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Spanish Resident Services

By Jeremy Ferguson - Topics: Financial Planning, Financial Review, Marbella, spain
This article is published on: 10th September 2019

10.09.19

I was recently with someone whom I have known for quite a while, having met him regularly at business events in and around where I live. I knew what he did for a living (chef) and he knew what I did for a living, or at least I thought he did!

Over dinner one evening, I was asked “Jeremy, I know you are a Financial Adviser, but what exactly do you do?”

It actually took me by surprise, thinking everyone would know what I did if I had told them my job title. The discussion continued; “ I would get it if you said you were a chef, you cook food; if you were a car mechanic, you repair cars; if you were a pilot, you fly planes; but what exactly do you do as a Financial Adviser?”

Wow! My answer actually took a little longer than I thought, explaining all of the different aspects I deal with. That got me thinking, I do need to explain a little more about what I do, but not bore people to death.

With that in mind, I put together a small ‘flyer’ showing the areas I deal with, which then pushed me to write this article with the objective of giving people a little more detail around all of the areas I can help with.

So this is what I do for people who live here in Spain:

Retirement Planning / Pension Management
If you haven’t got to that age yet, have you tucked enough away to get you through retirement? Is what you have saved so far suitably invested now things are changing? If you have got to that age, is what you have expensive and suitable for your current lifestyle? We can review your plans and help with managing your finances in retirement.

Pension Transfer Advice
QROPS is a complicated area. What does it even mean? Qualifying (it qualifies as a pension) Recognised (it is recognised by HMRC in the UK) Overseas (it is outside of the UK) Pension Scheme. It simply means it may make sense to move your pension away from the UK to gain more control, for example to choose Euros instead of Sterling. Quite often it makes no sense to move it. What is important is that we can provide you with all of the information you need to make an informed decision. Brexit may mean there is a limited time to do this.

Tax Efficient Investments
If you have ISA’s you will be taxed on these in Spain. Are you invested in policies you bought in the UK holding UK funds that are being taxed on the profit? We can take a look at what you have and see if there are better options out there for living in Spain from a cost, tax and administrative perspective.

General Financial Overviews
Savings in banks in the UK and here, ISA’s, personal pensions, state pensions, general investments, shares, and the list goes on. Are all of these suitable now things have changed and you have retired in Spain? Do you know where all your monies are? Have you forgotten a small pension you may have paid into when working for a company many years ago in the UK? Are you being charged too much for what you have? Is everything all kept together in one place? We can help manage all of this.

Cash Flow Planning / Long Term Plans
How long are you going to live? (I’m afraid we cannot answer that one). How long will what you have last? What effect is inflation having on everything. Can you reduce your outgoings? We can help you take some time to look at all of these things in detail and maybe tweak things to help your money go a little further.

Succession Planning
Who do you plan to leave your assets to when you pass away? (Please don’t say the Taxman!) Where are the likely beneficiaries living? Where are your assets based and is everything in place to make sure things go as smoothly as possible when the unthinkable happens? We can help you with all of this and give guidance on wills, taxes and everything associated with succession plans.

Mortgages
Are you looking to buy a property here in Spain but worried about the poor exchange rate when you have sterling to pay for it. Have you considered borrowing as much as you can in Euros so you can keep your pounds and maybe exchange in years to come if the rate has improved? Mortgages are at all time lows with regard to interest rates at the moment, so maybe now is the time to take advantage and lock those low rates in? Do you understand the mortgage offer you have from the bank? We can help expats with mortgages and all of these questions through our mortgage division.

So now you can understand why my friend needed a little more explanation about what I do. I hope this has given you an insight into all of the areas I can help people with and if all has gone to plan, next time someone asks me exactly what I do, my answer will certainly be a little more polished!

Are You British, And Have You Recently Become An Official Resident Of Spain?

By Jeremy Ferguson - Topics: Domicile, domiciled, Financial Planning, Income Tax, Marbella, Residency, spain, tax advice
This article is published on: 9th April 2019

09.04.19

If The Answer is Yes,
What’s Going to Change For You?

Last night I attended a presentation hosted by the British Consulate covering the issues of living here post Brexit. Well, I am not sure how informative it was, as there seemed to be lots of ifs, buts and maybes. One thing I did conclude from it all however, and something I have always maintained, is if you live here, why not just get in to the system properly rather than constantly ‘wondering’ about it, or simply avoiding the issue.

Many people have been here in Spain for years without ever becoming officially resident. Differing circumstances cause this, varying between lots of time spent travelling, working away in another country or just being told not to worry. These tend to have all created a ‘meaning to get round to it tomorrow’ situation for many people.

This has quite often been the case when I have met with people during the 20 plus years I have been here, until along came this Brexit situation. It has resulted in more and more talk about what to do in the press, on the TV and radio, in bars, at family gatherings; basically everywhere.

EU membership has led to the feeling of it being very easy to live here in oblivion to all things official. But that looks like it is now changing. Or is it? One thing we do know is that the Spanish have seized the opportunity to entice people to become official residents of Spain, and if you want to avoid any doubt going forward, it is by far the most sensible option.

EU membership

In the build up to the 29th of March deadline, the British Consulate and local Spanish town halls have actively encouraged people here to take up official residency in a series of talks like the one I attended last night. It’s amazing how quickly this has all become reality in what seems such a short time since the original referendum in June 2016. Now we are looking down the barrel of a possible no deal Brexit on the 12th of April.

Or are we? Who knows as I write this.

All of this aside, the sensible thing, without doubt, is for people to become officially resident here in Spain. For many, since the Brexit situation it has felt like a fait accompli and therefore something they simply have to do. Whatever the reason, if you have made the decision, then what does it actually mean for you going forward? Things seemed to be absolutely fine before, so surely not a lot will change?
Well, that is not exactly true.

The first thing to stress is how nice it is to know that now you won’t need to worry about ‘sort of knowing’ you probably should be resident and in the system. Things can certainly now be 100% clear. I call it ‘the sleep easy factor’, and it’s amazing the amount of people who say how good they feel when it’s all done.

There are a number of things that you should now consider, not necessarily in this order.

Do you have Spanish will?
You should already have a Spanish will if you own a property here, so that’s not changed. If you haven’t done that, you must, and it is very easy to do. It can be in both English and Spanish so you will understand everything.

And it’s not expensive. A lot of lawyers I know will do it for a couple of hundred euros if things are all quite straightforward. That will be another box ticked!

estate planning

Once resident, currently some say you have up to two years to change your driving license to a Spanish license. There are others who say you have three months, others who say 9 months. The UK Government advice site says two years.

Regardless of who says what, and to avoid any embarrassing confusion, once you have residency why not just get on with changing your license? Again, there are many people around who will help you do this. You will get a temporary license while it is being dealt with and then a nice new Spanish license. A medical test will be needed, but again these aren’t that difficult to arrange. As long as you are in reasonably good health this shouldn’t be an issue.

On a positive note I have certainly found Trafico much easier to deal with showing a Spanish license when pulled over for a roadside check. The rules here are different to what you may be used to. You start with 13 points and they are deducted when you are caught being naughty. When you get to zero, then a suspension will occur!

Importantly, there will be taxes and tax returns to consider.

If this is your first time becoming a tax resident, then you will have to file a tax return for this year. The tax year here is the same as the calendar year (unlike the UK with their silly April date!). Your first return will therefore have to to be filed no later than the 30th June 2020.

tax in spain
  • Income tax will be due on income received during the year at varying rates depending on the amounts involved. This is similar to the UK with the rate increasing the greater your income level.
  • If you were previously a non resident, then you would pay capital gains tax when you sold your house (assuming there was a profit!). Now, as a resident, this will not apply on your main residence when it is sold, subject to certain criteria being met.
  • Wealth tax is due every year on your assets. This, as the words say, is effectively for people considered wealthy, and increases the wealthier you are. For most people this is not too much of an issue, but can be painful for people with a lot of assets.
  • Inheritance tax can be a complex area, and tax is paid by the person who receives the inheritance. The rules here in Andalucia have changed recently, meaning this should really not be so much of an issue anymore as there are now large exemptions granted which almost eradicate any amounts due, depending on the size of the estate.
  • At the end of each year, you will now also have to file a separate tax return from the one mentioned above, on a form known as Modelo 720. This is simply a declaration of everything you own in excess of 50k € outside of Spain (bank accounts, property, investment policies, share portfolios etc), and needs to be filed by the 31st March 2020.

Investments & Pensions
Regarding your investments and pensions, take a good look at where your income is coming from and what type of investments you hold. A simple example of the different treatment after taking residency would be holding UK ISAs. Although these are tax exempt in the UK, as a tax resident here these will now be taxable.

final salary pension review

Also, how will your pension be taxed now? Previously, you were entitled to a Pension Commencement Lump Sum (PCLS, previously referred to a tax free lump sum). This will now be taxable here in Spain. The rate applicable will vary depending on how old the scheme is, and any benefits you are receiving will be taxed differently depending on the amount. If you haven’t started drawing from your pension yet, it may be worth looking at moving the scheme away from the UK, for a multitude of reasons. On the other hand it may not, so if you do look into this, make sure you are furnished with all of the information you need to make a well informed decision.

Having taken residency will mean you have adequate medical insurance in place, and although this can be seen as expensive, the treatment you will receive will be second to none.
Of course, as with all of these things there are the exceptions and everyone’s circumstances differ slightly. But the overriding message is that things should be fine here, even after Brexit, and as we know, the Spanish are very keen to keep us all here for many years to come.

I have covered many different aspects in this article, but please make sure you take good advice from people in the know. There are many legal, tax and financial advisers here who will be able to help you with most of the subjects covered; but as always, make sure you shop around, as prices and service levels do vary greatly, and always see if you can get a recommendation from someone who has firsthand experience of using that person before.

So, with all things considered, maybe Brexit pushing you to become a fully fledged Resident of Spain wasn’t such a bad thing after all.

Creating THE Folder…

By Jeremy Ferguson - Topics: Financial Planning, Marbella, Pensions, spain
This article is published on: 18th February 2019

18.02.19

It was only recently I wrote about the fact we are all living longer as a result of improved lifestyles and medication, and the lovely Spanish lifestyle we are all enjoying.

The point I was making is how it is all very relevant to our finances and how we best manage them. But what if you are the one who tends to manage the family affairs and finances: are you confident that all of the papers and documents you hold are not only all in order, but equally as important, somewhere where they can be found and easily understood in the event of your demise? I am aware of many couples who would not know where all of the important documents relevant to their lives are. It is all down to who normally runs the financials, and that can the husband or the wife.

We all spend time every year making sure the ITV for the car is sorted, house insurance and car insurance policies are up to date, tax returns are filed etc. How about putting some time aside to create ‘ THE Folder’ as I like to call it?

So what is THE Folder?
It is a single file (digital or physical) where you keep all of your important personal and financial information together. It allows easy access to these documents in the event that you are no longer around to help. It is really important to have it in place when one family member takes the lead on the family finances; this includes paying bills, managing accounts and storing documents. Even if that is not the case, it is an important exercise.

So what should be in THE Folder?
All documentation that is relevant to running your household with regards to finances, such as:

  • Birth, marriage and divorce (if applicable!) certificates
  • Bank account details, including online login details
  • E-mail and social media account details and logins
  • Life assurance policies
  • Funeral plan policy
  • Pension documentation and statements
  • Investment documentation and statements
  • Wills
  • House ownership deeds

THE Folder can be very simple, and I always suggest contact details for each of the relevant policies etc. should be clearly marked as well. Also, make sure that when THE Folder is complete, you sit down together and explain all of the information it contains, as it will be as useful as a chocolate tea pot if you don’t both know exactly what is there.

Is it worth the effort?
Well, I think it is worth the effort. At a time of loss it can be stressful enough, without having to try to piece together the deceased’s financial affairs. This can be a really difficult time for family members, even more so if your support network, typically children, is back home in the UK.

final salary pension review

However, preparing THE Folder is much more than just avoiding stress; if you leave behind an administrative nightmare, you could delay access to inheritors’ funds and potentially cost a small fortune in legal fees.

To give you an example of this, the UK Department of Work and Pensions estimates that there is currently more than £400 million sitting in unclaimed pension pots in the UK.

Which is best…..physical or digital?
This comes down to personal preference. It can be done by either creating an electronic file that survivors can access in the event of death, or an actual paper file. An electronic file can be stored on your main computer, in the cloud or on an external hard drive. Make sure everyone knows how to access the computer, cloud or hard drive though!

Alternatively, if you use a physical folder to keep all of the important information together, make sure it is large enough to keep everything together. The good old shoe box has been a long time winner in this department, although a well organised file does make life a lot easier for everyone.

For what it’s worth, I find lots of people prefer paper and are happier with hard copies of everything. I personally prefer digital, which I have shared with some trusted family members. It may even be worth considering asking your legal advisers to hold the folder on your behalf (electronic is much better for this reason), so a simple visit to them if anything happens means they can assist you far more easily with everything.

Typically they will want all of the information it contains anyway, so by saving time when it becomes relevant, the small annual charge they may make for holding the information will normally be offset.

How often should THE Folder be reviewed?
It is sensible to note the date that it was last reviewed, so that anyone using it has an idea of how up-to-date the details are, and then going forward, reviewing the file on an annual basis should be sufficient, or of course, whenever a significant change occurs which you consider materially important.

And finally…
I have already stressed this, be sure to tell someone about it! There is little point going to the effort of creating such a folder if no one knows of its existence or where to find it…..

We are all living longer, and it’s not all good news

By Jeremy Ferguson - Topics: Financial Review, Inheritance Tax, Marbella, QROPS, Retirement, Saving, spain
This article is published on: 5th February 2019

05.02.19

When it comes to the way in which we are leading our lives, the world in which we live has changed significantly over not that many years.

Do you remember starting the day off with a bowl of cornflakes smothered in processed sugar and full fat milk, followed by a couple of slices of white processed bread smothered in butter and marmalade (laden with sugar), then washing that down with a couple of cups of strong coffee before we rushed off to work? Then at work the stresses of the day were broken by coffee to keep you going, with a packet of sandwiches and a bag of crisps at lunch time. A sneaky stop off on the way home for a couple of pints for some, then dinner followed by bed. Sound familiar?

Through a combination of increased awareness of the dangers of processed food and sugars, non-stop articles and TV programmes warning us of health issues; people are becoming increasingly health conscious. Add to that the mass of personal trainers and nutritionists out there, and people nowadays are more active and much more aware when it comes to healthy eating and lifestyle.

If you are reading this, you probably made the decision to move to the south of Spain some years ago, and boy, how things have changed as a result. Longer days, constant sunshine, lovely salads, a relaxed life, and probably a lot more time spent outside walking, or for many, playing golf or tennis. Oh yes, and the big one, much less stress!

spectrum ifa retirement

This is all resulting in something that is causing massive issues around the Globe for all sorts of reasons. People are living longer and needing more medical help along the way, because, despite being generally healthier now, older people still have more health issues than younger people. With that comes an ever increasing stress on healthcare systems. The ageing population also means that the ratio between retirees and workers is swinging in a way that means less taxable income is there to help fund the ever increasing medical needs.

So, while it is great we are all living longer, and therefore having a longer and healthier retirement, how much attention are we paying to this fact with regards to financial health? The pension pot and savings pot we hope you have accumulated now has to last for an ever increasing length of time. Have you considered the need for adequate medical insurance before it is too late to be accepted as a client (because you are too old)? Inheritances may be left to you at a much later stage of your life, and when they are, they could also be smaller due to the fact your parents lived so much longer.

In summary, it is really very important to spend time considering all of these factors. How many of us actually look at this in detail, with an honest reality check regarding the years ahead?

One of the things I like to do with my clients is to make sure we look at the big picture, assessing what you have and how long it is likely to last. Should you be putting the brakes on the lifestyle just a bit for that added longevity financially, or are you being too cautious? It is amazing the amount of couples I meet who are being too careful with money. Or have you got it just about right?

What happens if inflation rises or falls, or the money you have invested loses value or, hopefully, makes more than you expected? Oh yes, and what happens to your income when exchange rates move?

It is always said that you cannot buy time, but strangely enough, most clients I meet here in Spain look a lot younger than they actually are, so in my view, they all seem to have managed to do just that, aided probably by all of the things we know are good about living here. So, if by talking we can remove a little more stress by getting all of those financial ducks in a row, then maybe you can cheat the grim reaper for a good many more years to come.