Viewing posts from: November 2000
In for the long haul
By Susan Worthington - Topics: Investments, Mallorca, menorca, Moving to Spain, Spain
This article is published on: 4th June 2020
As a financial adviser, during lockdown I had the luxury of time to keep in touch with clients, albeit remotely.
In the first few weeks, the mission was to send out some facts and reassurance so that my clients all knew I was still there, whatever the current circumstances. But as the weeks went by, I had time to learn about how clients were reacting and whether they might feel their situation was under threat in any way. Was anything I was saying, helping them; was I missing any vital signals where help was needed?
My first experience with a major stock market crash was in 1987 and from that I learnt that the priority, when investing money, is to ensure you have a sufficient emergency reserve. Doing so will allow the upheaval to resolve itself without the desperate need to draw on investments during the most unfavourable times. Those needing income from their investments worry the most, but as long as everyone remains invested they have better potential to recover from sharp falls. March presented the toughest time.
At The Spectrum IFA Group we maintained weekly Zoom meetings with fellow advisers in Spain and from this came the concept of a questionnaire to send out, which I adopted to become The Lockdown Questionnaire.
The results were reassuring and informative, giving me the opportunity to provide additional support where it was needed. It is still ongoing as not everyone has yet responded, although have told me they will do soon.
In brief, the results so far revealed the following:
8% only, had found lockdown difficult.
70% were very comfortable talking over the phone, on video chat or email.
78% were worried about their investments but understood that sitting tight was the key.
31% only, felt that now was a good investment opportunity.
78% have saved on their spending and felt in control financially.
31% felt their priorities with money had changed through lockdown.
92% which was reassuring, had enough emergency money set aside for the short term.
100% which was an excellent result, have an up to date will.
This is evidence to me that health comes first, but knowing that their money was doing the best it could under the circumstances and having regular contact does help to give peace of mind.
There is much ongoing activity for me now to follow up with. Some more hand holding, some more reviewing of income requirements, without any need to recommend a will!
If you would like to discuss managing your money in these volatile times, don’t hesitate to contact me with the details below.
A Fundamental Reshaping of Investments
By Susan Worthington - Topics: ethical investing, Mallorca, menorca, Spain
This article is published on: 25th February 2020
Having recently attended The Spectrum IFA Group Annual Conference, I discovered we are on the brink of a fundamental reshaping of finance.
We were given presentations from the various fund managers we work with. This year the message was the same from each one and very different from the usual theme. Refreshingly so!
There was less concern or discussion about Brexit, Trump and the Trade Wars. It was more focused on a much bigger concern, which is believed to stem from customer demand, connected to our environment. A concern now and very much for the future.
So how can fund management help the environment? Do they only select successful companies where there is the best potential for growth for their investors? Here we see a fundamental change to one where the sector for good potential for growth might now be ESG Investing. This stands for Environment/Social Governance Investing generally known as environmentally friendly investing or green investments.
As my colleague, Gareth, in Italy sums it up:
Certain fund managers are adapting to the challenges and know that if their sector fails to adapt then they will likely go out of business. Consumers are being selective about who they do business with and are making choices based on how company policy sits with their personal views. Equally, investment managers have realised this trend and are also aligning their asset management styles with those of their customers, because they can see that prospective investors will choose investments based on how they match with their ethical views.
Asset managers are the largest allocators of capital in the world: investment funds, pension funds, sovereign investment funds etc and now they are starting to look at not just where they place money, but question why they do it. This could be the catalyst for real change.
Consumers and employees are the real capital of any business. People are making choices based on how businesses treat their customers and also their employees. Happy employees make for higher profits and more prosperous businesses.
Let’s do things for the future not in the future. Creating wealth without borrowing from the future.
The Spectrum IFA Group is adapting to these changes and we are currently working on a selection of ESG investment portfolios. We are mindful that there is always the danger that this trend can attract what is known as “green washing” funds, i.e. not completely compliant with ESG requirements, so we have a careful selection process. A word of warning if you seek ESG type investments: avoid anything that sounds too good to be true, that merely has a trendy sounding name and don’t invest in anything that does not have a track record. Use professionals to guide you who have the resources and research behind them.
If you would like to know more about ESG investment funds, please contact me below:
The Emotions of Investing Money
By Susan Worthington - Topics: Financial Planning, Financial Review, Investment Risk, Investments, Mallorca, menorca, Spain
This article is published on: 21st February 2018
Most days I count my blessings for having a job that I love doing. There are the odd times when it does get challenging, but when I’m helping clients all day long they are the magic cure. Being an Expat Financial Adviser giving advice on how to invest your money means it’s vital for me to get to know my clients. That involves understanding what their passions and goals are and what their fears and dislikes are too. It’s usually two things that drive investments, fear and greed, and my job is to manage these aspects. I let the experts manage the money and I take care of the emotions.
That’s not to say that I am a psychologist or psychoanalyst, but I did take advice from one while writing this to make sure I express myself as having the best interest of the client and not just voicing my opinion! If a client does not feel comfortable with advice they receive,then it must not be right. Persuading someone to do something is not in your best interest. I may have been guilty of this in the early years of my career when we were put under pressure by our management, however, at The Spectrum IFA Group we are trained differently, and age and experience have taught me that this is not the way to keep a client.
I am an investor myself so understand that the value of your money can and will go down as well as up, yet if I believe in what I recommend I can help clients when the times are unsettling. Having patience and belief in the advice you receive is paramount. If your gut instinct says that you don’t believe any part of what you’ve already done then discuss your concerns with an Adviser.
Emotions connected to your finances can relate to varying issues because each and every one of us is different. Common symptoms are: maybe you can’t sleep, you always worry about money, you are fearful about what might happen to it, you haven’t heard from your Adviser, you’ve never done this type of thing before, what happens to your money when you die, can you lose some or all of it, what if you go back to live in the UK?
When we are younger we are prepared to take more risk with our money, but as we grow older we tend to become more cautious and have concerns about whether the money will see you through. This all needs careful managing and looking after to ensure it does what you want it to.
5 Factors I take into account before making a recommendation are: what income do you have and need to live on, what assets do you own, where do you pay your taxes, what level of risk, if any, are you prepared to take and how long do you wish to plan for.
Another point to consider for living in Menorca is where is you Adviser regulated? This is important because if you have a legal problem it ideally must be dealt with in Spain. We are registered and regulated under the DGS (Correduria de Seguros). Does it work to have someone regulated in the UK when you live under the authorities of Spain? All Spectrum Advisers are regulated in the country they live and work in, they are expected to live locally and within easy reach of their clients.
3 words to say. Reassurance, Reassurance, Reassurance. To know that all is as it’s meant to be will allow you to live your life more peacefully and happily on this beautiful island.
Menorca has a special place in my heart. I used to live and still own a property here on the island and purely demand from work made living in Mallorca more practical. My opportunity now to say thank you to all my friends and clients here who keep me having to come backwards and forwards all the time!
Spectrum client event, Sant Luis, Menorca
By Susan Worthington - Topics: Events, Mallorca, menorca, Spain
This article is published on: 18th June 2017
To celebrate our continued commitment to both new and long term clients, our Balearic team organised a relaxed and fun event in Sant Luis, Menorca.
A total of 39 people attended the gathering which enabled Spectrum’s advisers time to chat with their guests and catch up in a relaxed and fun atmosphere.
The location was excellent at Bodegas Binifadet in Sant Luis. The staff were very attentive, the food really tasty and in general the venue was ideal for a relaxing afternoon. Thanks go to Andrea Collier for organising the event, to Rocío Berzosa and her team at Binifadet, to the team from Tilney Asset Management for their sponsorship and to the whole Spectrum team in Mallorca and Menorca for their support and organisation.
Will BREXIT have an effect on your Pension Plans?
By Susan Worthington - Topics: BREXIT, Defined benefit pension scheme, Final Salary Pension, final salary schemes, Mallorca, Pensions, QROPS, Spain, Uncategorised, United Kingdom
This article is published on: 20th October 2016
Brexit could have an effect on your Pension whether it is a Private Plan or Final Salary Scheme that is waiting to be paid. There are many various pension plans these are just two examples
Do you have a Private Frozen Pension in the UK?
Pensions are driven by HMRC ruling not EU Membership and a QROPS (Qualifying Recognised Overseas Pension Schemes) which allows you to transfer your pension overseas. This option may not be available in the future as there is talk that HMRC may pull the plug, make restrictions or even insert transfer tax.
Do you have a Final Salary Pension Scheme in the UK?
There have been a number of recent changes within the UK economy and UK pension world that make a review of any pension(s) essential for those living or planning to live outside the UK.
Final Salary pension schemes (also referred to as Defined Benefit schemes) have long been viewed as a gold plated route to a comfortable retirement, however there are likely to be large changes ahead in the pension industry. The key question is; will these schemes really be able to provide the promised benefits over the next 20+ years?
Why Review now?
Record high transfer values
- Gilt rates are at an all-time low. This has caused transfer values to be at an all-time high, some transfer values have increased by over 30% in the last 12 months.
- Recent examples show that very large deficits in pension schemes cause a number of problems, in particular no one wants to purchase these struggling companies as the pension deficits are too big a burden to take on
- Could the Government be forced to change the laws to allow schemes to reduce benefits? A reduction in the benefits will reduce the deficits and make the companies more attractive to purchasers
Pension Protection Fund (PPF)
- This fund has been set up to help the schemes that do get into financial trouble, two points are key. Firstly it is not guaranteed by the Government and secondly the remaining final salary schemes have to pay large premiums (a levy) to the PPF in order to fund the insolvent schemes. As more schemes fall into the PPF there are less remaining schemes that have to share the burden of this cost.
- It is likely the PPF will end up with the same problems as the final salary schemes, they won’t have the money to pay the “promises” for the pensioners
- In April 2015 unfunded Public Sector pension schemes have removed the ability for transfers, so schemes for nurses, firemen, army personnel, civil service workers etc. can no longer transfer their pensions. Now these are blocked, it will be easier to make changes to reduce the benefits and no one is able to respond by transferring out of the scheme
Autumn Statement (Budget)
- This is on 23 November 2016. Could the Government make any further changes to Pension rules? When Public sector pensions were blocked there was a small window of time to transfer, however most people couldn’t get their transfer values in time as the demand was so high. People who review their pensions now may at least have time to consider options
What could happen in the Future?
- An end to the ability to transfer out of such schemes
- Increase the Pension Age, perhaps in line with the increase of the State Pension
- Reduction of Inflation increases, (already started as many now increase by CPI instead of RPI)
- Reduction of Spouse’s benefit
- Increase of contributions from current members
- Lower starting income
Act now! Review your pensions
Susan Worthington of The Spectrum IFA Group has been giving investment advice here in Mallorca and Menorca since 1994.
If you wish to have a chat with Susan about any frozen or paid-up pension.
Contact: email@example.com or telephone 670 308987.
10 tips for managing your finances
By Susan Worthington - Topics: Mallorca, Saving, Spain, Tips, Uncategorised
This article is published on: 16th March 2016
10 great tips for managing your finances from Susan Worthington our Partner of the Spectrum IFA Group for the Balers and Mallorca.
- Keep control of your finances. It’s easy to spend more than you earn rather than earn more than you spend. One reason for this is that unless you track what your regular expenses are you can never budget. This is the vital first step to managing your money.
- Be sure to budget for rainy day money. In working out your monthly expenditure try to include a little for the emergency pot, you never know what is around the corner. Set it aside in a flexible account where you can get your hands on it in case it’s needed quickly, this is money not to be tied up in an investment of some kind.
- Keep credit card debt to a minimum. This is another vital payment to be included in your monthly expenses as it is the no.1 obstacle to getting ahead. If you have large credit card debts try to stop using the card and pay bits off each month. The amount of interest you are paying if saved, could be put to better use.
- Pay your bills on time. Bills such as your IBI and car taxes, if not paid on time, result in fines which are quite hefty and end up costing you much more than you need to pay. These annual bills are often the ones that catch us out and form part of the exercise mentioned in No.1. Try to pay them as soon as they come in.
- Review all of your insurance policies. When you think about all the different types of insurances we pay, e.g. car insurance, life assurance, home insurance, medical insurance, travel insurance, pet insurance etc. they amount to substantial sums over the year. This is where you could make a saving which might help paying off credit card debt. Speak to your insurance brokers and ask before the payments are due if you can save some money this year by looking around at alternative policies. Banks are now also offering very good deals for their customers on grouping together your insurances. Your broker will know this and I’m sure will want the best deal for you.
- Update your Will. If you own assets anywhere then you need a Will. If you own assets in Spain then a separate Spanish Will is also advisable. There were changes to Spanish Wills on August 15th last year which means that unless a certain clause is written into your Will then children may benefit before the spouse does. Caution is recommended here if you have children from a previous relationship.
- Use only legitimate financial institutions. You need to know that your money is protected, all major institutions are required to provide some level of protection. What happens to your money if the bank or investment provider fall into problems? Check the amount of protection and then spread your money to diversify any risk involved. Check also the fees that the institutions charge.
- Think and/or take advice before spending or acting. Do not rush into anything that feels uncomfortable. If it’s too good to be true then it usually is! If you are making a big decision such as buying a property or investing your savings, take advice from the experts first.
- Use the services of professional people. If you need tax advice you need an accountant, lawyer or gestor. If you need investment advice you need an expatriate financial adviser. If you need banking advice nearly all banks have a dedicated adviser. There are mortgage brokers specialising in mortgage advice and insurance brokers specialising in general insurances. Some may charge a fee for their service, however you could in the long term be better off.
- Enjoy and respect what money you have coming in. We speak to many people who fear money and as a consequence avoid the responsibilities associated with it. Money can be interesting, it can bring you things that you need and want in life, without which our life is not as enjoyable. If you feel negative about money try to turn that belief around……if you have to pay tax then that means you are earning the money to be charged it. Seeing it as a part of our daily existence, with the many positive things it can do may help to make you feel happier.
Spanish Inheritance Tax update
By Susan Worthington - Topics: Inheritance Tax, Mallorca, Spain, Tax, Uncategorised, wealth management
This article is published on: 26th November 2014
The EEC ruled in September 2014 that these discriminate non-residents.
The worldwide estate of British expatriates who are UK domiciles are liable to UK inheritance tax on death, as well as being liable to Spanish succession tax on chargeable Spanish assets, e.g. house, bank account etc.
Spanish Succession tax rates vary from 7.65% to 34%. The tax liability is subject to multipliers based on the pre-existing wealth of the recipient, which can take the highest effective rate of tax to just below 82%. Then, Inheritance Tax in the UK is payable on assets above £325,000 at a rate of 40%.
There is no Double Taxation Agreement on inheritance Tax between Spain and the UK although if tax is paid in one jurisdiction it is not usual that it has to be paid yet again. However, the news is that EEC rules state that Spain should not discriminate between resident and non-resident. This is hoped to come into force by 2016 which is favourable for residents of the Balearics.
There has not been any formal approval by Spain but proposals are to treat those non-Spanish tax residents living in the European Union (EU) or the European Economic Area (EEA) as if they lived in one of the autonomous regions of Spain where tax rates tend to be heavily discounted such as here in the Balearics. There is currently 99% reduction so the effective rate is just 1%. The region will be determined by where you have spent most time in the last five years or by where the majority of your Spanish assets are situated if you live outside Spain.
Gifts outside the EU or EEA to a Spanish resident could be subject to the rules of the autonomous region where the recipient has his/her residency.
Although the changes have not yet been formally approved, it seems some lawyers are now submitting tax returns on the basis that the qualifying non-resident will receive the tax advantages of the relevant autonomous region.
This will mean that, for example, children living outside Spain, inheriting from parents in Spain, could no longer have the much higher (generally) “National” Spanish taxes to pay. Parents may be able to gift property to their children without necessarily needing to make expensive tax avoidable arrangements.
This would be a tremendous advantage to many UK expatriates living here in Menorca. Before you die you need to consider all aspects of your tax situation. In addition to ensuring your assets can pass down easily to your beneficiaries when the time comes, your income and capital gains tax need to be checked for efficiency whilst you are alive. Little point in worrying about what happens when you die if you are left with little to pass to your beneficiaries in the end!
The details are based on The Spectrum Group’s understanding of current legislation and may be subject to change. No liability can be accepted for any change of interpretation or practice relating to any tax or legislative measure or the introduction of any new measures that may affect this information.
The Spectrum IFA Group suggest you take personal advice on how the new rules will affect you.
Residency and Tax
By Susan Worthington - Topics: France, Italy, Residency, Spain, Tax, Uncategorised, Yachting
This article is published on: 22nd October 2014
Where are you resident?
Where should you pay Tax?
Should you pay Tax?
These questions are usually as easy as “who do you bank with?” However, for some Yacht Crew, they can be as complex as “what is the meaning of life?” The problem with residency and overseas or cross-border tax is that there is nothing in black and white, most of it is a grey area.
Let’s start with the basics :
1) If you spend more than 183 days a year in a European country, you are considered a Fiscal Resident. This means that the country you are living in expects you to pay tax on your Income as well as Capital gains and possibly even Inheritance Tax in that country.
2) If you do not declare residency anywhere then you are usually expected to pay tax where you are considered domicile.
3) Domicile is one’s primary residence for tax purposes. A domicile is established via a driver’s license, voter registration and/or as being the address on record for credit cards and other bills – it could possibly be the country of birth of your father. It is not necessary that one actually lives in their listed domicile, although most people do. Because a domicile is established primarily for tax purposes, it is somewhat controversial. This is due to the fact that many foreign workers establish residences elsewhere to avoid paying taxes. Most countries will argue that you are domicile in that particular country if you were born there or plan to die/ be buried there. Domicile is an extremely complicated issue and I have outlined the very basics only.
A quick example of how complicated it can be :
Person A was born in France where his father was working at that time. However, his father was from Australia and his father’s permanent home was in Australia. The family subsequently moved to the UK for a couple of years and when Person A was 18 he got a job as a deckhand on a boat. He has worked around for a few years on the boats and never really declared residency anywhere or paid tax anywhere. His domicile = Australian.
4) Within Europe if you spend more than 90 days in a country and pay tax in that country, but spend no more than 183 in any other country, then you can pay tax in the country in which you reside for 90 days and not in another.
For example, you work on a boat but are based in Monaco for 4 months a year. You have a house in Spain where you spend 5 months a year and you spend the remaining 3 months at sea. You could then declare your residence in Monaco, as long as you rent a flat there. This is one way of keeping the tax you pay to a minimum.
There are three main taxes that most people don’t particularly like :
- Income Tax
- Capital Gains Tax
- Inheritance Tax
Now I will concentrate mainly on Spain and France as these are the biggest centres for yacht crew in Europe at the moment.
5.5% – 45%
24% – 52%
Capital Gains Tax
21% – 25 %
21% – 27%
5% – 45 %
1 % – 34 %
The level of the taxes depends largely on the amount, the relationship between the parties and your residency.
There are deductions that can be made from these amounts depending on such things as if you have dependents, allowances and, with succession tax, the relationship between the donating and receiving parties.
Property is the obvious one that can prove to sometimes fall into all of these categories.
Assets such as investments can be wrapped in an “assurance vie” or life assurance wrapper. This creates an extremely tax-efficient vehicle for you or anyone else who might be receiving the money. It gives you the option on when to pay your tax on it and how much you pay.
Some of these rules are set to change on January 1st 2015 in Spain.
The following seem to be the relevant (incl. unchanged) points for private banking clients:
- Wealth Tax and Inheritance Tax are not included in this reform. Although the government initially said they would be, changes have been postponed pending a global agreement with Spanish autonomous regions.
- Marginal income tax rates are reduced at 45% and corporate ones to 25%. However, the income threshold to reach the new marginal maximum is significantly lower (from 175,000 EUR to 60,000 EUR).
- The “dual base” approach in Income Tax is maintained: The income tax rate on Savings is reduced from 27% to 24% in 2015 and to 23% in 2016. Savings income threshold is increased from 24,000 EUR to 60,000 EUR.
- Capital gains in shares and funds held for less than one year will not be taxed at marginal income tax rate from 1 January 2015.
Source : Boletín Oficial 121/000109
- Assets acquired prior to 1994 will be now fully taxed on gains if sold after 1 January 2015, without deductions.
This article is written to the best of the understanding of the Boletín Oficial 121/000109 which was realesed to change the Ley 35/2006 and could be subject to change.
If are interested in finding out if you pay too much tax, if you need more information on residency or domicile or to find out if your assets could be more tax efficient for you, please contact your local adviser
Who can you trust with your money?
By Susan Worthington - Topics: Investments, Mallorca, Spain, Uncategorised, wealth management
This article is published on: 8th October 2014
During a recent meeting with a client we were discussing two topics; one being the continual closing down of offshore bank accounts and the other being the effect that the financial crisis has had on people and who they can trust with their finances. As they are inter-related I thought I would share my views.
Over the last few weeks one large Bank has been writing to most of their savers informing them that they need to hold a balance of at least £100,000 in their bank accounts or the account will be closed. This is part of a growing trend as banks undergo “strategic review”, resulting in many expats being forced to close their offshore accounts.
Bearing in mind that banks are paying minimal rates of interest, it seems unfair to expect someone to deposit £100,000 just for the privilege of holding a bank account when they receive next to no interest in return. On top of this, the interest is then taxable which must be declared on your “declaracion de la renta” (Spanish tax return) further reducing the true rate you receive.
There are now several insurance companies that offer Spanish Approved investment policies in which you can choose what level of risk you wish to take (low, medium or high) but where the income receives favourable tax treatment. Many people invest in banks because they feel they do not incur risk. This view is rapidly changing as a major risk to the money nowadays is inflation.
And so my client then went onto say that deciding on where to move their money is a major challenge. People don’t know who to trust these days.
A report by the Financial Times says: “Much damage has been caused by the breakdown in trust that took place in the wake of the financial crisis. Although financial advisers played little part in causing the crisis, it is clear that their relationships with customers have not escaped the fall-out”. This is a concern I respect which in turn means we as advisers must be aware. The report recently suggests the following:
i) An Adviser now needs to gain a truly granular understanding of the client’s needs and expectations. To really regain trust, advisers will need to gain much more granular insight such as client’s goals, aspirations, investment behaviour and expectation of service.
ii) Guiding and coaching will be important new skills for many advisers and asset managers to learn. Advisers should seek a more holistic perspective on the investor.
iii) Communication is vital but it needs to be tailored and relevant. Clients do not want to be bombarded with generic information. They want insight that they feel is relevant to their situation and demonstrates to them that their personal needs are being met.
The world of a Financial Adviser never stays the same, it is a constantly changing world which is what makes my work both interesting and very satisfying.
Office Opening in Bendinat, Palma
By Susan Worthington - Topics: Spain, Spectrum-IFA Group, Uncategorised
This article is published on: 20th November 2013
Susan and Tom Worthington of the Spectrum IFA Group (Independent Financial Advisers) held their first Coffee Morning on Wednesday 13th November at their new office in Bendinat.
This event was an informal “open door” with coffee, organic croissants from Natura Club and even bucks fizz for those who felt like it. The crowd that attended was a mix of young and older guests, proving that financial advice is not only for those with larger sums of money but for everyone out there who wish to plan ahead.
Whether it be for someone young on their first job wishing to start saving for a house, a young family wanting to save for their kid’s education, or people who have already accumulated capital and wish to invest for growth or income in retirement they can offer tailor made advice. The idea was to provide people with an insight into the role of a Financial Adviser. They are often asked the question, “what exactly is it that you do.” The company prefer a soft approach to helping new clients, taking their time to fully understand what people are aiming to achieve.
There have been complaints recently about companies cold calling people in Mallorca with aggressive sales techniques, giving a bad name to the financial advising industry. Susan Worthington has described her approach as “a soft approach to helping new clients” and Tom added “we take our time to get to know the client so that we can give the best bespoke advice possible for that client.” They explained they are committed to providing clients with a copy of the Spectrum IFA Group Client Charter outlining their commitment to clients on their first meeting, this also highlights what you can expect from the Spectrum IFA Group.
The Spectrum IFA Group office in Mallorca is located in Plaza Bendinat while the Head Office is based in Barcelona, with an ever increasing amount of offices spread across Europe.
The Advisers here in Spain are regulated under the Correduria de Seguros. If you have unfortunately missed the event, not too much to worry about as there will be more Coffee Mornings taking place throughout the year. You can also call them on 971 69 62 92 to make an appointment at a time of your convenience.