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How Safe is your Bank?

By Pauline Bowden - Topics: Banking, Costa Blanca, Costa del Sol, Inflation, International Bank Accounts, Saving, spain
This article is published on: 24th August 2017


Which bank? Which jurisdiction? As more amazing stories come out about the world’s banks, we have seen a shift from Deposit Accounts being a low risk investment, to a much higher rated risk. So what exactly does each jurisdiction offer as security against your bank going bust?

Isle of Man Personal Account 50,000GBP
EU €100,000
UK 85,000GBP
Jersey 50,000GBP
Guernsey 50,000GBP
Gibraltar €100,000


Many people in this area of Andalucia have bank accounts in Gibraltar, Isle of Man or The Channel Islands. Of the above list, the Isle of Man and Channel Islands have the least protection for the account holder.

I often write about spreading your risk, by investing in different asset classes. Perhaps now we should also spread our bank accounts and have smaller deposits in more banks, in more jurisdictions.

It can make life a little more complicated, but it makes financial sense not to put all your eggs in one basket. At least then, if one egg gets broken, you do not lose all of them!

Holding cash as an asset class is no longer a “safe bet”. With interest rates so low now, the real value of the capital is being eroded by inflation. People that relied on the income from deposit accounts have seen their disposable income fall drastically, especially if they are sterling investors in receipt of sterling pay or pensions. Many are having to eat into their capital to maintain their lifestyles.

Alternative investment strategies need to be considered in order to protect the wealth that you already have and maximise the returns from that wealth.

Inflation – Are you prepared?

By Gareth Horsfall - Topics: Inflation, Italy
This article is published on: 12th May 2017


Let’s face it Inflation is not the most interesting of topics and not when we can have more interesting heated and political debates about Syria, Brexit, Trump and Russia, but from a Government point of view that is just what they want. The almost invisible creeping force of inflation to go almost unnoticed.

For investments, retirement and people who have fixed incomes it is by far and away the most important consideration when making plans for the future.

My bet is that it is likely to be the most significant financial issue that will affect us all in the not so distant future.

This article is about being prepared!

What is inflation?
By definition Inflation is the rise in the cost of living or an increase in the money supply in an economy. They are both intricately linked.

Since 2008 central banks around the world have created $6 trillion worth of new money.

Imagine $1 trillion
If you spent $1 million a day since Jesus was born, you would have not spent $1 trillion by now, but $700 billion. This is the same amount the banks got during their bailout.

Inflationary Effect
We now know what it is but why is it so important right now? The policies the Governments around the world have taken to prevent financial depression and deflation were always likely to cause inflation and erode our standards of living. Governments have an incentive to distort real inflation rates because it allows them to keep their inflation-linked benefits and pension payments low. It also, magically, erodes the underlying debt of a country in the same way as a mortgage. For example the debt becomes proportionately less as the value of the house increases and wages grow as well.

A simple example would be someone who bought a house in central London in the 1980s for approx £40,000. A mortgage of £30,000 taken out at the time might have been a heavy burden, (75% – Loan to Value (LTV)) but in 2017 this would be considered very small and if the house is now worth £1 million, then proportionately the debt has been eroded to 3% Loan to Value.

The heavily indebted governments around the world have a huge incentive to allow inflation to run out of control for some time to come.

History repeats itself
I always find that there is some value to the phrase ‘History repeats itself’ and not forgetting it. In researching this article I found figures which show the inflation rates of countries around the world and in most developed economies inflation has been falling (with intermittent blips) since about 1980 and has fallen from its highs in approx 1974. I was born in 1974 and am 43 years old this year. I have never lived through a period of significant inflation.

Well, that might all be about to change!
Brexit and the fall in the value of GBP has certainly caused a marked effect on prices in the UK. Inflation is on the rise there and that is unlikely to stop soon. The true effects of Brexit were never going to be apparent straight away and real economic effects always emerge approximately 18 months after decisions have been taken. The UK can realistically expect more price rises. However, Europe is also seeing signs of recovery and inflationary markers are also turning up for the USA, Germany, Spain, Ireland and even Italy.

So the real question is…is this the start of a 40 year reversal in trend? or is it just another blip?

Wages must grow
I think it might be the start of a trend but which will not take off just yet. The biggest problem holding back inflation is wage growth. It makes sense that wages have to grow for inflation to take effect. The more money is in people’s pockets, the more they will spend. However wage growth has been stubbornly slow to take off.

Corporate greed and minimum wage
The EU have now started to look at ways in which people can receive a living wage. One way is by stopping state sponsored corporate tax evasion and fairly taxing the profits of large corporations. However, this might be more of a long term objective, Another option is to introduce a fair minimum wage and this is something the EU is pressuring all members states into imposing. So whilst it may be hard to see how wages could grow naturally they may be forced up through new regulation which in itself would in turn create an inflationary effect.

Inflation, investments and interest rates
So, you might be thinking that if inflation starts to rise then interest rates will rise as well. This is very likely to be true and then why the need to invest capital instead of leaving it in the bank account.

The answer to this is very simple
For as long as money measures have been recorded, and central banks have existed, they have never, ever been able to control inflation or deflation. Once the inflationary gun has been fired the central banks are always behind the trend. They are constantly playing catch up and trying to raise interest rates whilst real inflation rises. To make matters worse, this time round, they have a real incentive to be well behind the curve and allow inflation to spiral out of control. It will assist in deflating their debts away. So what incentive do they have to apply interest rates increases which will dampen the very effect which can erode the public debt.

And what about the personal saver and investor? Let’s look at the 2 things separately:

Savers: If you earn a fixed rate of interest at 1% (bank account of fixed rate Bonds) and inflation is at 2.3% (as is currently the case in the UK) then your net return on your money is -1.3%. On a deposit of £100,000 your net annual return is NEGATIVE £1300.

Investors: Whilst the price of your asset will fluctuate, you could be earning interest and in the right assets this could be as high at 3-4%. In addition the value of your asset might also rise. History tells us that the stock market generally rises in an early inflationary environment. Inflation in developed countries has been at historically low levels,
but the outlook is picking up and this could bode well for projected investment returns.

My feeling about inflation, for what it is worth, is that we are going to see a reversal in trend and over the coming years it will start to move swiftly upwards with intermittent slow periods. It has to! There are no more monetary manipulation tools left for central governments to play with and therefore inflation must rise.

Equally governments have no incentive to slow it down, quite the opposite, and we could see the cost of living start to rise quickly once it starts.

It is hard to see when it will all start and how, but that is the joy of economics and finance. It just is and just does. (I sound like Forrest Gump).

The key for individuals like ourselves is to be ahead of the trend and start planning forward…NOW. There is no value in waiting for things to start to happen and then playing catch up.

What’s next for GBP versus EURO

By Gareth Horsfall - Topics: BREXIT, Inflation, Italy
This article is published on: 29th March 2017


Whatever you think about Brexit and the effects it is having and the effects it will have I can’t think of a more sudden and bigger impact on most people’s lives than the depreciation of Sterling.

An approximate 20% fall in the currency since the heights of 2015.

Most people I know are able to accommodate this in some way, cutting back on the non-essentials and saving in other areas. However, if it falls further how will that affect us?

So, I thought I would do some digging around and contact some financial institutions to find out their opinion on the future of Sterling.

Let me start with a caveat to this article: Currencies are notoriously unpredictable. Most industry professionals accept that they can’t control them and have little ability to predict them. Predictions are about as effective as looking at ‘Il Meteo’ to see what the days weather is going to be!

Whilst it is impossible to predict currency movements you can guarantee that behind the scenes there is plenty of activity and big positions being taken. I avidly remember when I spoke with someone in the financial markets the morning of Brexit vote +1. The person on the other end of the line told me that he had no idea how the markets were going to react but that fortunes had been made the morning of 24th June 2016 with currency speculators betting against GBP v EUR and USD.

These same speculators love uncertainty as it gives them more influence over the market…in theory. However, given the fact that recent key announcements don’t really seem to be devaluing Sterling any further it gives you the impression that it may have found a level of equilibrium that prices in any current uncertainty…for now.

I think it is safe to say that post Brexit day Sterling is likely to suffer marginally, purely due to the negative economic notions associated with it. The news flow during this period is, in the main, likely to be negative (unless you read the Daily Express or Daily Mail) and therefore it is reasonable to assume this will have an impact on Sterling and push it further down.

The negative news is probably already being prepared as I write and therefore we can expect a gush of it next week. However, stretching the time horizon out further into the process the news flow will probably slow to a trickle with occasional floods, dependent on political news on any given day. It is absolutely clear that an advanced economy which has been involved in an economic union for the last 56 years cannot extract itself from this same union in only 2 years and therefore the negotiations ‘could’ continue a lot longer than expected. A long drawn out negotiation with the EU could work in Sterling’s favour and we could see a significant rally.

I think it is also useful to never forget the psychology of people and our cumulative tendency to be over anxious in times of stress and over confident when times are good. This is a classic investment bias and no one is immune to it, not even the greatest minds. Our currency biases are no different. We can easily anchor to an exchange rate that we feel is a ‘natural level’ based on our own experience, but on what basis are we making these assumptions? Are we seeking out all opinion, even that which is contradictory to our own thinking or are we making these assumptions based on information that we seek out to confirm our own opinion?

Maybe Sterling is overly devalued merely on the preconceived notion that its choice to leave the EU is a bad thing. Unfortunately for us we are about to enter uncharted territory and our biases will soon be tested.

In reality, it is good to look at the facts, even though understanding our own psychological processes around exchange rates is probably more important. But BEWARE:

What I am about to write may just allow you to ‘anchor’ your perceived idea of where Sterling should be valued based on what you already think. I would encourage you to not let my musings influence your thoughts!

Using long term macro-economic modelling, Sterling looks very undervalued versus the Euro. Without Brexit, you could easily argue that fair value should be around 1.4 euros to the pound, taking into account structural economics only. Assuming Brexit, we can work on the basis of c.1.25 but it could take years to get there.

Productivity is the key driver of this long term model – particularly productivity in the tradable goods sectors. This is likely to suffer after Brexit due to non-tariff barriers to trade (think about the additional overseas regulation and customs regimes that need to be implemented post Brexit). That said productivity growth in the EU is and has been weak and it is unlikely to surge ahead whilst the UK economy recalibrates, which should ultimately limit the damage to Sterling.

Over the medium term, the exchange rate trades within a range of values where 2 or 3 year interest rate expectations would imply it should be.

So the next time you speak with someone and you hear yourself quoting a post Brexit level of 1.25 or a long term rate of 1.4. Make sure you remember where you heard it first and pinch yourself. It’s all theory. The rate is what it is on any given day and there is nothing you can do to influence it!

Currency swings have a major impact on people’s lives. Therefore, it is important to make sure that the rest of your financial affairs: investments, pensions, tax planning etc., are working to maximum effect. If you would like to ensure that all your other financial affairs are in perfect working order then don’t hesitate to contact me on or call me on +39 333 649 2356 for a FREE consultation.

Capital protection and growth in one investment ?

By Daniel Shillito - Topics: Inflation, Interest rates, Investment Risk, Investments, Italy, Milan, Uncategorised
This article is published on: 12th September 2016


Investing with confidence is something many of us find difficult to accomplish.

Bad news sells, and the economic environment and uncertainty we hear around us and in the media, can combine to make us risk-averse, unwilling to invest and shy of putting our savings into a new investment.

However without investment, without some risk, your wealth cannot grow, and is in fact more likely to go backwards, as inflation or the average prices of goods and services all around us, continues to rise. Example, your bank may pay you 0.5% per annum interest and inflation may be running at 1% per annum. You are losing 0.5% per annum!

It’s why many of us stay invested in cash or one or two properties. It’s why many banks direct you to investing in government bonds or BTP’s (Italian government treasury bonds). There is a belief or expectation that the risk is low, but a regular income can be gained and that there is some protection or guarantee that we won’t lose our money. We need to be aware that the price or value of BTP’s on the market often fluctuates, and there is no capital guarantee. These investments rely on government liquidity, the balancing of the government’s budget, and their commitments to honor that debt to us, the debt-holders.

What if you could invest in the market (funds and shares) and yet still have some capital protection to know your money would be safe and would be returned to you later?
One such investment type is a structured product. They consist of a capital-protected portion (of up to 100% protection) plus the opportunity to share the growth earned along the way with the provider of the investment, usually over a fixed time period.

Some such products can be complex, but there are now more products in the European market that are relatively simple to understand and use, and which provide some level of capital protection. They might also provide a better result than the usual cash-like capital protected products you find in Italy provided by some local insurance companies.

For more information about capital protection and a specific opportunity in such an investment today, contact me by email or by phone on the number below.

*Please note the above is not specific financial advice but prepared for information purposes. We recommend you obtain tailored financial advice by consulting with your financial adviser about what is appropriate for you and your own situation.

Every Cloud

By Derek Winsland - Topics: BREXIT, europe-news, France, Inflation, Interest rates, Pensions, QROPS, Uncategorised
This article is published on: 8th September 2016


With the exception of a weakening pound and falling interest rates, we are yet to see the full impact of Britain’s vote to leave the European Union. Perhaps we may not ever see it if Teresa May and/or others decide against triggering Article 50 to herald the start of the process. We currently sit in a ‘phony’ period where no-one knows quite what will happen, causing doubt and uncertainty to set in. We await with bated breath the latest results to come out of the Treasury and the Bank of England.

The latter recently reduced interest rates to an historic low of 0.25%, at the same time announcing a new round of Quantitative Easing. Falling interest rates are either a good thing or a bad thing depending on which side of the saver/borrower fence you occupy. Clearly borrowers are happy, but for savers, especially those who rely upon their capital to supplement their retirement income, it’s not such a happy picture. Indeed, I am seeing this most days I speak to people about their finances. Thankfully, we are able to make investment recommendations that will generate higher levels of returns to counter falling interest rates, but these don’t suit everybody. But like most things I find in financial services, there’s generally a positive that accompanies a negative, if one looks close enough.

One such area relates to the impact falling interest rates has upon pension transfer values. In my last article I touched upon the way transfer values from occupational (defined benefit) schemes are calculated. Without going into chapter and verse, a fundamental part of the calculation process uses gilt interest rates to determine the transfer amount. Although the schemes have a certain amount of leeway in interpreting the rules, the bottom line is that low interest rates result in much higher transfer values having to be quoted by scheme trustees. This makes the decision on whether it suits an individual’s purpose to transfer somewhat easier to determine.

The observant amongst you will recall I mentioned TVAS in my last article, and the (somewhat out-of-date) rules that the FCA still clings on to. Remember critical yields? Well, a higher transfer value will result in a more achievable critical yield becoming attainable, so making the decision to move to a personal pension such as a QROPS, easier to make. Sure there are variables and these are more or less important depending on who you are and what your circumstances are. Carrying out a full analysis of your own particular situation, Spectrum’s advisers can place you in an empowered position to make your choices, so, if you have a defined benefit scheme that you’ve either never reviewed, or one that hasn’t been looked at for a while, perhaps now is the perfect time to do so.

Every cloud……!

Stay invested and don’t try to second guess the market – Discipline is rewarded

By Derek Winsland - Topics: France, Inflation, Investment Risk, Investments, Saving, Uncategorised
This article is published on: 6th May 2016


Individual investors may face many “known unknowns”—that is to say, things that they know they don’t know. The UK’s referendum on EU membership is one of them, confronting people with a large degree of uncertainty. But as we’re witnessing, it’s not just the investor that’s afflicted by this Known Unknown condition – the markets are really uncomfortable as evidenced by the fall in the value of the pound.

We have though been here before; perhaps not having to make decisions that could affect our financial stability for years to come, but as the chart below shows, major global events that have impacted on our lives to a greater or lesser effect. Through all of them, the markets have shown a remarkable resilience over the longer term and that is one of the most important lessons the individual investor can learn.

You see, it’s not necessary to “make the right call” on the referendum or its consequences to be a successful investor. Our approach is to trust the market to price securities fairly; to take account of broad expectations of future returns.

In arguing for the status quo, the “remain” campaign is able to point out familiar characteristics of membership.

The “out” campaign, however, is based on intangibles that can only be resolved after the result of the referendum is known. It is impossible for any individual to predict the implications of these unknowns with certainty.

But this is no cause for concern. While the referendum is imminent and its implications are potentially vast and unpredictable, it is not necessary for individual investors to make any judgement calls on the outcome. We have faced many uncertainties in the past—general elections, market crises, recessions, wars—and throughout all of them, the market has done its job of aggregating participants’ views about expected returns and priced assets accordingly.

And while these events have caused uncertainty, volatility and short-term losses and gains, none of them has altered the expectation that stocks provide a good long-term return in real terms.

We have a global view of investing, and we know that the market is very good at processing information that is relevant to future returns. Because of this view, we don’t attempt to second-guess the market. We manage well-diversified portfolios that do not rely on the outcome of individual events or decisions to target the expected long-term return.


These events are not offered to explain market returns. Instead, they serve as a reminder that investors should view daily events from a long-term perspective and avoid making investment decisions based solely on the news. Past performance is no guarantee of future results. MSCI data © MSCI 2016, all rights reserved.
Research has demonstrated time and again that the best returns are achieved through ‘Time in the Market’ and not by trying to ‘Time the Market’; in other words, stay invested rather than guess the best time to invest and disinvest.

If you would like more information on our investment philosophy, please ring for an appointment or take advantage of our Friday Morning Drop-in Clinic here at our office in Limoux. And don’t forget, there is no charge for these meetings.

Dealing with volatility

By Chris Webb - Topics: Inflation, Investment Risk, Investments, Madrid, spain, Uncategorised, wealth management
This article is published on: 11th March 2016


Market volatility has become a common discussion with all of my clients. Whether they are seasoned investors or new to the investment game, volatility is an area that is now at the forefront of their minds when looking to invest their hard earned savings. To a large percentage of people their only understanding or awareness of a volatile market comes through the media, who we all know love to sensationalise every story at every opportunity.

What is a volatile market? By definition a volatile market is where unpredictable and vigorous changes occur in the price within the stock markets. It is necessary for some movement within the market in order to sell commodities, however a volatile market can represent the most risk to investors.

If you’re not in the “daily trading” game, and are investing for the medium to long term then it’s not always wise to listen to all the hype and speculation in the media. It may be a wiser decision to focus on the fundamentals behind why you invested in the first place, and stick to those fundamentals. Two key areas to focus on are your personal emotions and your attitude to risk.

In volatile times emotions play a significant role in investing decisions. Many investors feel the short term variances in the returns of their investments much more than the average return over the medium term of their investments, even though the decision to invest was a medium term one. Rationally, investors know that markets cannot keep going up indefinitely. Irrationally, we are surprised when markets decline.

It is a challenge to look beyond the short-term variances and focus on the long-term averages. The greatest challenge may be in deciding to stay invested during a volatile market. History has shown us that it is important to stay invested in good and bad market environments. During periods of high consumer confidence stock prices peak and during periods of low consumer confidence stock prices can come under pressure. Historically, returns trended in the opposite direction of past consumer confidence data. When confidence is low it has been the time to buy or hold. Of course, no one can predict the bottom or guarantee future returns. But as history has shown, the best decision may be to stay invested even during volatile markets.

During these emotional and challenging times it is easy to be fearful and/or negative so let’s turn to the wise advice of one of the world’s best investors, the late Sir John Templeton:

“Don’t be fearful or negative too often. For 100 years optimists have carried the day in U.S. stocks. Even in the dark ’70s, many professional money managers—and many individual investors too—made money in stocks, especially those of smaller companies…There will, of course, be corrections, perhaps even crashes. But, over time, our studies indicate stocks do go up…and up…and up”

So do you invest or watch from the sidelines? When markets become volatile, a lot of people try to guess when stocks will bottom out. In the meantime, they often park their investments in cash. But just as many investors are slow to recognize a retreating stock market, many also fail to see an upward trend in the market until after they have missed opportunities for gains. Missing out on these opportunities can take a big bite out of your returns.

Whilst dealing with the emotional side of investing it would be worth evaluating your risk tolerance. Many clients attitude to risk will change over time, this may be due to age, personal circumstances or just added awareness to how the markets move. Each and every one of us has their own individual risk tolerance that should not be ignored when considering making any type of investment. Your investments should always be aligned to your level of risk even if that means making drastic / strategic changes to your portfolio as times change.

Determining one’s risk tolerance involves several different things, and there are different ways to look at how you should look at the risk you need to take. First, you need to know how much money you have to invest, what your investment and financial goals are and what time horizon is involved. Then you need to consider the actual risk you are prepared to take. One simple question can help determine your attitude to risk, however a more detailed discussion should take place to really ascertain your tolerance level and to compile a suitable portfolio.

The one question….. If you invested in the stock market and you watched the movement of that stock daily and saw that it was dropping slightly, what would you do, sell out or let your money ride?

If you have a low tolerance for risk, you would want to sell out… if you have a high tolerance, you would let your money ride and see what happens. This is not based on what your financial goals are, it is based on how you feel about your money! Your risk tolerance should always be based on what your financial goals are and how you feel about the possibility of losing your money. It’s all tied in together, it’s emotional.

So a few pointers to help you through the volatility.
Review your portfolio. Is it as diversified as you think it is? Is it still a suitable match with your goals and risk tolerance?

Tune out the noise and gain a longer term perspective. Numerous media sources are dedicated to reporting investment news 24 hours a day, seven days a week. Do you really need to be glued to it? While the media provide a valuable service, they typically offer a very short-term outlook. To put your own investment plan in a longer term perspective, and bolster your confidence, you may want to look at how different types of portfolios have performed over time. Interestingly, while stocks may be more volatile, they’ve still outperformed income oriented investments (such as bonds) over longer time periods.

Believe Your Beliefs and Doubt Your Doubts. There are no real secrets to managing volatility. Most investors already know that the best way to navigate a choppy market is to have a good long-term plan and a well-diversified portfolio but sticking to these fundamental beliefs is sometimes easier said than done. When put to the test, you sometimes begin doubting your beliefs and believing your doubts, which can lead to short-term moves that divert you from your long term goals.

Prior to working with any clients I insist on completing a personal detailed risk tolerance questionnaire. This will tell us exactly what your attitude to risk is and a suitable portfolio can be devised to suit you individually. If you are interested in investing or saving for the future, get in touch to discuss the opportunities available and just as importantly the risks associated. If you already have an investment portfolio and feel that it was never risk rated against your own risk tolerance then let me know, I am happy to discuss further and go through the questionnaire to ensure that what you have already done is suitable for your circumstances.

How much have your savings increased in the last 12 months?

By John Hayward - Topics: Inflation, Interest rates, Investments, Murcia & Almeria, Saving, spain, Uncategorised
This article is published on: 26th November 2015


How much have your savings increased in the last 12 months?

Which of the following reflects where your money has been?

Savings account         +0.5% to 2% (before tax)*

FTSE100                       -3.17% (before charges and after dividends)*

Cautious fund             +4.3% to 5.5% (after charges)*

With interest rates predicted to stay low for some time to come, many in Spain are finding it difficult to grow their savings, or increase their income, without having to take risks they would not normally do, risking their capital.

So what are the options?

Deposit account
There are Spanish savings accounts offering around 2% although in reality this could be the rate for the first few months which will then reduce to a much lower rate. There are often restrictions on how much you can invest in these accounts. Inflation is running at a higher rate than most savings accounts and so, in real terms, most people are losing money in what they see as a risk free account.

Over the long term, through growth and dividends, it is possible to make significant gains. However, first-hand knowledge, or a lot of luck, is required to make the most of stocks and shares. Most people tend to have neither. In addition, most people are not prepared to take the rollercoaster ride that stocks and shares tend to produce.

Structured Notes
These are, generally, complicated and inflexible products which are really only suitable for experienced investors. The gains can be based on a variety of things but often requiring 5 to 6 years before seeing any return. 

Over time, property has proven itself to be a winner. However, it has also proven that it can suffer massive reductions. It is also probably the most illiquid asset you can hold as well as potentially, the most costly to hold in terms of upfront costs, taxes and maintenance. There can also be emotional risk.

Under the mattress
This is often mooted as a home for money in times of uncertainty but then there is the risk that it could go up in flames or end up in a burglar’s swag bag.

The solution?
As financial planning advisers, we are in a position to offer the best of all worlds; the potential for growth in a low risk environment. By Investing in a Spanish compliant insurance bond, with a company that is one of the strongest in Europe, holding a variety of assets, including shares, bonds, cash and property (but not the mattress), one can achieve steady growth. There is also the facility to take regular income. Your money can grow tax free within the bond until money is withdrawn. Even withdrawals are taxed favourably. Two potential advantages; higher growth and lower taxes. Perfect!

* Source: Financial Express (12 months to 23/11/15)


What are the main financial risks as an expat in France?

By Rob Hesketh - Topics: Currencies, France, Inflation, Investment Risk, Retirement, Uncategorised, wealth management
This article is published on: 29th September 2015


Age and wealth are often linked. One increases inexorably in a linear fashion, and the other tends also to increase over time, but always in a non-linear way. Following this traditional route, we tend to become more affluent as we get older, barring financial mishaps and accidents of course. This may have something to do with the notion that as we get older we become wiser. That may well also be true up to a point, but then it can occasionally go horribly wrong. Leaving that unfortunate possibility to one side, how can we expats best contribute to our own financial well-being?

All a bit deep that, but here is what I’m getting at. If I were to attempt to present a snapshot of my average client to you, it would be of a couple in their late 50’s to early 60’s who have retired early after successful careers and family building, based either on employment or their own business. Avid Francophiles, they are now ‘living the dream’ funded by the fruits of their former labours. All is well in their world; or at least that is how it appears on the surface. Underneath though, there are concerns, and these concerns are common to all of us. Age and money.

I think very few of us actually like getting older; I certainly don’t. It is becoming more and more difficult to ignore those ‘milestone’ anniversaries. I think of them more as millstones these days. As I suspect is the case with many of us, I tend these days to look my accumulated ‘wealth’ (cough), and wonder if it will last me out. I think it will, and I certainly hope it will, but I’m pragmatic enough to realise that it isn’t a ‘gimme’ (in Solheim cup parlance).

So then I start to look at the variables. What can possibly go wrong? What can I do to defend myself against the risks? What are the risks? I am after all a financial adviser; all this should come naturally to me. To an extent it does, but knowing what is out there doesn’t mean that you necessarily know how to beat it. It does help though. Here is my top three on my list of risks to worry about:

Institutional Risk   –   Basically this means that you put all of your money under the floorboards in the attic, but next year your house burns down, floorboards and all.

Market Risk   – How could putting all your money into VW shares possibly go wrong?

Exchange Rate Risk     –   This is where Murphy’s Law comes into play. Whatever the rate is; whatever you do will be wrong. Otherwise known as Sod’s Law.

Obviously, it is a good idea to work on avoiding these risks wherever possible. I thought long and hard before listing them in this order, but I do think that Institutional Risk stands out. After all, it can wipe you out completely. It can also be avoided completely. The other two cannot be eradicated, although some would argue about F/X risk.

Indeed there was a time when I would have argued that F/X risk can be avoided. In a former life (I’ve told you this before I know), I used to be a foreign exchange dealer in the world of international banking, before it became unfashionable. One of my jobs was to explain to corporate and private clients that F/X risk was the enemy, to be identified and eliminated at all costs; unless of course your job was to make money trading (gambling) in it.

Ten years ago I brought this dogma into my new career as an IFA in France. How long do you intend to stay in France? (forever). Where are your savings? (in the UK, in sterling)… Over the years, the subtleties started to emerge. The collapse of sterling against the Euro; the resulting exodus of thousands of UK ‘snow birds’ from Spain because their UK pensions wouldn’t support them anymore, and the growing realisation that our old enemy ‘age’ was always going to play its trump card; they all contributed to the much changed conversations that have with my clients these days. Strangely though, it is another banking term that now dominates my thinking, namely hedging.   ‘Hedge your bets’. To be honest, I tend to question anyone these days who says that they will never return to the UK. Statistics show otherwise. We tend to base our current view on our current circumstances, preferring not to think about what will happen if we end up on our own. How many UK expats are there, I wonder, in French care homes?

Since the Euro came into existence the £/€ exchange rate has been as high as 1.7510 and as low as 1.0219. In anyone’s language that is an enormous range. Coincidentally we currently sit at almost exactly the half way point between those two extremes, but I don’t see that as any reason for complacency. We need to take this risk very seriously, especially if we accept the possibility that we will one day have no more use for Euros. I have a firm view on the best way to manage this risk, but I’ve run out of space in this edition. If you want to discuss it, you know where to find me.

Why a Pension audit is vital for your wealth Part 1

By David Hattersley - Topics: Costa Blanca, Inflation, Pensions, QROPS, Retirement, spain, Uncategorised
This article is published on: 25th August 2015


I have been trained in the UK and have been specialising in Pensions since 1987. As well as keeping up to date with the subsequent (and numerous) changes in legislation, I also have a good understanding of the variety of pensions offered since then. In this article I am concentrating on Pre-Retirement Planning ie. those people that have yet to take their pensions. With ever changing careers in private industry and the end of the idea of “jobs and pensions for life”, which was part of the revolution in the late 70’s, most people acquire a number of pensions and different types of pensions over a period of 30 to 40 years. In some cases, they are not even aware of their entitlement, in particular, Defined Benefits Schemes to which the rules changed from the late 80’s (my Father in Law being a case in point who was not aware he was entitled to benefits under such a scheme until well into his retirement) and Contracting Out of SERPs plans.

Since the Finance Act of 2004 pensions have come under that legislation. The general wording of this legislation was “Pensions Simplification”. As advisers at the time, we knew full well that this would not be the case and we have been proven correct, with the subsequent attacks on pensions by a variety of governments seeking to raise revenue and reduce tax advantages at the same time.

Since moving here to Spain, I have come across many clients who were not aware of the benefits that they were entitled to. It has required a vast amount of work tracking down both providers and employers that no longer exist. In some instances it has proved to be fruitless, but others have benefited from plans that they are not aware of. That is the first stage of my role as a Financial Adviser, which is to question a potential client’s work history and seek full details. That however is the easy bit as the options available at retirement have been given greater flexibility, but the irony is that independent advice is hard to come by in the UK unless you are prepared to pay a fee on a time cost basis.

The first question is, do you plan to become tax resident in another European country? For those that plan to still maintain a home in the UK (even as a holiday home), that is further complicated by ever changing rules regarding residency in the UK vs tax residency in the chosen country.

What do you need to do before you leave the UK and become tax resident in an EU country? A simple question perhaps, but the tax free lump sum available in the UK now referred to as “Pension Commencement Lump Sum” or PCLS (one can see the tax free status of that being restricted in the future) is liable to be taxed certainly in France and Spain once you become tax resident. There are legitimate rules reducing this, but once again, these need advice. How does one therefore get your PCLS to take advantage of the current UK tax free status, without having to take the pension too? Perhaps you want to stagger your pension income as a result of continued part time work or “consultancy”. Many of my generation want to still work past normal retirement age, but at a slower pace.

Currency also has an impact, within the last 5 years the £ to the € has gone from 1.07 to 1.42 Euros. If one thinks that will be maintained, consider that in 2002 when the Euro was launched the £ to Euro was as high as £1 to 1.56 Euros. The impact to those that budgeted on that basis over the ensuing 8 years was detrimental to their wealth, so how does one hedge against currency fluctuation?

Does all your pension come from a UK source or have there been earnings and pension entitlements from overseas employment? Do you have a mixture of Final Salary schemes and personal money purchase pots? Is there a need to consolidate these, or treat each individual arrangement on its relative merits?

With recent legislation, trustees of Final Salary schemes (Defined Benefits), with the exception of transfers less than £30,000, now need the involvement of a fully qualified UK financial adviser who has passed his recent exams. This is all very laudable but how can that adviser be aware of the tax rules in your new country of residence? In any analysis carried out by a Spectrum Partner, it is vetted and checked by a Spectrum Fully Qualified Chartered Financial Planner, and if need be by a UK Financial adviser if part of your pots are as above. It is important to note that no UK Government funded pension eg. Civil Service can be transferred.

Then there is the reduction in the Lifetime Allowance, the passing of your pension pot to your chosen heirs and beneficiaries, the correct selection of good quality properly regulated funds and fund managers dependant on an individual needs, regular reviews as needs change, and the changes to the amount one can take on an annual basis due to recent pension flexibility rules. These are all areas that are vital to consider.

Even after the audit, and a decision to potentially transfer part or all of one’s pots, care needs to be taken in the selection of the QROP/SIPP Trustee and the jurisdiction that it comes under.

Having mentioned the above it may be in some cases that not all your pension pot should be considered for a transfer.

It may be beneficial to consider the purchase of a Lifetime Annuity from a UK provider as these have substantial tax advantages over pension payments in Spain. This will have to be carried out before one moves abroad on a permanent basis and, as stated earlier, for every potential client advice is given on a case by case basis.

In many cases, a lifetime of pension saving can result in funds being equal to or greater than the value of a property purchased abroad. Should one not take the same planning, care, advice and due diligence when planning your retirement for an income that may have to last 30 years? That is where we can be of help.