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Understanding How Risk Affects Your Portfolio

By Emeka Ajogbe - Topics: Belgium, Investment Risk, Investments, wealth management
This article is published on: 11th June 2019

11.06.19

A crucial step to achieving long term financial security is recognising the importance of (and the relationship between) investment risk and return. In practice, this means implementing an investment strategy which matches your personal objectives and risk profile.

When I am speaking to clients about investing for the first time, they generally fall into two categories:

  • The Risk Averse
  • The Not So Risk Averse

Normally, within the first two to three years, one category changes their mind and changes to the other. Can you guess which one?

If you replied the risk averse becoming the not so risk averse, you would be right. This usually stems from clients becoming more comfortable with the idea of investing and the fact that taking risk can, when understood and applied properly, have a staggeringly positive effect on your portfolio.

There are many different reasons as to why people invest and no two people will have exactly the same objectives. Risk is a necessary and constant feature of investing – share prices fall, economic and political conditions fluctuate and companies can become insolvent. Therefore, understanding your risk profile is an important consideration before you actually invest.

Your risk profile is the relationship between your investment objective, risk tolerance and capacity for loss. As a result, you should be aware of your ability and willingness to accept risk and what level of risk might be required to meet your investment goals.

Investment profiles broadly fall into one of the following three categories:

Low Risk Profile
People with a low risk profile wish to preserve their capital and understand that there is very little scope for significant capital growth. These portfolios are heavily weighted to investing in cash and bonds.

Medium Risk Profile
People with a medium risk profile understand that to achieve long term capital growth, some degree of investment risk is necessary. Portfolios for this category of investor are usually balanced between cash, bonds and shares (equities)/equity funds, with perhaps some exposure to property as well.

High Risk Profile
People with a high risk profile are those who are prepared to accept the possibilty of a significant drop in their portfolio values in order to maximise long term investment returns. Higher risk portfolios have a far greater weighting towards equities/equity funds and less exposure to bonds and cash.

Different kinds of investment carry different levels of risk:

Cash
Cash or savings accounts are often regarded as ‘low risk’, yet, as the credit crisis of 2007 – 2008 showed, they are not ‘risk free’. Inflation will also reduce the value of cash savings if it is higher than the rate of interest being earned. At the time of writing, inflation in Belgium is just above 2% and the interest rate is 0%, which means that you are effectively paying your bank to hold your cash savings.

Bonds
Bonds or fixed interest securities are popular with many investors. If you invest in these instruments, you are essentially lending money to the issuer of the bond; usually a company or a government. In return, the issuer pays interest at regular intervals until the maturity date. The obvious benefit to the investor is regular income. However, there is a risk that the issuer may not be able to maintain interest payments and the capital value of the bond can fluctuate.

Shares
Although past performance is not a guide to future returns, historically the best long term investment performance is produced by equities or equity funds. The increased level of risk associated with equities is directly linked to the higher returns typically available from this type of asset.

The price of a company’s shares trading on a stock market is a reflection of the company’s value as influenced by the demand (or lack thereof) from investors. Essentially, when you invest in a company you are buying part of that company and hence able to share in its profits. The converse is also true, so you could be exposed to operating losses and a fall in the company’s share price. The risks, therefore, can be high, especially if you own shares in only one or a handful of companies. Equity funds, run by professional managers and which usually invest in a range of companies, are a means of avoiding such concentrated risk.

TYPES OF INVESTMENT RISKS

There are several types of investment risk that the you can be exposed to if and when you decide to invest, and you should be aware of the possible effect on your portfolio before you start:

Market Risk
Also known as systematic risk, it means that the overall performance of financial markets directly affects the returns from specific shares/equites. Therefore, the value of your shares may go up or down in response to changes in market conditions. The underlying reason for a change in market direction might include a political event, such as Brexit, government policy (consider current US-China trade tensions) or a natural disaster.

Unsystematic Risk
This refers to the uncertainty in a company or industry investment, and unlike market risk, unsystematic risk applies to only a small number of assets. For example, a change in management, an organisation making a product recall, a change in regulation that could negatively affect a organisation’s sales, or even a newcomer to market with the ability to take away market share from the organisation you are investing in.

Systemic Risk
This is the possibility that an event at company level has the potential to cause severe instability or collapse to an entire industry of economy. It was a major contributor to the financial crisis of 2007 – 2008. Think back and you will remember the phrase that Company X ‘was too big to fail’. If it collapsed, then other companies in the industry, or the economy itself, could fail too.

Currency Risk
Investment options include shares/equities in a range of currencies. Changes in exchange rates can result in unpredictable gains and losses when foreign investments are converted from the foreign currency back into your base currency, from US dollars into Euros for example.

Portfolio Construction Risk
This is the possibility that, in constructing a portfolio, you have an inappropriate income/growth split, or that you fail to monitor and manage the portfolio in line with your investment objectives. There is also a risk that you select assets that are inconsistent with your risk profile.

Interest Rate Risk
Interest rate risk is the possibility that an investment held will decline in value as a direct result of changes in interest rates. For example, bond prices are usually negatively affected by interest rate rises.

Concentration Risk
This is the possibility that you over-invest in a particular asset, sector, industry or region, which removes valuable diversifaction from your portfolio.

Opportunity Risk
This is the risk of being ‘under-exposed’ to other types of investments that could potentially deliver better returns.

Whether you are investing on a regular basis or have invested a lump sum, it is imperative to understand how risk, or your attitude to risk, can fundamentally affect the potential growth of your investment.

The Spectrum IFA Group: A corporate partner, a generous friend

By Spectrum IFA - Topics: Belgium, corporate responsibility, France, Italy, spain, Spectrum-IFA Group, Switzerland
This article is published on: 16th May 2019

16.05.19

As a small NGO, Street Child EU is always on the lookout to build relationships with corporate partners as a means of strengthening our long-term fundraising ambitions. We are always grateful when, after approaching an organisation, they take the time to contemplate our vision and give consideration for the potential benefits of our projects. Yet, even with our proven track-record, this is a competitive industry, and securing regular funding is a painstaking and uncertain process. Thankfully, every so often, we encounter a corporate organisation that immediately identifies with our philosophy and subsequently demonstrates an admirable commitment to transforming our ambitions into reality – The Spectrum IFA Group is one such case.

Over the years, this Financial Services Organisation, has shown an unwavering dedication to providing hope to some of the world’s most marginalised groups and disadvantaged children, their donations to Street Child thus far reached 14,000 € . Street Child’s relationship with The Spectrum IFA Group stretches back to 2016, when they provided us with a generous donation for our Girls Speak Out programme. This project was set in the difficult context of post-ebola Sierra Leone and Liberia. Our mission aimed to support at least 20,000 girls to access and sustainably remain in quality education. When The Spectrum IFA Group provided us with 3,750 € we could immediately family business grants for the Street Child team in the capital of Sierra Leone, central Freetown. This meant that 65 individual caregivers were given the means to protect and nurture the vulnerable children in their care. The grant also enabled an extra 65 girls and 65 of their siblings to attend school – totalling 130 children for whom education had previously been out of reach. Moreover, the donation has had a wider impact of providing an additional 195 family members with access to an increased income. Overall, this has been a great source of optimism in the community, wedging open a door of opportunity for future generations of children in Freetown.

In 2017, The Spectrum IFA Group once again willingly answered Street Child’s call to action by providing support for our Breaking the Bonds Project in Nepal. Street Child was implementing an ambitious plan to reverse the effects that decades of discrimination have inflicted upon the Musahar community. With a donation of 5,000 € we made great strides in our efforts to free Musahars from bonded labour and disrupt this cycle of poverty. The donation has enabled 27 Musahar girls to complete our livelihoods support program which, through a careful combination of business skills training and life skills workshops, has given these Musuhars the resources and skills needed to propel them towards economic independence. In 2018, The Spectrum IFA Group reiterated their support for the Musahar community by donating an extra 3,000 € to the cause.

This organisation has always been interested in receiving project updates from the field, and we have always happy to oblige with photographs and case studies. They have kindly used these materials to show off during presentations at company events, encouraging even more donations by The Spectrum IFA Group’s staff. It is important for us that our corporate partners show off the projects they have funded with this kind of pride. It is important that corporate organisations engage with NGOs out of a genuine interest in social progress and The Spectrum IFA Group clearly does so.

All to often corporate partnerships cannot stand the test of time, but the relationship between The Spectrum IFA Group and Street Child is strong and looks set to stay. We have already shared positive initial conversations in relation to our new project in Afghanistan and furthermore, an extra 2000 € donation already indicated for a new Musahar project. We are tremendously grateful for the trust and support The Spectrum IFA Group has continuously offered us. Our experience with The Spectrum IFA Group is a testament to the fact that the NGOs and Corporate organisations can positively bridge the gap between these differing industries in order to pursue a common goal.

1

Soti, a Musahar in Nepal has benefitted from business skills training to establish a steady income for herself and her children.

2

In Central Freetown, Sierra Leone, Aminata been supported through the Girls Speak Out programme. She can now attend School regularly and has aspirations to one day become a teacher

*Note: The names of individuals have been changed to protect their privacy and identity

Investing – Where do I start?

By Emeka Ajogbe - Topics: Belgium, Investments, wealth management
This article is published on: 22nd March 2019

22.03.19

Receiving a lump sum payment can be exciting, as it is not often that we have the opportunity to spend or invest a large amount of money at one time. However, if you are investing for the first time, it can be an intimidating step to take. After all, not everyone knows the difference between a share, a bond or a fund and the financial markets can seem like running a gauntlet if you do not know what you are doing.

Investing sensibly in stock-markets, rather than saving at the bank (particularly nowadays when you would be lucky to find interest rates above 1%), is an important means of achieving financial security, and, particularly over the long-term, returns are typically far higher than is achievable from holding cash.

That’s not to say that it comes without risks. Indeed, every fund or investment comes with a disclaimer that past performance is no guarantee of future returns, and this statement is indeed true. However, past results can be useful when reviewing how the fund or investment performed during a financial crisis or when the markets were buoyant.

MY CURRENT FINANCIAL SITUATION
Before you invest, it is imperative to first assess your overall financial stability. It is not usually appropriate to invest if you are in debt, for instance. It is recommended that you undertake a review of your current financial situation with a financial professional. This should include looking at your household’s current net income, expenditure and any debt (it is advisable to pay off debts such a credit card balances before investing as the interest rates for borrowing are likely to be higher than the returns you could achieve by investing). As investing should be a medium to long-term strategy, it is also advisable that you have an emergency or ‘rainy day’ fund that you can use should you need it. As a general rule of thumb, you should have at least six months’ expenditure set aside for immediate access.

HOW AND WHERE SHOULD I INVEST?
Once we have reviewed your financial situation, the next step is to consider how and where to invest.

There are two schools of thought when it comes to how to invest. Either take the plunge and invest the entire sum at once, or drip the lump sum in on a phased basis until it is all invested. Investing the money all at once will give you the best chance of benefitting from compound returns. However, if the markets drop significantly soon after you have invested, you may regret it, at least for a while. Drip feeding a lump sum by splitting it into smaller amounts is called unit cost averaging, so-called because you are trickling in the money over time and averaging the ‘price’ at which you buy your chosen investment(s). Depending on who you speak to, you will be advised to proceed one way or the other, or perhaps a combination of both. It also depends on how much you are investing. It is unlikely that any amount under €100,000 would be invested on a phased basis.

ADVANTAGES OF INVESTING THE ENTIRE LUMP SUM
Despite the risk that accompanies investing the whole lump sum in one go, research has demonstrated that the majority of the time, ‘going all in’ will outperform unit cost averaging. This is because it exposes you to the markets sooner, giving you more time to take advantage of compound returns. Research by a global leader in fund management, Vanguard, showed using historical returns, and a hypothetical portfolio that consisted of 60% stocks and 40% bonds, that in the UK, US and Australia, going all in usually outperformed the unit cost averaging strategy. There were only a few short-term periods during the deepest 12 month downturns where this was not the case.

Historically, markets have increased in value over time (which is great for growing wealth and making money) and Vanguard’s research showed that the lump sum strategy generated returns on average 2.39% higher than with drip feeding an investment in over twelve months. That does not sound like much, but when you take compounding into account, after just ten years the difference is quite staggering.

The table below illustrates how global markets have performed historically. As you can see, the positive periods far outweigh the negative both in performance and duration.

SOURCE: GFD, BLOOMBERG, GOLDMAN SACHS GLOBAL INVESTMENT RESEARCH

Markets typically trend upwards, so in most cases, if you were to wait and contribute using a unit cost averaging strategy, the markets will rise before you can invest everything. This means that you will be buying at a higher cost and attaining lower returns.

DRIP FEEDING MAY BE APPROPRIATE FOR SOME INVESTORS
Behavioural psychologists have long known that, for most people, the pain of losing money hurts more than the pleasure of making money when it comes to investing. This is clearly seen when markets are down and people tend to panic into selling, instead of waiting out the downturn.

Let’s say that you invested €100,000 and the next day, or week, your valuation dropped by 10%. What would your reaction be? Would you remain invested or take it all out as soon as possible? Someone who is risk averse or anxious about investing might prefer to invest via the drip in strategy to reduce any emotional discomfort that may arise from market volatility.

BRANCH 23

In Belgium, you have the opportunity to invest via what are known as Branch 21 and Branch 23 products. With Branch 21, you benefit from capital protection but usually a low return. With Branch 23, your capital can fluctuate in value but the prospects for growth are far greater than with Branch 21. Branch 23 is particularly tax efficient as you will not pay withholding tax on your returns, whereas there is withholding tax payable on interest from bank deposits, Branch 21 returns and on most directly-held mutual funds.

For more information on Branch 23 and its benefits, please click here

BRANCH 23 – Tax Efficient Investment In Belgium

By Emeka Ajogbe - Topics: Belgium, Branch 23 investments, Investments, wealth management
This article is published on: 11th February 2019

11.02.19

While you are living in Belgium, you have a number of valuable investment options available to you. If you wish to maximise tax efficiency, Branch 21 or Branch 23 products are very attractive. These are life insurance products widely used in Belgium for saving and investment. While Branch 21 can provide security through guaranteed returns, Branch 23 offers access to a wide range of assets which can provide you with excellent long-term capital growth.

Branch 21 vs Branch 23
Branch 21 products provide the investor with a guaranteed return (at the time of writing, between 0.1% and 1%), with a possible bonus. However, the bonus is not guaranteed and is dependent on the insurer’s terms and conditions. This solution is popular as a pension strategy, but crucially the effect of inflation should always be taken into account when calculating the real rate of return.

By taking out a Branch 21 policy, you qualify for tax relief, which can mean a tax saving of up to 30% on the amounts invested. Currently you can invest up to €980 per year and receive tax relief on it. You can invest more, up to €2,350 per year, in the long-term savings system.

A Branch 21 policy can have a fixed term of, say, ten years, or it can be open-ended. An open-ended policy ends when the policy is surrendered, or on the death of the life assured. You are also able to take out additional guarantees, such as death or disability cover. Note that as this is a life insurance policy, there is a 2% tax on premiums unless it is a pension savings insurance policy.

If Branch 21 is the no-frills option, then its sibling, Branch 23, is the all singing, all dancing alternative that offers broader investment scope and the prospect of higher returns (with of course the increased risk that comes with foregoing a guaranteed yield). A Branch 23 policy can invest in a wide range of assets including:

1. International, multi-asset mutual funds
2. Discretionarily managed portfolios
3. Active or passive investments

Importantly, there is no maximum investment in a Branch 23 product, and for larger amounts you can also access personalised, discretionary investment management.

Returns will vary, depending on market conditions, your attitude to risk and the length of time you remain invested. With the help of a financial professional, you have the opportunity to design a portfolio to suit your personal circumstances, maximising potential returns whilst managing and understanding the principles of investment risk and reward.

The time horizon is key here ie. how long before you envisage needing access to your money. You should not be investing in a portfolio like this unless you have a time horizon of at least 5 years.

Tax efficient investment
As mentioned previously, these solutions are very tax efficient. A 2% tax is payable on premiums if it is not a pension savings insurance policy, but in addition to up to 30% tax relief enjoyed by Branch 21 investors, you will not have to pay withholding tax (based on a notional return of 4.75%) if you leave your funds invested for at least eight years. If you did not received a tax benefit on the premiums, then there is no tax to pay on the money that has accumulated.

With Branch 23, you still pay 2% on your premiums (like Branch 21), but you do not pay a withholding tax on your investments unless it has additional performance guarantees (for example, from structured products). In that case, the withholding tax will then be calculated on the actual return and not a notional 4.75%.

Other than that, there is no tax to pay on the final amount, or on any withdrawals.

Furthermore, these products can also be very useful when it comes to estate planning, since the beneficiary and the life assured do not necessarily have to be the same person. Let’s walk through an example: a parent wishes to gift a substantial amount of money to their child. The child can be designated as the beneficiary of the policy and the parent as the life assured. At the time of the parent’s death, no inheritance tax is due if the parent passes away at least three years after gifting the sum of money to the child (the beneficiary). This is a straightforward and reliable way of ensuring that your wealth is passed on to the people you care most about, without them having to pay inheritance tax on the bequest.

Additional benefits
On top of tax efficiency, estate planning opportunities and the freedom to invest in a wide range of international, multi-asset funds, if you have existing investments these can also be transferred into your Branch 23 policy, with flexible access when you need it.

How Expats Can Consolidate Their UK Pensions

By Craig Welsh - Topics: Belgium, Uncategorised
This article is published on: 8th February 2019

08.02.19

Very often we are contacted by expats who have several different pension schemes, and usually they are scattered around different countries. Of course, in an ideal world pensions would be MUCH easier to keep track of, but unfortunately efforts to ‘harmonise’ pensions across the EU haven’t made much headway. Pensions are inherently linked to the taxation system of that particular country (because you usually get tax relief on the contributions you make) and so it can be very difficult to consolidate them or even move your ex-employer’s scheme to your new company scheme.

The good news is that this CAN be done with UK pensions. So, if you are an expat who has previously worked in the UK, you can consolidate them all into one pot. That ‘pot’ can be either be left in the UK, using what is known as an ‘International SIPP’, or taken out of the UK using a QROPS (Qualifying Recognised Overseas Pension Scheme).

Both the SIPP and the QROPS route can offer excellent flexibility when it comes to taking benefits, as well as very favourable estate planning opportunities (being able to pass on the full value of the ‘pot’ upon death, for example). More on that later.

BUT!
There’s a but, of course. It’s not suitable for everyone and it depends on a host of different factors. Moving any pension requires regulated advice from suitably qualified and licensed advisers. There is a proper process to go through, a process which is designed to ensure that you only transfer if it is clearly in your best interests to do so. Indeed, if you are considering moving a defined benefit (final salary) pension scheme then extra care should be taken as you will be giving up a guaranteed income, and you may find that you will need advice from two advisory firms. The regulated process is there for your protection!

Everyone’s situation is different of course, and a licensed advisory firm will look at your financial situation as a whole. But here are some general rules of thumb;

A QROPS may be suitable for you if all of the following applies to you;

  • You have UK pension schemes with a total transfer value of over £100,000
  • You have left the UK and do not intend to return
  • You live in the EEA (European Economic Area) and you don’t intend to leave in the next 5 years*

*An OTC (Overseas Tax Charge) was introduced in 2017 which means a 25% tax charge would be applied to a transfer unless both the new pension scheme AND the pension scheme member are based in the EEA (or both are in the same country).

An International SIPP may be suitable for you if all of the following applies to you;

  • You have UK pension schemes with a total transfer value of over £100,000
  • You have left the UK but there is a chance you will return
  • You are unlikely to be affected by the LifeTime Allowance (LTA)** of £1,030,000. If this is likely to be an issue for you, QROPS should be considered

**the LTA is the overall limit of tax-privileged pension funds you can accrue in the UK, before a Lifetime Allowance tax charge applies.

What are the benefits of consolidating?
What next? As I said before, transferring a pension requires regulated advice from suitably qualified and licensed advisers, and a full assessment needs to be carried out. If it is established that a transfer is indeed in your best interests, what can a QROPS or International SIPP offer you?

Well, both can provide you with;

    • Flexi-Access. From the age of 55, a 25% lump sum (in some cases 30%) is available (tax-free in the UK but take care as it may be taxable in your country of residence). Thereafter you have the option of flexible drawdown (taxable income). This means you choose when you start taking your income, and you can vary how much you want to take

For those with defined benefit / final salary pensions, this can mean turning the promise of a fixed income for life into a large pot of capital you can access flexibly.

    • Control of the Investment Pot. You are not giving up your savings for an annuity; the ‘pot’ is invested, and you can control how it is managed, according to your risk profile
    • Currency Choice. Even with the International SIPP option, you can change the currency of your assets from Sterling to Euro. We had clients who took advantage of this a few years ago when the rate was €1.39 to £1, and now they’re pretty glad they did!
    • Estate Planning. The pot can be passed on to your beneficiaries on death. With a QROPS the whole pot can be passed on free of tax, while the SIPP (as it is still a UK product) will be taxed at the recipient’s marginal rate only IF the deceased was aged over 75

This can be a real game-changer if you have a large defined benefit / final salary scheme, which typically offers a spouse’s pension of 50% on the death of the member. For example, I have seen many cases where it meant turning a guaranteed income for the surviving spouse of £10,000 per annum into a potential lump sum of over £500,000. Tough choice!

  • Lifetime Allowance. In the UK, pension savings of over GBP 1,030,000 are taxed at either 25% or 55%. Once a QROPS has been used however, the LTA no longer applies. So, if you are anywhere close to the LTA, a QROPS should be considered

Elephant in the Room
I have deliberately not mentioned the B-word; Brexit! That’s because at the time of writing, with only 50 days until the UK is due to leave the EU, we are still no clearer as to whether the UK will leave with a deal, without a deal, or will leave at all.

The current opportunities for expats to consolidate their UK pensions may well be at risk depending on the outcome of Brexit. The rules could be changed; we just don’t know. So, it’s advisable to act now before any doors are closed.

At Spectrum we offer a free initial analysis of your UK pensions by our highly qualified advisory team, as well as our ongoing advice on portfolio management and the various retirement options. You can read some feedback from existing clients here

New QROPS tax charge for 2017 – Will this change after BREXIT?

By Spectrum IFA - Topics: Belgium, BREXIT, France, Italy, Luxembourg, Netherlands, pension transfer, Pensions, Portugal, QROPS, Retirement, spain, Switzerland, United Kingdom
This article is published on: 20th April 2018

20.04.18

In the Spring 2017 Budget, the UK government announced its intention to introduce a new 25% Overseas Transfer Charge (OTC) on QROPS transfers taking place on or after 9th March 2017. The HMRC Guidance indicates that the OTC will not be applied in the following situations:

  • the QROPS is in the European Union (EU) or EEA and the member is also resident in an EU or EEA country (not necessarily the same EU or EEA country);
  • the QROPS and the member is in the same country; or
  • the QROPS is an employer sponsored occupational pension scheme, overseas public service pension scheme or a pension scheme established by an International Organisation (for example, the United Nations, the EU, i.e. not just a multinational company), and the member is an employee of the entity to which the benefits are transferred to its pension scheme.

It is also intended that the above provisions will apply to transfers from one QROPS (or former QROPS) to another, if this is within five full tax years from the date of the original transfer of benefits from the UK pension scheme to the first QROPS arrangement.

Nevertheless, it is clear that taking professional regulated advice is essential. This includes if you have already transferred benefits to a QROPS and you are planning to move to another country of residence.

It is important to explore your options now while you still have the chance as who knows what changes will come with BREXIT. Contact you’re local adviser for a FREE consultation and to discuss your personal options

How Do I Find My Pension?

By Emeka Ajogbe - Topics: Belgium, Pensions, Retirement, UK Pensions
This article is published on: 19th April 2018

19.04.18

I have been asked this question, more than once. Some clients are embarrassed to ask. Others have simply lost sight of their pension for one reason or another and have no idea how to track it (or them) down.

Why am I telling you this? Well, recently the UK Government announced that there is over £400 million of lost pensions sitting with various pension and insurance companies in the UK – left behind by former employees who have either moved abroad, are unaware that they had a pension (it’s more common than you would think), or simply have not kept track of their pension. In fact, figures show that four out of five people will lose track of at least one pension over the course of a lifetime.

How can this happen?
It is surprisingly easy for people to lose track of their pension(s). Firstly, because people frequently move around for work. As the former Minister for Pensions, Baroness Ros Altmann said:

“People have had on average 11 jobs during their working life which can mean they have as many work place pensions to keep track of…”

That’s a lot of paperwork to keep on top of and to be fair, most people will only really think of their pensions when they are close to retirement. Which brings me to the second point.

We can and do lose contact with the companies which administer our pensions. The most common reason for this is that pension and insurance companies have merged, and hence brand names have disappeared. For example, a company called Phoenix Life owns more than 100 old pension funds. Its list includes schemes from Royal & Sun Alliance, Scottish Mutual, Alba Life, Pearl Assurance, Britannia Life and Scottish Provident. This invariably leads to a lot of frustrated people looking for their money. It will perhaps surprise you that neither the Association of British Insurers nor the Financial Conduct Authority have a comprehensive list of which company owns which funds.

OK, how can I track down my pension?
Glad you asked. We can help with that, of course. We would need as much information from you as possible which, depending on the type of pension, would include:

Personal Pension

  • The name and address of the pension scheme (you may find that this has changed)
  • The bank, building society or insurance company that recommended or sold the scheme
  • Policy/NI Number

Work Pension

  • The company you worked for and if they have changed names/address since you left
  • Dates you worked there
  • When you started contributing to the scheme and when you finished
  • Employee/NI number

Obviously, the more information that you can provide, the easier it will be to locate your money. However, we will work with what you’ve got to explore all possible options.

Some companies are more efficient and responsive than others when it comes to handling enquiries on historic pensions, even when the original policy documentation is available. It can take years to locate and recover lost funds. You can fight the battle yourself; or we can pursue on your behalf until we get a satisfactory outcome.

Another reason to review your work pension(s) is that transfer values for defined benefit, or final salary, schemes are at record highs. Depending on the company, valuations are higher than most people anticipate. For example, a pension projected to pay £8,000 per year could have a transfer value of over £285,000, well in excess the average house value in the UK!

I’ve got my pension(s). What next?
Depending on your age and circumstances, transferring an existing pension into a new scheme may be beneficial, including if you have more than one pension. Consolidating existing arrangements removes the need to monitor numerous pensions and, perhaps more importantly, allows you to optimise returns from a single, personalised investment strategy, often with greater flexibility over the timing and amount of payments and in your preferred currency.

Ahead of any potential transfer, the first step is to determine whether a transfer is in your best interests. A responsible adviser will always complete a detailed and objective review of your current position and plans. A transfer may not be appropriate, for a variety of reasons – for example if it means the loss of valuable guaranteed benefits – so it is essential to consult only a suitably authorised, qualified and experienced adviser. A proper assessment will enable you to make an informed decision on whether a transfer is best for you.

If you do proceed with a transfer, as part of the exercise you should also expect ongoing advice on matters such as investment performance and outlook, together with guidance on the suitability of the scheme following, or ahead of, a change in your circumstances.

For help with locating and reviewing your UK pension(s), please contact me either by email emeka.ajogbe@spectrum-ifa.com or phone: +32 494 90 71 72.

The European Commission Pension Scheme

By Emeka Ajogbe - Topics: Belgium, EU Pension Transfer, european commission pension scheme, European Institutions Pension Scheme, European Union Pension Scheme
This article is published on: 8th February 2018

08.02.18

There are many benefits to working for European Institutions; the opportunity to be involved in policy making – changing the lives of millions, the opportunity to be integral in shaping the future of Europe and the opportunity to travel. This does not include the generous benefits; such as the good salaries (though those have been coming down in recent years), the opportunity to send your child or children to the European School of Brussels (either heavily subsidised, or free), and, of course, the opportunity to become a member of the gilt edged, well-funded, European Commission Pension Scheme.

The European Commission Pension Scheme is what is known as a defined benefit/final salary scheme. This means that when you retire, the organisation guarantees you a monthly payment (or defined benefit), every month of every year of your retirement, until you die. When you pass away, your partner will receive a reduced monthly payment, known as a Survivor’s Pension for every month, of every year that they are alive, until they die. As you can imagine, this is an extremely good scheme to be involved in, as when you retire, you will receive up to a maximum of 70% of your final basic salary, for the rest of your life, and your partner will receive up to a maximum of 60% of your final basic salary until they die.

The issue is, the European Commission Pension Scheme is not just given to anyone who works there; you have to qualify for it. This means that you must work there for at least ten years before you are eligible. The good thing is that this does not have to be consecutive. You can leave and return. Contributions are deducted from yourself and the EU, and a lump sum is collected that will form the basis for your eventual pension.

However, what happens if you leave before the ten years? Does the money just disappear? Well, no. You can take the lump sum with you and use it for whatever you like, as long as it is a pension. The pension must meet stringent EC guidelines before you can transfer it; see what I mean here: www.spectrum-ifa.com/eu-pension-transfer-eu-institutions-eur-money/

Having worked here for a number of years, I have accumulated knowledge and experience on this matter and can explain to you how your pension works, and help you transfer it should you need to. Contact me below for either query.

Brussels Presentation – Should I transfer my pension out of the UK, or not?

By Emeka Ajogbe - Topics: Belgium, BREXIT, EU Pension Transfer, United Kingdom
This article is published on: 16th January 2018

16.01.18

Brexit.
A word that exploded onto the British lexicon almost three years ago and has refused to dissipate. Indeed, instead of disappearing into the shadows and reappearing every time the ruling party wishes to dangle a carrot (or stick) in front of the populace, it has remained in full view without a day or week going by without it being mentioned on the news, by the watercooler, at home amongst family, or debated amongst friends and experts alike.

What does it mean? To some, it is wrenching back sovereignty from the EU Overlords, to others, it is an unmitigated mistake. To some, it is the taking back control of the British borders and stemming the tide of immigrants, to others, it is an unmitigated mistake. What is sure, is that it means that the UK voted to leave the EU next March and the EU28 will become EU27.

Whilst the politicians discuss the terms on which they will work together in the future and untangle the ties of the past, what does it mean for you?

If you have worked in the UK and have a pension (or more) there, then the lack of clarity and swirling uncertainty surrounding Brexit undoubtedly has you concerned about your money; fortunately, we at The Spectrum IFA Group have a solution for you.

On Wednesday 7th February, we have invited leading industry experts to discuss the potential implications of Brexit on your money and more specifically any pensions that you have in the UK. This is a must attend event for anyone who has worked and has a pension in the UK. Our experts will discuss likely scenarios and provide solutions for your pension concerns and we will also have a local Belgian Tax Expert who will talk about the tax treatment of UK Pensions here. The evening will end with finger food and drinks and an opportunity to meet and greet our experts, advisers, and attendees.

Click below to confirm your attendance, and we look forward to meeting you at the Renaissance Hotel.

Yes, I would like to attend the presentation on Wednesday 7th February/

EU Pension Transfer from the EU Institutions – It is EUr money

By Emeka Ajogbe - Topics: Belgium, EU Pension Transfer, France, Luxembourg, pension transfer, Retirement, Switzerland
This article is published on: 15th August 2017

15.08.17

Have you ever worked for any of the below institutions for less than 10 years? Go ahead, and have a look:

• European Commission
• European Council
• European Parliament
• EEAS
• European Court of Justice
• Eurocontrol

If yes, then carrying on reading this article, as an EU Pension Transfer will definitely be of interest to you. If not, then you’ll probably want to stop reading, unless you know someone in the aforementioned position.

To Whom It May Concern, if you have worked for less than 10 years at the EU Institutions (and have left), you will not have qualified for the gold plated, much coveted, EU Pension. I say much coveted, as no one is really making pensions like them anymore; as they are very, very expensive for the employer to maintain. Yet, they can be very, very good for you, the employee. Anyway, I digress. That is for another article.

As you will know by now, you have to work at the EU Institutions for at least 10 years (this can be interrupted, as long as the total is 10 years) before you qualify for the pension. If you leave before that time, then you are eligible for a severance grant which you can transfer into a scheme that has been approved by the EU. As it states in the EU Staff Regulations handbook:

“An official aged less than the pensionable age whose service terminates otherwise than by reason of death or invalidity and who is not entitled to an immediate or deferred retirement pension shall be entitled on leaving the service:

a. where he has completed less than one year’s service and has not made use of the arrangement laid down in Article 11(2), to payment of a severance grant equal to three times the amounts withheld from his basic salary in respect of his pension contributions, after deduction of any amounts paid under Articles 42 and 112 of the Conditions of Employment of Other Servants;

b. in other cases, to the benefits provided under Article 11(1) or to the payment of the actuarial equivalent of such benefits to a private insurance company or pension fund of his choice, on condition that such company or fund guarantees that:

I. the capital will not be repaid;
II. a monthly income will be paid from age 60 at the earliest and age 66 at the latest;
III. provisions are included for reversion or survivors’ pensions;
IV. transfer to another insurance company or other fund will be authorised only if such fund fulfils the conditions laid down in points I, II and III.”

The last 4 points are the most important to note as your money will not be transferred unless the approved receiving organisation adheres to those criteria.

WHY WOULD I TRANSFER?
Essentially, you have to, unless you like losing large sums of money. If you have not transferred by the time you have reached pensionable age, then your money disappears and is absorbed by the EU. If you die before you claim your money, then it is also lost. It will not be transferred to any beneficiaries as it is not a pension. When you leave, the amount that you leave behind is frozen and only increases at a very low interest rate; no further contributions are made on your behalf. So moving it when you leave allows you the opportunity to invest it into funds that could grow your money substantially over the years (depending on how close you are to retirement). For example, if you left the institutions at 40 years old, you would have at least 25 more years to grow your money. If you leave earlier, then you would have longer.

Moving it would also allow you better protect your financial future, make provisions for your partner or dependents/beneficiaries. It can be of benefit even if you decide to return to the EU Institutions.

There may be circumstances where it is not appropriate for you to transfer the money at that time, your particular situation will be evaluated by our pension specialist who will compile a report detailing the appropriateness of the potential transfer.

SOUNDS GREAT! WHAT NEXT?
We will conduct an evaluation of your situation and also the accumulation of your money at the EU. Once we have confirmed and agreed with you that transferring out is the right option for you, we will work with an approved provider to who complies with the requirements as stated above who will help set up your new pension. Then, as part of our ongoing service, we will review your pension and personal circumstances every quarter to ensure that you are always updated with the latest information. Even if you move countries, our service will continue.

We have established contacts with case handlers in the Office for the Administration and Payment of Individual Entitlements (the department responsible for calculating and transferring your money), and have developed the knowledge and expertise to ensure a smooth transfer, putting you in control of your money and helping you make the right decisions, as and when they are needed.

So, if you have no longer work for the EU Institutions and have less than 10 years’ service, you don’t like losing large sums of money, wish to protect your financial future, and potentially provide for your dependents/beneficiaries, then contact me either by email: emeka.ajogbe@spectrum-ifa.com or phone: +32 494 90 71 72 to see whether an EU Pension Transfer is suitable for you.