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Retiring & income in retirement

By Derek Winsland - Topics: France, Pensions, QROPS, Retirement, State Pensions After BREXIT, UK Pensions
This article is published on: 8th June 2018

08.06.18

A major part of my role as a Financial Planner involves helping clients move towards retirement and advising those in retirement about the best and most tax-efficient way of generating their income once they stop work.

One question I’m often asked is how much money I should save to enable me to retire comfortably. A good question, it depends on what constitutes a comfortable retirement for that particular person. It’s generally quite a straightforward discussion: how much do you need now, and what will change as you approach retirement (mortgages redeemed, no more school or university fees, travel expenses to and from work for instance). Factor in extra expenses for pursuing hobbies, travelling etc. and we begin to build a picture of what retirement will look like and how long the active retirement period will last for.

In the UK, a Which? survey concluded that, in the UK at least, a couple entering retirement needed £26,000 a year to live comfortably. OK, that’s the UK and not necessarily representative of life here in France, but it is a basis for opening a discussion. The next consideration is to identify what the sources of income are – likely there will be an entitlement to UK state pension, possibly some French state pension and maybe rental income form letting out the old UK home, or Gites in France.

For those people actively thinking about and planning for retirement, it is also likely there will be some private pension provision, perhaps even membership of a final salary pension from time spent working for an old employer. And then there are the savings you’ve set aside for the day when you can put down those work tools, and say “That’s it, I’ve done my bit”.

But what income can I reasonably expect those savings to generate to supplement the other sources of income. The Institute and Faculty of Actuaries have ruminated over this question (well they would, wouldn’t they! I can imagine the topic of conversation going around the dinner table at their annual conference). The conclusion they’ve come to is (not surprisingly) based on the life expectancy of the retiree. Retiring at age 55, they believe you should draw down only 3% of your capital each year to ensure that your money doesn’t run out. This then rises to 3.5% if retiring at age 65. Other financial experts believe the figures could rise to 5% per year for a 65-year-old. This then assumes that your capital is invested to generate returns greater than the rate of inflation.

The options for the individual facing an income shortfall include:

    1. Increasing your savings
    1. Decreasing your retirement income expectation
    1. Delaying retirement
    1. Exploring alternative ways of investing available capital and pensions to obtain growth greater than inflation and certainly better than bank interest

A Financial Planner can draw up a future forecast using established assumptions for inflation, rates of investment return, the most tax efficient way of drawing down or generating income, using either life expectancy tables or any other age after discussing your family mortality history with you. This will give you your ‘number’, the amount of capital you’ll need to live comfortably.

The Office for National Statistics has recently launched an online tool on its website designed to tell you what your life expectancy is. If you’re curious, click here:

Once completed this Financial Plan should be implemented to address any recommendations for re-structuring the existing assets, and thereafter reviewed yearly, updating the investment returns achieved and the impact this has on the capital, checking any changes that need to be made to the assumptions and making any amendments that you want included. Long-lost pension funds will be identified, and the expected benefits brought into the plan, and again, any issues addressed. The move is towards handing the responsibility of retirement over to the retiree, so there is not a better time to consult a fully qualified financial planner.

If you have personal or financial circumstances that you feel may benefit from a financial planning review, 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.

Taper Relief on Capital Gains from the Sale of Shares

By Derek Winsland - Topics: Captial Gains, France, ISAs, taper relief on capital gains, Tax
This article is published on: 16th November 2017

16.11.17

My colleague, Sue Regan, in her last article, gave details of a number of tax changes currently being debated in Parliament and which are expected to come into force by the end of the year. On a positive note, wealth tax (Impot de Solidarite sur la Fortune) is to be abolished, to be replaced by a tax on the value of property (Impot sur la Fortune Immobilier) or IFI. This can have real benefit to those with investments outside of property.

Less positive is the intention to abolish taper relief on capital gains from the sale of shares, which includes equity investment funds. This can have serious connotations for those investors holding investment portfolios outside of an Assurance Vie. Portfolios held within equity Individual Savings Accounts (ISA’s) in the UK, for example, will be affected. For UK residents, ISA’s represent an excellent savings and investment vehicle, with ‘income’ drawn from the ISA tax free in the hands of the investor. Growth in the investment attract no capital gains tax charge, irrespective of whether the gains are extracted or allowed to roll up within the ISA.

In the hands of a French tax resident though, ISA’s don’t enjoy any of the tax benefits UK residents take for granted. It is as if the ISA wrapper doesn’t exist. Instead, in France, taper relief is granted on gains made from equities (shares) where the holding is greater than two years. Where shares have been held for two years and up to eight years, the relief is 50%; after eight years the relief rises to 65% under the current system. Crucially, this relief also applies to collective investments where a minimum of 75% is invested in equities.

If you then factor in the fact that all gains are calculated in euros, shares and equity collectives in the UK held for a long time can be further reduced because the purchase price will be converted into euros using the exchange rate on the day of purchase. Likewise, the euro value is calculated on the day of sale. With the value of sterling currently low, the amount of any gain can therefore be further reduced if the exchange rate on the day of purchase is higher than the rate on the sale date.

All of this means that if you are resident in France, holding on to stocks and shares ISA’s in the UK, it really is time you thought about cashing them in, reinvesting the proceeds in the far more tax efficient Assurance Vie. Time really is of the essence.

If you feel you could be affected by this, or have personal or financial circumstances that you feel may benefit from a financial planning review, 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.

Will Brexit affect your plans to move to France?

By Derek Winsland - Topics: Automatic Exchange of Information, BREXIT, common reporting standards, France, Residency
This article is published on: 4th October 2017

04.10.17

The performance of the UK government’s Brexit negotiators, Theresa May included, is giving rise to concerns amongst UK businesses, EU nationals living in UK and, of course, us living and working in the EU. Sterling continues to react daily to the actions and reactions on both sides of the negotiating table, and the general uncertainty that this causes conveys itself to people’s decision-making.

Over the last 15 months or so, I have been approached by a number of prospective new clients, most of whom are asking the same questions: “How will Brexit affect our plans to move to France” and “How will Brexit impact our desire to remain in France”. The honest answer to this (at the time of writing), is no-one yet knows and until something concrete comes out of the negotiations, this will remain the situation. My own belief is that some compromise will be cobbled together to allow some continued freedom of movement in exchange for access to the single market.

What we do know is that if you have aspirations to live in France, you will become resident for tax here and there is nothing more certain than taxes (apart from death of course). As a French tax resident, there are a number of different taxes you will become subject to. This is no different to the position in UK, indeed comparisons undertaken on behalf of a number of prospective ‘movers’ to France has shown only minor differences in tax payable for those people. The proviso used though was that those people put their financial house in order before moving to, and becoming resident in, France.

My Limoux colleague, Sue Regan in her last article, pointed out the pitfalls in assuming UK-based investments would serve the same purpose in France, and that the tax treatment of those investments in UK would transfer across the Channel to France. This is not the case, in fact holding and maintaining UK investments can and do result in nasty tax shocks for those ex-pats who wrongly believe investments like ISAs would be tax exempt in France.

Also, with the introduction of Common Reporting Standards, financial information is being shared across borders, so considering oneself to be hidden from the tax-man in France, whilst holding bank accounts and investments in UK, is delusory. If you have recently received a letter from your UK bank asking you to confirm your address, this is Common Reporting Standards in action; your bank will pass the information on to HMRC who in turn will share it with their French counterparts.

It is better to acknowledge that the ways of the past will not continue to hold true and that work needs to be done if you want to live in France and this includes re-structuring assets to make them French tax-efficient. The simplest way to approach this is to invite an independent financial adviser to carry out a financial review of your circumstances. He or she will put together a report of recommendations, to ensure your move to France will not result in tax shocks further down the line. All you have to do then, of course, is act on the recommendations.

If you feel you could be affected by this, or have personal or financial circumstances that you feel may benefit from a financial planning review, 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.

I look forward to seeing you soon.

Do you know the rules around domicility?

By Derek Winsland - Topics: domiciled, Events, France, Habitual Residence, Residency
This article is published on: 1st September 2017

01.09.17

Like many in France, I took time off this month, and to while away the time, caught up on some industry articles. One such article was written by Old Mutual International that presented the results of a small survey it can conducted amongst ex-pats regarding what they believed were the rules around domicility.

It asked the respondents six questions, and the answers were sufficiently enlightening that I thought I’d share them with you.

1. British expats mistakenly believe they are no longer UK domiciled
Everyone has a domicile of origin, acquired at birth. For UK nationals, it’s possible to acquire a new domicile (a domicile of choice) by settling in a new country with the intention of living there permanently. However, it is not always guaranteed that one can lose one’s UK domiciled status and acquire a new one, as there are no fixed rules (as you would expect from HMRC) as to what is required.

Living in another country for a long time, although an important factor does not prove a new domicile has been acquired. Among the many conditions that HMRC list, it states that all links with the UK must be severed and they must have no intention of returning to the UK.

Research* shows 74% of UK expats who consider themselves no longer UK domiciled still hold assets in the UK, and 81% have not ruled out returning to the UK in the future. This means HMRC is likely to still consider them to be deemed UK domiciled.

2. British expats mistakenly believe they are only liable to UK inheritance tax (IHT) on their UK assets
As most British expats will still be deemed UK domiciled on death, it is important to understand that their worldwide assets will become subject to UK IHT. A common misconception is that just UK assets are caught. This lack of knowledge could have a profound impact on beneficiaries.

Before probate can be granted, the probate fee and any inheritance tax due on an estate must be paid. With UK IHT currently set at 40%, there could be a significant bill for beneficiaries to pay before they can access their inheritance. Setting up a life insurance policy could help ensure beneficiaries have access to cash to pay the required fees. Advisers setting up policies specifically for this purpose must ensure they place the policy in trust to enable funds to be paid out instantly without the need for probate.

Research* shows a staggering 82% of UK expats do not realise that both their UK and world-wide assets could be subject to UK IHT.

3. British expats mistakenly believe they are no longer subject to UK taxes when they leave the UK
All income and gains generated from UK assets or property continue to be subject to UK taxes. Some expats seem to think that just because they no longer live in the UK they don’t need to declare their income or capital gains from savings and investments or property held in the UK. By not declaring the correct taxes people can find they end up being investigated by HMRC, and the sanctions for non-disclosure are getting tougher.

Research* shows 11% of UK expats with UK property did not know that UK income tax may need to be paid if their property is rented out, and 27% were unaware that Capital Gains Tax may need to be paid if the property is sold.

4. British expats mistakenly believe that their spouse can sign documents on their behalf should anything happen to them
The misconception that a spouse or child or a professional will be able to manage their affairs should they become mentally incapacitated is leading people to think they don’t need a Power of Attorney (POA) in place. This could result in families being left in a vulnerable position as their loved ones will not automatically be able to step in and act on their behalf. Instead, there will be a delay whilst they apply to the Court of Protection to obtain the necessary authority. This extra complication is all avoidable by completing a lasting POA form and registering it with the Court of Protection.

Research* shows 44% of UK expats wrongly believe their spouse will be able to sign on their behalf should they become mentally incapacitated.

5. British expats unsure if their will is automatically recognised in the country they have moved to
It is wrong to assume a will or POA document is automatically recognised in the country in which they move to. Often overseas law is driven by where the person is habitually resident, and the laws of that country will apply. Therefore, people may require a UK will and POA for their UK assets and a separate one covering their assets in the country they live. The wills also need to acknowledge each other so as not to supersede each other.

Research* shows 50% of UK expats do not know if a will or POA is legally recognised in the country they have moved to.

If you feel you could be affected by this, or have personal or financial circumstances that you feel may benefit from a financial planning review, 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.

Le Tour de Finance

Le Tour de Finance, Domaine Gayda, 6th October 2017

This year’s event is now fully subscribed and we are unable to accept any more places. If you were wanting to attend, but hadn’t got round to booking, then all is not lost. It’s possible to make a personal appointment to see me in our Limoux office. Please ring either the office or me directly on my mobile.

Common Reporting Standards

By Derek Winsland - Topics: common reporting standards, Exchange of Information, France, International Bank Accounts, Le Tour de Finance, Residency
This article is published on: 27th July 2017

27.07.17

Over the last few weeks, I’ve witnessed the application of the Common Reporting Standards initiative in action. Firstly, from my bank HSBC requesting information to be transmitted to the tax authorities both here in France as well as in UK. This week, I received an email from a client who has also received a letter again from HSBC enquiring about his residency.

It’s clear that the sharing of financial information between tax authorities of different countries is now in full swing. Annual reporting by every financial institution into its own tax authority was introduced in January 2016 and I’m seeing more and more examples of this in operation. For the tax authorities, residency is the main focus – where has the individual declared residency, and where are that person’s assets held.

We’re at the stage now where that information is being studied by local tax offices and enquiry letters being sent. But what information is being shared? Overseas bank accounts are the most common example, hence HSBC and others enquiring about an account holder’s residency status. Other examples include investment bonds held overseas, ISA accounts, unit trust and investment trust portfolios, share accounts, premium bonds…. the list goes on.

With investments held outside of an insurance-based investment bond, any change of fund either through switching or closure could be liable to capital gains in the hands of the investor, so your local tax office is sure to be interested in learning about this. Income drawn from certain, non-EU jurisdiction investment bonds are viewed very differently here in France. And remember, ISAs carry no tax advantages here, so any switches, partial encashments, or sales of funds made by a UK financial adviser or investment manager could have repercussions for the investor resident in France.

If you’re tax resident in France, you are obliged to list all overseas investments and accounts on your annual tax declaration; non-disclosure can result in fines ranging from €1,500 per account up to €10,000 depending on where the account is held. These fines are also per year of non-disclosure.

Quite often we see situations where doing nothing has proved to be an expensive mistake so if ever there was a time to get your financial affairs in order, it is now before the Fisc comes calling. If you’re resident in France, your local tax office can look back through previous years as well, so long forgotten ISAs cashed in can potentially appear on its radar.

If you would like information on how best to re-organise your investments to make them tax-compliant, we are staging the latest in our series of popular Tour de Finance events in the Limoux area on Friday 6th October. Open to everyone, the event, held at Domaine Gayda in Brugairolles is now in its ninth year. Always a popular event, you are urged to order tickets well in advance. There will be a series of short presentations during the morning, culminating with lunch and an opportunity to sample the local wines. If you would like to attend, please email me for your tickets, numbers are limited, so I urge you not to delay.

Subjects covered during the morning include:
Brexit
Financial Markets
Assurance Vie
Pensions/QROPS
French Tax Issues
Currency Exchange

If you have personal or financial circumstances that you feel may benefit from a financial planning review, 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.

New Pension Transfer Rules!

By Derek Winsland - Topics: Final Salary Pension, final salary schemes, France, Pensions, QROPS, United Kingdom
This article is published on: 10th July 2017

10.07.17

Those of you who are familiar with my past articles will know I have a certain affinity with the pensions landscape; indeed, in the I’m considered a bit of an expert on the subject.

If you have read previous articles you will know that I have been quite critical of the Financial Conduct Authority’s seeming inability to keep up to date with developments in the UK pensions arena. Well up until the 21st June 2017, that is.

In a complete reversal of previous ‘guidance’, the FCA has now eventually recognised that an individual’s circumstances differ from the next person’s. Up until now, the FCA’s default position regarding any request to transfer out of a defined benefit (final salary) pension scheme has been to view them as unsuitable. In other words, the emphasis (irrespective of a pension member’s situation), has been to decline such transfer requests, primarily because the FCA says it is not in the member’s interest to do so.

The introduction of Pensions Freedom by then Pensions Minister, Steve Webb, presented the FCA with a challenge. On the one hand, here was the government releasing the constraints that pensions had been progressively bound up by from successive previous governments; whilst on the other, the FCA was continuing to protect the interests of the pensions companies, at the same time becoming increasingly more detached from the consumer, for whom it was supposed to serve.

For the last two years, the FCA has struggled with the new pensions landscape, still believing that preserved former pension benefits, even those held within schemes that are only 50% funded, should remain where they are. The Pension Protection Fund, set up to protect members’ pensions where the employer has folded, is coming under increasing strain, because it is funded by all the other occupational pension schemes. As more schemes fold, the more the remaining schemes come under pressure. Clearly, therefore, something had to be done – those self-same members, now fearing their preserved pensions weren’t as guaranteed as they had been led to believe, wanted action.

On 19th June, Steve Webb, now working for Royal London, reminded the FCA of its duties, warning it against ‘over-regulating’ DB Pension Transfers. The result? New ‘guidance’ (read ‘rules’ to us IFA’s) now focusing upon the individual member’s circumstances. Without blowing my own trumpet, I’ve been saying this ever since Pension Freedoms came in in 2015. You could have knocked me down with a feather when I read about this volte-face. At last, it is not now just about critical yields and hurdle rates, it’s about applying financial planning assumptions to individual needs. If a client has sufficient other assets to fund retirement, why leave deferred benefits in a scheme where on your death (and that of your spouse or partner), the pension is lost? Tell that to your kids……

“Johnny, you know you’re struggling to make ends meet, let alone build funds for your eventual retirement? We guess what, I’m going to leave my pension benefits in a scheme that will provide nothing for you on my death. How does that sound?”   Under Pension Freedom, you can pass unused pension funds to your children, if it is outside of a defined benefit scheme. How many parents wouldn’t want that for their children, once their own needs had been catered for?

This is not to say that the floodgates have opened; we as advisers MUST assess the needs of not only the pension member, but also the family unit. We must assume something of a nanny role, helping our clients to plan for the future, to properly identify what capital and income will be available and when. There will be circumstances where the best advice is the comparative guarantee of an occupational pension income; for those people, the advice will be to remain a member of the scheme. But for a lot of people, this new FCA guidance will be seen as empowerment to take control of one’s own financial future. Our role as financial advisers is to provide help and support along the way. Proper financial planning.

Under the radar?

By Derek Winsland - Topics: Exchange of Information, France, Offshore Disclosures Facility, Residency
This article is published on: 24th May 2017

24.05.17

The question of residency features highly in requests I receive from prospective new clients looking for advice generally. These requests generally come from people who are looking to move permanently to France. I also receive requests from people who have lived in France for some time, either on a part-time basis (before returning to the UK or elsewhere for the remainder of the year), or on a full-time basis, living ‘under the radar’, so to speak.

In French tax law, the definition of domicile fiscal can fall under personal, professional and economic conditions. To be considered resident in France for tax purposes, any ONE of the following conditions must be met:

1. Your main home is in France
2. You work in France, either on an employed or self-employed basis
3. Your centre of economic interest is in France. This can include your investments, or business interests are here

In addition, there is the commonly known means-test of 183 days in the year, which many people use as the chief determinant; like most things in France it’s not as simple as that. If you spend less than 6 months in France, but spend even less time in another country, then you can still be considered resident in France. Take the retired couple who spend their time between UK, France and Spain. If they lived in UK for 4 months, Spain 3 months and France for 5 months, they will be deemed to be resident in France because it is France where they have spent the most time during the year.

There are, of course, many different scenarios that determine residency, for instance the couple whose business is centred exclusively in UK, but live in rented property in France. All activity is in UK, yet because the couple switch on the home computer to check the company bank balance, this is construed as operating a business in France, thus definition 3 applies.

There are always grey areas, where tax residency can be in more than one country; in these cases, one hopes that a Double Taxation Treaty is in existence that would apply to ensure the person isn’t taxed twice.

What does concern me, though, are those people who have lived in France for a number of years, but not declared themselves resident. Common Reporting Standards were introduced in January 2016, whereby tax authorities from over 100 countries now share financial data between the host country and the country where the individual lives. Assuming that the individual declared him or herself non-UK resident on the grounds of moving to live in France, then any financial information (bank accounts, investments etc) will now be shared with the French tax authorities. Depending on that individual’s circumstances, they may suddenly appear on the fisc’s radar, who might just start to take an interest in them. Non-disclosure of financial information is becoming a big deal, so it is more important than ever that residency is determined and if that is in France, affairs are put in order to address any tax implications for savings and investments.

If you have personal or financial circumstances that you feel may benefit from a financial planning review, 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.

Inheritance Tax Planning

By Derek Winsland - Topics: Estate Planning, France, Inheritance Tax, Succession Planning, Tax
This article is published on: 18th April 2017

18.04.17

In my everyday dealings with prospective clients and ex-pats looking for advice generally, I’m finding myself dealing with increasingly more complex personal and family situations. From re-structuring of UK investments such as general investment accounts and Individual Savings Accounts (ISA) to make them French tax-friendly, analyzing occupational pensions to assess the suitability of transferring way from the UK and into QROPS, through to financial planning for the future, every case is varied and different, requiring bespoke advice.

One area I find particularly common is how best to address the impact French succession laws have on those of us used to the fairly flexible UK Inheritance Tax laws. In the UK, its fairly simple: you can leave everything you own to your spouse free from inheritance tax. On the surviving spouse’s subsequent demise, the first £325,000 of that person’s estate can be passed on without tax liability. Since 2007, the deceased partner’s allowance can also now be used by the surviving spouse, thereby ensuring that £650,000 of the combined estate is free from taxation. In addition, there is an additional property nil rate band that can boost the tax exemption even further. Furthermore, with the exception of the spouse, there is no discrimination in who benefits in terms of tax treatment. The tax rate in UK is 40% on the excess over the £325,000 threshold.

In France, assets passing to the spouse have also been tax free since 2007, but this is where the similarity ends in terms of potential taxation. Taking its lead from Code Napoleon, French succession laws put the children of the deceased at the forefront when determining who inherits, giving them Protected Heirs status. Who inherits, and that person’s relationship to the deceased, also determines what tax free allowance is available and following on from that what tax is payable.

Sons and daughters, both natural and adopted, can receive €100,000 each from the deceased’s estate free from tax, thereafter there is a sliding scale based on the amount inherited. But here’s the rub: step-children are not blood related, so the children’s allowance doesn’t apply to them and they fall into the category of ‘unrelated person’. As such they can only inherit €1,594 free from inheritance tax. The balance is taxed at the eye-watering rate of 60%.

Protected Heirs are entitled to receive the major share of the deceased’s estate, at the expense of the spouse, so structures need to be put in place to protect the spouse, such as wills, marriage regimes, family pacts etc. Generally, these relate to the property, but can also include more liquid assets such as bank deposits and investments.

When addressing the issue of shielding step-children from the severest level of taxation, at the same time ensuring the surviving spouse is properly looked after, one weapon in our armoury is the assurance vie, or life assurance investment bond. On the death of the bond holder, any beneficiary can inherit without discrimination. In the holder of the assurance vie was below age 70 when the policy was taken out, each beneficiary can inherit €152,500 without a tax liability. For amounts above €152,500 the tax rate is 20% or 31.25% if the amount inherited is above €700,000. This is per beneficiary and not per assurance vie. But what if I don’t want my money to pass to my children or step-children on my death, but rather to go to my spouse?

This is where it gets clever! By inserting a Demembrement Clause within the assurance vie policy, your spouse can be granted usufruit or life interest in the assets held in the policy, thereby ensuring protection to him or her.

And there’s more. By drawing capital out of the deceased’s policy, the spouse is creating a debt that will be repaid on the spouse’s subsequent death, paid for out of his or her estate, thereby further reducing the amount of any inheritance tax liability. This is what we call true financial planning, and this forms the bed-rock of what we do here in Spectrum.

If you have personal or financial circumstances that you feel may benefit from a financial planning review, 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.

When is a guarantee not a guarantee?

By Derek Winsland - Topics: Company Pension Schemes, Defined benefit pension scheme, Final Salary Pension, final salary schemes, France, Pensions, QROPS, Retirement
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 113th Le Tour de Finance event at Domaine Gayda

By Derek Winsland - Topics: BREXIT, Le Tour de Finance, Uncategorised
This article is published on: 25th October 2016

25.10.16

On Friday 7th October, 62 invited guests attended the 113th Le Tour de Finance event, once again staged in the beautiful setting of Domaine Gayda, in Brugairolles in the Aude. This is the seventh time The Spectrum IFA Group has returned to Domaine Gayda, and after the presentations guests were able to sample some of the wines produced there.

On arrival, guests were treated to coffee and pastries before listening to six presentations on a range of financial subjects including Assurance Vie, Pensions, Financial Markets and Currency Exchange and French Tax issues. The presentations were delivered by industry professionals and commenced with a presentation by Michael Lodhi CEO of The Spectrum Group who immediately drew the attention of the attendees by addressing the issue uppermost in the guests’ minds, that of the EU Referendum result and how it would impact the expat community. Michael then went on to highlight the other main theme of the day, that of the state of the UK pensions industry, scheme deficits and the options open to pension members.

Michael then made way for Jeremy Ferguson of SEB Life International who spoke about Assurance Vie, its tax advantages in France both for income and inheritance tax, and demonstrated the product’s flexibility in adapting to changes in the policy-holder’s circumstances. This is always a popular presentation, and didn’t disappoint.

Following Jeremy, we heard a presentation on the current situation in the financial markets delivered by Robert Walker from Rathbones, who shared the ‘house’ view on the impact of Brexit on the investment markets, and on the value of the pound. Of particular interest were his views on where the true value of the pound lies and the timescales before those values are likely to be restored.

Following Robert came a short presentation by George Forsyth of Prudential who presented the Prudential International Assurance Vie and how it differs from the SEB Life International contract. Majoring on the strength of Prudential’s investment funds and how this allows the returns to be smoothed out, rather than suffer the periodical fluctuations of the investment markets, George was able to convey the view that the volatility in global markets can be successfully managed without causing the investor sleepless nights.

There was a noticeable sitting up in seats when the next speaker stood up to speak – Paul Foreman from Momentum Pensions. Speaking about the developments in pensions brought about by last year’s change in legislation, it was clear this was a subject of great importance to the attendees. There is clear concern being expressed currently and this was confirmed to us in feedback received after the event. Paul delivered a highly informative presentation that inevitably raised more questions than answers, but an opportunity to ask those questions came over lunch.

Pippa Maile of Currencies Direct then delivered a typically entertaining presentation on the different transaction opportunities available through the Currencies Direct online portal. Once again this was of particular interest to the room.

Finally, guests were introduced to Rachel Thomas-Bonnet whose company Perfide Albion provides help and support in a whole range of aspects to ex-pats, ranging from help with property purchase, entering the French healthcare system and (noticeably more reluctantly) re-registering your car in France. Rachel also helps with completion of tax returns, and through her work with Notaires coupled with her legal training she has built up a reputation as the go-to person for all aspects legal. It was clear that Rachel was a popular speaker by the comments made by the attendees and the number of people who made a bee-line for Rachel over lunch.

The presentations were then wound up by Michael Lodhi who invited all to stay and enjoy the lunch provided by Domaine Gayda and to sample some of its wines.

To all of us there, it was evident that the guests had found all the presentations highly informative and of value to them. Once again, a very successful Tour de Finance.