe hit this week, with two of the Catalan banks, Banco Sabadell and Caixabank down 6.3% and 6.7% respectively. Indeed today Banco Sabadell is holding an emergency meeting, Thursday the 5th October, to approve relocating their headquarters out of Catalonia.

Therefore, as an emergency communication to my clients and contacts I thought it would be useful to know what you should be thinking about and the main questions that have arisen this week:

1. Personal Money in banks
Any money in a bank, unless used to live on a day by day, is devaluing in real terms. If Spain reacts to Catalonia declaring independence, we have no idea what might happen. In the last crisis, banks made it difficult to move and even limited the money you could take from your bank account. If you have ‘excess funds’ in accounts in banks, you may want to consider other options so you still have full control of your money and no worries.

2. Business Bank Accounts
If your business account is with a Catalan bank, but you have a personal one that is not, you CAN move money into this. However, you have to be careful and follow these guidelines:

‘In order to avoid problems with the consideration of dividends it would be preferable to do a loan agreement between you and your company and to file a form through la Generalitat, in order to demonstrate the date of the loan and the content of the agreement. There is no stamp duty to be applied and it is not necessary to go to a Notary, but it is better to have this document done, just in case, if in the future somebody asks about this amount.
Source: Silvia Gabarro, GM Tax.

3. Currency
Anyone with sterling Money will have felt the pain of the currency weakening since the Brexit vote. Analysts have been saying for months that this is very undervalued, and built on worries about the UK leaving the EU. However, there are still fundamental issues within the EU, including the real major problems of the Italian banks, the fragile Spanish economy and a few members who are heavily in debt and unlikely to ever be able to repay this. Now we also have the Catalan Independence problems coming to a head within Spain, this could be compounded. Then in May next year we have the Italian elections which could be interesting to say the least.

Therefore, it could be argued before the Euro weakens any further, a good time to transfer money into sterling from Euros.

4. Existing/Investments
Many Catalan/Spanish banks whose client’s money is invested have more of an emphasis on their own funds or Spanish funds, than a non Spanish bank/investment would. We call this being more ‘Spanish Centric’. If the Spanish stocks are booming then this is fine, however if not the case this could be very dangerous to your investments, whether personal or corporate.

The larger the stock market, the closer correlation (it does the same as) to other large stock markets. Therefore, if your money is invested with a truly global bank/investment firm you will not put your money so much at risk to this.

5. Relocation
Believe or not, some businesses and people are relocating due to the current predicament, and some companies share prices have even gone up by 20% on revealing this news to the press!

You may or may not want to consider this, or be in a position to, but your personal and corporate finances do not need to worry if you have them set up correctly. Companies’ savings and your personal money can be with a ‘Portable bank/institution’ that acts like a balloon. Wherever you go, you pull your balloon along with you happily. Then, when you want to access some of the money, you let some ‘air’ (money) out and adhere to the local rules of where you are. No need to open up bank accounts in different countries, or go through the extensive administration. Just tell us you want your money and after some due diligence you shall receive it, wherever you are and knowing the process is legal and compliant.

Has your bank in Spain paid you over 3% p.a. interest on your savings recently?

By John Hayward - Topics: Costa Blanca, Interest rates, Investment Risk, Investments, Saving, spain, Uncategorised

19.09.17

The probability is that it hasn´t. However, you could have made more than 3% a year in a low risk savings plan with one of the biggest insurance companies in the world. We have many happy savers who have seen steady growth of over 3% a year for the last few years. How? Read on…

Saving money in a low interest world

Losing spending power to inflation
With special offers currently being offered by banks of 0.10% APR interest and inflation in Spain running at 1.6%, there is a guaranteed loss of the real value of money at the rate of 1.5% a year. There are some who would be disappointed, if not angry, if their money in an investment had lost 7.5% over 5 years yet this is exactly what has been happening to people over the last few years without them really appreciating it. 3% a year is not only an attractive rate of return but it is necessary to cope with inflation and provide real growth.

Spanish compliant insurance bonds
ISAs, Premium Bonds, and some other investments in the UK are tax free for UK residents. They are not tax free for Spanish residents. We are licensed to promote insurance bonds in Spain which are provided by insurance companies outside Spain but still in the EU. In fact, even after Brexit, these companies will still be EU based and so Brexit will not have the impact on these plans that it could have on UK investments. As the bonds are with EU companies, and the companies themselves disclose information to Spain on the amount invested, as well as any tax detail, the bonds are Spanish compliant which makes them extremely tax efficient. We do not deal with companies based outside the EU as we are satisfied that the regulation within the EU is for the benefit of the investor. We do not have the same confidence in some other financial jurisdictions and neither do Spain.

What investment decisions do you have to make?
Although we have the facility to personalise an investment portfolio within the parameters laid down by the EU regulators, offering discretionary fund management with some of the largest and best known investment management companies, we can also use a more simple approach for those who do not require any input into the day to day investment decisions.

So what has happened over the last 5 years?
The chart below illustrates the performance of one of fund’s available to you compared to the FTSE100 and the UK Consumer Price index. The argument to stay invested when markets fall is valid when one looks at the FTSE100 roller coaster line with the increase we have seen over the last year or so since the Brexit vote. However, anyone accessing their money around the time of the vote could have seen a 25% drop in the investment values. Not so with the fund in the insurance bond.

Real cases

Real case 1 – £40,000 invested 24/07/12. £50,770 as at 14/09/17. Up 26.92% in 5 years

Real case 2 – £356,669 invested 10/09/14. £431,177 as at 14/09/17. Up 20.88% in 3 years

Real case 3 – £316,000 invested 05/04/16. £334,422 as at 14/09/17. Up 5.82% in 18 months

Real case 4 – £80,000 invested 13/07/16. £86,160 as at 14/09/17. Up 7.70% in 15 months

Real case 5 – £20,000 invested 27/01/17. £20,712 as at 14/09/17. Up 3.56% in 8 months

These growth rates are not guaranteed but are published to illustrate what has actually happened and that the percentage returns on the fund are irrespective of the amount invested.

How can they produce such consistency?
Each quarter, the insurance company estimates what the growth rate will be for the following 12 months. This rate is reviewed based on the views of the underlying management company with people situated in all parts of the globe specialising in their own particular area. In good times, the company will hold back money that it has made so that, when things are not so good, they are still able to pay a steady rate of growth to their savers.

I don´t want to take any risk
It is difficult to avoid risk. In fact it´s practically impossible. A risky investment is seen by many as something which has a good chance of failure, either in part or completely. Stocks and shares are seen as risky whilst putting money into a bank deposit account is not. It is generally known that stocks and shares can go down as well as up but some people are unaware, or simply ignore, the risk of keeping money in a perceived “safe” bank deposit. Bank accounts have limited protection against the bank going bust. Then, if it came to the situation where a bank had to be bailed out by the government, it could take months, if not years, to access your money. As already mentioned, if the account is making less than inflation, you are losing money in real terms. So a bank account is far from risk free. The fund illustrated above is rated by Financial Express as having a risk rating of 22% of that applicable to FTSE100, much further down the risk scale and in an area that many people feel comfortable with.

What are the charges?
We explain in detail the underlying costs. In my experience, far too many people commit to a contract without understanding what they have, having received little explanation of the terms and conditions. This is where we differ to most. Different companies have different ways of charging and we run through all of the charges so that you are happy with what you have. The real examples above have had charges deducted and so these are the real values. Your bank may not charge you for the 0.10% interest (less tax) they are paying you but they are making money through investment but not passing anything on to you even though you supplied the money they invest.

What do I need to do next?
Contact me and I can review your savings, investments, and pension funds. I can then explain how you could arrange these in a tax efficient way whilst giving you the opportunity to access the growth that is available, for an improved lifestyle and to cope with rising costs.