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Pension Commencement Lump Sum Tax in Spain – How does it work?

By Chris Burke - Topics: Barcelona, Pensions, Spain, UK Pensions
This article is published on: 16th March 2018

16.03.18

There are conflicting stories on how much lump sum/one off amount can you take from your pension if resident in Spain and what the tax will be. Indeed, many people with UK pensions believe it is better to take their UK pension lump sum in the UK before (grey line here if they have already moved!) they move to Spain permanently, as they will pay less tax. Firstly, even if you have a UK pension but are resident in Spain, this has to be declared in Spain. Secondly, if you finished contributing before 2007 you actually can receive MORE tax relief in Spain than in the UK (dependent upon the pension you have and how you take it).

To clarify, in the UK you can currently take a 25% tax free amount from all your private pensions and anymore would then be taxable.

If resident in Spain, you have the right to take up to 100% of your personal pensions in one go (100% in capital), to receive part in capital and part through regular payments or to receive the whole amount through regular payments. If you receive an amount in capital (a whole or a part) then you can apply for a tax reduction of 40% of the amount received for any contributions you made prior to 2007. This option can only be applied once, so, if you have more than one pension plan, you have to receive all of them in the same tax year if you want to apply this reduction.

If you take the amount as a regular payment you will have to pay income tax as if you have received any other general taxable income (a salary for example). In both of these cases, the amount that is taxed (with or without the 40%) is subject to the general income tax rate.

Lump Sum Pension Tax in Spain Lump Sum

Total amount of pensions £150,000
Amount to be taken in lump sum/one off £50,000
Amount tax exempt in Spain £20,000
Pension lump sum amount income taxable £30,000 (added to your annual income tax band)

 

Now if we look at the UK example we shall see the difference

Total amount of pensions £150,000
Amount to be taken in lump sum £50,000
Amount tax exempt in the UK £37,500
Pension lump sum amount income taxable £13,000 (added to your annual income tax band)

However, in the following scenario the Spain example works more in your favour:

Total amount of pensions £100,000
Amount to be taken in lump sum/one off £100,000
Amount tax exempt in Spain £40,000
Pension lump sum amount income taxable £60,000 (added to your annual income tax band)

 

UK Example

Total amount of pensions £100,000
Amount to be taken in lump sum/one off £100,000
Amount tax exempt in Spain £25,000
Pension lump sum amount income taxable £75,000 (added to your annual income tax band)

Important points to note here are:
If you cash in your UK pension OVER 25% and are registered in the UK as a non resident, an emergency tax code is likely to be used up to 45% and you will have to claim back what is owed to you. Unless you are able to provide a P45 from the current tax year following withdrawal from employment and/or current pension plan,

or

The pension provider already holds a P45 or up to date cumulative tax code received from HMRC as the result of previous withdrawals from that pension plan, and can apply it.

If you take your UK pension as a 25% lump sum, this should be declared in Spain and would apply to the Spanish rules of 40% being tax exempt and the rest income taxable. You would therefore pay any tax owed in Spain.

Only the FIRST Lump Sum is tax exempt so it’s important to realise that and make sure you plan effectively.

Regular payments from your pension fall under income tax

From 2007 onwards there is NO tax exemption of this kind.

Top Tips For Your Pension Lump Sum/One Off
When taking your lump sum, take it in the year that is most tax efficient for you, such as when you have lower income from other sources.

Moving your pension outside the UK could give you more freedom, more choices and potentially less tax to pay in the long term (depending on your situation).

Source: Silvia Gabarró GM Tax Consultancy Barcelona

Pension Healthcheck – Tips and Advice for 2018

By Chris Burke - Topics: Barcelona, pension transfer, Pensions, QROPS, Retirement, Spain
This article is published on: 2nd March 2018

02.03.18

Whether you are thinking about the amount of pension you want in the future or are approaching retirement, a pension health check might be the answer you are looking for. With the UK government bringing in autoenrolment (the process by where companies who employ at least 1 person have to make sure they save into a pension) which has been massively successful, it is clear that as the years go by and with people living longer, it is more important than ever to save for the future. A pension healthcheck is your chance to ask general questions, be proactive and start planning for your retirement. Every year that you don’t start a pension, the amount of money that you will require becomes a lot more expensive for you to achieve, due to the effects of compound growth.

The UK population is projected to continue growing, reaching over 74 million by 2039. It is also getting older with 18% aged 65 and over and 2.4% aged 85 and over. In 2016 there were 285 people aged 65 and over for every 1,000 people aged 16 to 64 years (“traditional working age”). Years ago, people generally retired at 55 and perhaps lived until 66/67 meaning 12 years of retirement income. Now, retirement starts at 60/65 and the average life expectancy is Europe is around 85. So mathematically, you can see the issue, which is why 89% of final salary pension schemes in the UK are financially in trouble: their calculations were not initiated on this model of retirement and life expectancy.

Are pensions the answer?
This is debatable for many circumstances, particularly in Spain where you do not receive tax relief on large pension contributions. Many years ago it was different, when you could put tens of thousands of pounds into a pension and receive tax relief, or a company paid into it for you. However, in today’s world most people don’t fall under this scenario.

What IS the answer to retirement planning?
Make sure any assets you own work for you, including rental properties, investments, inheritances or money saved regularly. Yes, you can receive tax relief on money you save into a pension purse, however, this money is usually blocked (except in the case of critical illness or disability) until you are allowed to have it and has to always act like a pension, i.e. less flexibility and adhering to pension rules.
Therefore when thinking about retirement you should focus on the following tips to truly give you flexibility, confidence in your retirement and peace of mind:

Maximise Property Assets
If you own property, is it earning you the real value of your money invested in it? For example, a property investor today would usually want to receive a 7% return on their investment to make it worth their while:

Annual rent of property: €15,000 pa
Property Value:€300,000
Annual yield:annual rental, divided by property price, x 100 = 5%.

This may or may not take into account any expenses on the property you have. Are you also paying an agency to look after your property? Here are some areas to work on:
Is the rent high enough given the amount of money invested?

Can you reduce the costs of running the property, i.e. maintenance/agency fees? If they have been managing it for a while and there isn’t too much for them to do, ask them to ‘sharpen’ their pencil. More often than not they will, as they won’t want to lose the regular income you provide them.

Investments/stocks/shares/funds
How are these performing? Dividend paying shares (that is those with the payments /bonuses given to you, reinvested) historically are one of the best performing investments (including property).
Are they outperforming the markets, or being managed less erratically? That means not going down as sharply as the markets do and giving a less volatile return, which in turn gives you security of capital invested

The key areas to note here are:

  • Performance
  • Fees
  • Trust in advice given

Pensions
Are you currently saving into a pension and if not, what are you doing instead (as I said above it doesn’t have to be a specific pension purse). Have you accumulated more than one pension, if so what are they all doing, how are they being looked after and where might you be when you retire?

Key points to find out:

  • Details/values/contact details of any pensions you have
  • What are they invested in and how are they performing?
  • What are your options?

When you have gathered all the necessary information (or the advisor can gather this for you with your authority), you can then sit down with a professional and talk through your options and what journey your life might take. You can also look at maximising your National Insurance contributions (a mathematical no brainer in many people’s circumstances, even if you live outside the UK) and planning what you can do to make sure moving forward you are maximising your assets and turning them into a comfortable retirement.

€200,000, achieving a 6% net return over a 27 year period would achieve 1 million Euros…….with good advice, planning and consistent reviews.

Will your pension sustain you through retirement?

By Spectrum IFA - Topics: France, Pensions, Retirement, State Pensions After BREXIT
This article is published on: 16th February 2018

16.02.18

It is widely known that Europe’s ageing population is a problem for EU Member States. Quite simply, people are living longer and this impacts on the sustainability of State pension systems, referred to as the first pillar. Member States may attempt to address this issue by raising State pension ages and increasing the number of years that people need to qualify for a full State pension. However, this then impacts on the standard of living that retirees can expect to attain, unless additional provision is made.

In some Member States, employees may benefit from occupational pension schemes that are sponsored by their employer. These are known as second pillar schemes and if a promise of a defined benefit pension related to salary and service is on the horizon, then this is highly advantageous. However, employers too are feeling the strain of funding such promises and so are increasingly closing defined benefit schemes and putting in place alternative defined contribution plans. There is no benefit promise and the employee will get whatever the eventual ‘pension pot’ purchases. In short, the risk of meeting the target benefit is passed on to the employee.

Third pillar pensions are also ‘money purchase’ and these sit on top of the first and second pillars. Voluntary by nature, these plans can make the difference between a comfortable or a poor retirement. Such additional pensions may also provide a ‘bridge’ to State retirement pension commencement, if the benefits can be accessed before the State retirement age. However, without appropriate and regulated advice, the saver may find out all too late that their aspirations for a financially secure retirement are not met. Saving sufficient amounts and investing the monies wisely are both essential requirements, but so too is taking advice.

Pension entitlement is a complicated subject. Regular reviews with the adviser should be carried out to check that the ‘pension pot’ is on target to achieve objectives. Generic on-line advice is unlikely to be enough, particularly if the person has accumulated several ‘pension pots’. Moreover, if a person has had a cross-border career, how does the ‘pension pot’ acquired in one State dovetail with one in another State? How are the State pensions earned in each Member State impacted by the EU State pension co-ordination rules? How do the diverse tax rules across Member States affect the outcome for the saver? These are just a few of many questions that should be addressed by the adviser – a robot cannot do this!

In June last year, the European Commission launched its proposal for a Regulation on a pan-European Personal Pension Product (PEPP), as a third pillar pension. In States where the first and second pillar systems are not well-developed, the PEPP may offer a solution for citizens who may be facing a poorer retirement. In other States, the PEPP should provide more choices to its citizens.

Whilst the PEPP initiative is welcomed, the Regulation as drafted, already presents some barriers to becoming a successful cross-border pension arrangement. The PEPP has the potential to contribute to the Capital Markets Union, but only if the barriers are overcome. Regulatory and fiscal rules diverge between the 28 Member States and so pragmatism and co-operation are needed to reach a solution. If the tax incentives are insufficient, and subject to change after an arrangement has commenced or even harmonised, the PEPP is unlikely to succeed.

The PEPP Regulation proposes a limited number of investment strategies be made available by PEPP providers. This includes a “safe investment option”, as a default option, which should provide a capital guarantee. The merit in capital guarantees for pension products is questionable, as these are expensive to provide. The result being that to support the capital guarantee (if in fact a real guarantee can be provided – and by what institution?), this would require low-yielding investments and consequently at retirement, the capital may be insufficient to provide an adequate level of income to supplement other pensions. Thus, the reference to a “safe investment strategy” could be misleading to the saver.

However, rather alarming is the proposal that the PEPP saver can waive the right to receive advice, if he/she selects the default investment option. It is arguable that PEPPs should not be sold on a non-advised basis, even in these circumstances. The Regulation as currently drafted could lead to the saver losing purchasing power, since an obligation to provide inflation-proofing has not been included.

Furthermore, the impact of national pension entitlements, varying decumulation options and retirement ages, particularly if the PEPP saver has cross-border accumulated benefits, strengthens the need for the PEPP saver to receive appropriate professional advice. Hopefully, the European Commission will also come to this conclusion.

This article was published on The European Federation of Financial Advisers and Financial Intermediaries website
Daphne Foulkes is a Board Member of the FECIF

Is your Pension close to the UK Lifetime Allowance?

By Spectrum IFA - Topics: Lifetime Allowance, pension transfer, Pensions, QROPS, Retirement, United Kingdom
This article is published on: 6th October 2017

06.10.17

With careful planning you can avoid the penal 55pc tax hit on pensions valued at more than £1 million

To find out how to avoid penal taxation on larger pension pots contact your local Spectrum adviser to arrange a free, no obligation consultation.

Lifetime allowance (LTA): what does it mean for your pension?

  • You need to monitor how much you’re putting into your pension funds and how well your investments are performing. Money held in a personal pension, including workplace schemes and SIPPs, Final Salary pensions, all count towards the limit, but the state pension doesn’t
  • If you have a defined contribution scheme or a SIPP the total fund value is assessed against the limit. This will be tested when a Benefit Crystallisation Event (BCE) arises. There are 13 different BCE’s. However the most common would be taking your PCLS, buying an annuity, transferring to a QROPS, reaching age 75, death etc. Each time an event occurs your pension is tested against the LTA limit
  • Generally if your final salary pension is worth more than £50,000 a year you’ll be over the £1m lifetime allowance
  • If you have a mixture of pensions, with benefits taken at different times, then it can get quite complicated to work out, how much LTA was used when and how much you have going forward
  • The LTA excess charge is 55% if the excess is taken as a lump sum and 25% if it is taken as an income. (If taken as income then the net amount is then subject to income tax at the members highest marginal rate, which usually works out to be a total tax of around 55% in total)
  • There are certainly very good ways to reduce the potential LTA liability in the future. This could include applying for protection to increase the LTA limit, however there are restrictions to apply
  • Furthermore if you live abroad there could be other options with International Pensions, such as QROPS, to help reduce or remove future liabilities
  • With our pensions specialists we are able to review your pensions, work out your current situation and then work out clearly your current situation and what the best way forward to help minimise any future tax liability with your pension

Planning to retire to France – don’t get caught in the tax trap!

By Sue Regan - Topics: Assurance Vie, France, Pensions, QROPS, Retirement, Tax
This article is published on: 18th September 2017

18.09.17

Retiring to France can be dream come true for many people. The thought of that ‘place in the sun’ motivates us to save as much as we can whilst we are working. If we can retire early – so much the better!

In the excitement of finding ‘la belle maison’ in ‘le beau village’, we really don’t want to think about some of the nasty things in life. I am referring to death and taxes. We can’t avoid these and so better to plan for the inevitable. Sadly, some people do not plan before making the move to France and only realise this mistake when it is too late to turn the clock back.

For example, investments that are tax-free in your home country will not usually be tax-free in France. This includes UK cash ISAs and premium bond winnings, as well as certain other National Savings Investments, all of which would be taxable in France. So too would dividends, even if held within a structure that is tax-efficient elsewhere. All of these will be subject to French income tax at your marginal rate (ranging from 0% to 45%) plus social contributions, currently 15.5%.

Gains arising from the sale of shares and investment funds will be liable to capital gains tax. The taxable gain, after any applicable taper relief, will be added to other taxable income and taxed at your marginal rate. Social contributions are charged on the full gain.

If you receive any cash sum from your retirement funds, for example, the Pension Commencement Lump Sum from UK pension funds, this would be taxed in France. The amount will be added to your other taxable income or under certain conditions, it can be taxed at a fixed rate of 7.5%. Furthermore, if France is responsible for the cost of your healthcare, you will also pay social contributions, currently around 7.4%.

Distributions received from a trust would also be taxed in France and there is no distinction made between capital and income – even if you are the settlor of the trust.

As a resident in another country, it would be natural for you to take advantage of any tax-efficiency being offered in that jurisdiction, as far as you can reasonably afford. So it is logical that you would do the same in France.

Happily, France has its own range of tax-efficient savings and investments. However, some planning and realisation of existing investments is likely to be needed before you become French resident, if you wish to avoid paying unnecessary taxes after becoming French resident.

I mentioned death above and as part of the tax-efficient planning for retirement, inheritance planning should not be overlooked. France believes that assets should pass down the bloodline and children are ‘protected heirs’, so they are treated more favourably than surviving spouses. Therefore, action is needed to protect the survivor, but this could come at a cost to the children – particularly step-children – in terms of the potential inheritance tax bill for them.

Whilst there might be a certain amount of ‘freedom of choice’ for some expatriate French residents, as a result of the introduction of the EU Succession Rules, this only concerns the possibility of being able to decide who you wish to leave your estate to and so will not get around the potential French inheritance tax bill, which for step-children would still be 60%. Therefore, inheritance planning is still needed and a good notaire can advise you on the options open to you relating to property.

For financial assets, fortunately there are easier solutions already existing and investing in assurance vie is the most popular choice for this purpose. Conveniently, this is also the solution for providing personal tax-efficiency for you. There is a range of French products available, as well as international versions. In the main, the international products are generally more suited to expatriates as a much wider choice of investment options is available (compared to the French equivalent), as well as a range of currency options (including Sterling, Euros and USDs).

If possible, you should seek independent financial planning advice before making the move to France. A good adviser will be able to carry out a full financial review and identify any potential issues. This will give you the opportunity to take whatever action is necessary to avoid having to pay large amounts of tax to the French government, after becoming resident.

Even if you have already made the move to France, it may still worth seeking advice, particularly if you are suffering the effects of high taxation on your investment income and gains or you are concerned about the potential inheritance taxes for your family. A full review of your personal and financial situation enables us to identify any issues and recommend solutions that will meet your long-term goals and objectives.

The above outline is provided for information purposes only and does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or on the mitigation of taxes.

Update – Le Tour de Finance, Domaine Gayda, 6th October 2017
This year’s event is now fully subscribed but we are keeping a reserve list in case of any cancellations, so please let me know if you would like to be added to the list. Alternatively, if you would like to have a confidential discussion about your financial situation, please contact me either by e-mail at sue.regan@spectrum-ifa.com or by telephone on 04 67 24 90 95.

The Spectrum IFA Group advisers do not charge any fees directly to clients for their time or for advice given, as can be seen from our Client Charter

New Pension Transfer Rules!

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

10.07.17

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

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

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

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

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

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

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

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

Pension Presentation in Luxembourg

By Spectrum IFA - Topics: Company Pension Schemes, Final Salary Pension, final salary schemes, Luxembourg, non EEA residents, Pensions, QROPS, Spectrum-IFA Group
This article is published on: 24th May 2017

24.05.17
non EEA residents Luxembourg

The Spectrum IFA group held a pension seminar at the NH Hotel in Luxembourg. The guest speaker was David Denton, Head of Technical Division from Old Mutual International who flew in especially for the afternoon to join two of the local Advisers in Luxembourg, Dave Evans and David O’Donoghue.

It was a sunny afternoon, which only happens a couple of times a year in Luxembourg, so it was great that the 39 guests still managed to turn up. It was hard to book David Denton in as he mentioned he had only just that month already been to Singapore and South Africa to give similar presentations.

Pension Presentation in Luxembourg

David discussed the recent changes with the UK Budget and how this has affected non EEA residents when considering QROPS transfers, he mentioned the changes to the death benefits and the fact that unfunded Final Salary schemes can no longer be transferred. The changes to pensions over the last couple of years shows the UK Government are intent on narrowing down the option in the future, especially with regards to International Pension transfers to Qualifying Recognised Overseas Pensions (QROPS) and transfers from Final Salary schemes. Whilst these schemes do have good benefits, so should not be moved lightly, but with the very high transfer values at the moment and potential ban on transfers in the future, requests for transfer values are at record highs. With the general election coming up there could be another snap Budget and so why not review you pension plans now while you have time to think about the best way forward and before some retirement options are closed by the UK Government.

Keeping On Track

By Chris Webb - Topics: Estate Planning, Financial Planning, Madrid, Pensions, Retirement, Saving, wealth management
This article is published on: 5th May 2017

05.05.17

Speaking with my many clients one of the most talked about topics is “I wish I had done something sooner” or “I wish I had put a plan in place”.

All too often in our younger years we race through the nitty-gritty details of our finances and neglect to focus on crucial “future proofing” in the process. In our 20’s we tend to spend, spend, spend. In our 30’s we try to save, but starting a family or purchasing property make it difficult. In our 40’s we’re still suffering the hangover from our 30’s and inevitably the work required to provide for your financial future becomes increasingly harder.

But if you adopt a marathon approach to money (opposed to a sprint – see my article on this topic), it can allow you to take a more holistic look at your overall financial picture and see how decisions that you make in your 20s and 30s can impact your 40s, 50s and into your retirement years.

It doesn’t matter how old you are, being financially healthy boils down to two things. The level of debt you have and the level of savings/investments you have. The only real difference is how you approach both subjects, as this will change with age .

Tips in your 20’s

1. Debt – Loans And Cards
It’s easy to think that making the minimal payments and delaying paying them off, to save more, is a good idea, but this strategy rarely works. The more you make the more you tend to spend, so getting round to clearing off these debts never comes any closer. As you go through the 20’s cycle, additional costs will start being considered, like starting a family or purchasing a house therefore the ability to clear your debts just doesn’t materialise.
This is why now is the time to work on breaking the credit card debt or loan cycle for good.

2. Start An Emergency Fund
While you’re busy paying down your debt, don’t forget that you should always be planning on having a “savings buffer” in the bank. To help accomplish this goal you should transfer funds straight from your “day to day” account into a deposit account. One where your aren’t likely to get access through an ATM which reduces the temptation to spend it on a whim. Ideally, you should aim to have three times your take-home pay saved up in your emergency fund.

3. Contemplate Your Future – Retirement

At this point in your life, retirement is far off, but it can be important to start saving as early as you can. Even small amounts can make a big difference over time, thanks to the effect of compound interest. Start saving a small percentage of your salary now to reap the rewards later in life. See my articles on compound interest and retirement planning to see the difference it can make.

Tips in your 30’s

During this decade, your financial goals are likely to get a bit more complicated. Some people will still be paying off credit card debt and loans, whilst still working on the “emergency account”. So what’s the secret to juggling it all? Rather than focusing on one goal you should be looking at the biggest of your goals, even if there are three or four.

1. Continue Reducing Debt
If you’re still paying down your credit card balances then considering consolidating onto one card with an attractive interest free period should be your first task. Failing that you need to concentrate on the card with the highest interest rate and reduce the balance ASAP. The most important thing to consider with debt is the interest rate, If you have low interest rates (I’d be surprised) then there’s no major rush to pay them off, as you could manage the repayments and contribute to other financial goals at the same time. If your interest rates are quite high then the priority is to clear these debts down.

2. Planning For Kids
Little ones may also be entering the picture, or becoming a frequent conversation. Once this is a part of your life you’ll start thinking about the cost implications as well. Setting aside a small amount of funds now to cater for the ever increasing costs of bringing up a child will reduce the financial stress later down the line. If you have grand plans for them to attend university, potentially in another country, then knowing these costs and planning for these costs should be part of your overall financial planning.

3. Assess Your Insurance
The thing that most people forget. Big life events such as getting married, having kids, buying a house are all trigger points for reassessing what insurance you have in place and more crucially what insurance you should have in place. If you have dependents, having sufficient Life cover is paramount. Other considerations should be disability, critical illness and even income protection.

4. Start that Retirement Plan
It’s time to stop just thinking about setting up what you call a Pension Pot, it’s time to take action. Starting now makes it an achievable goal, leaving it on the back burner because you’re still too young to think about retiring is going to come back and haunt you later in life.

Tips in your 40’s

This is the decade where you need to make sure you’re on top of your money. At this point in your life, the ideal scenario would be to have cleared any debts and to have a nice healthy emergency fund sitting in a deposit account.

1. Retirement Savings – Priority
During your 40s it’s critical to understand how much you should be saving for retirement and to analyse what you may already have in place to cater for this. In my opinion it’s now that you need to start putting your financial future/ retirement ahead of any other financial goals or “needs”.

2. Focus Your Investments
Although you may not have paid much attention to “wealth management” in your 30s, you’ve probably started accumulating some wealth by your 40s. Evaluate this wealth and ensure there is a purpose or goal behind the investments you have done. Each goal will have a different time horizon and potentially you will have a different risk tolerance on each goal. The further away the goal is the more you can afford to take a “riskier” option.

3. Enjoy Your Wealth
It’s about getting the balance right. Hopefully you’ve worked hard and things are stable from a financial point of view. You need to remember to enjoy life today as well as planning on the future. As long as important financial goals are being met there is no harm is splashing out on that dream holiday, and enjoying it whilst you can.

Tips in your 50’s

You may find yourself being pulled in different directions with your money. Do the children still require financial support, do your parents require more support than before ?, The key thing to remember is to put your financial security first, and yes I know that sounds a bit tough…….. You still have your retirement to consider and probably a mortgage that you’d like to clear down before retirement age.

1. Revisit Your Savings and Investing Goals
Your 50’s are prime time to fully prepare for retirement, whether it’s five years away or fifteen. At this point you should be working as hard as possible to ensure you reach your required amount. This means that careful management of your assets is even more critical now. It’s time to focus on changing from a growth portfolio to a combined growth, income and more importantly a preservation portfolio. What I’m saying here is it’s time to really analyse the level of risk within your asset basket.

2. Prioritise – Your Future V Kid’s Future ( It’s a tough one….)
During their 50’s a lot of clients struggle with figuring out how much they can afford to keep supporting a grown child, especially when they’re out there earning themselves. The bottom line is that although it can be tough you have to continue to put yourself. first. The day of retirement is only getting closer and unless your planning has been disciplined there’s a possibility you may need to work longer than anticipated, or accept less in your pocket than you hoped for.
You are number 1…….

3. Retirement Decisions and considerations
You should begin to revisit your estate planning, your last will and testament, power of attorney if you feel necessary and confirm that your beneficiaries on any insurance policies or investment accounts are all valid.
Once you’ve covered off the administration part then I’d suggest you sit back and look forward to the biggest holiday off your life……..have a great time !!!

Spanish State Pension system about to go Bankrupt?

By Chris Burke - Topics: Barcelona, Pensions, Retirement, Spain
This article is published on: 4th April 2017

04.04.17

During 2017 or early in 2018, the Spanish State Pension system is due to run out of money. At one point, the reserve fund the government created for this was standing at 66 million Euros.
Why has this happened?
During the crisis, millions of jobs were lost, and with them, an almost parallel reduction in contributions to the Social Security. Furthermore, a large part of the new jobs are precarious – temporary, part-time or free-lance – and with low salaries. This means that contributions to the system are way below expectations and the minimum required for it to be able to meet outgoings with incomings.
While this has been happening, payments to retirees have been increasing. In the last 11 years the number of actual pensioners has increased by over a million (8.3 million up to 9.4 million). The average pension amount paid out has also increased, from €647 per month to €906 from 2006 to 2016. In 2007, 79 billion Euros was paid out in pensions, compared to 117 billion in 2016, an increase of 48%. In real terms, the annual deficit for the year is 19 billion Euros.
This issue of funding pensions is made even harder by the lack of people in employment. In many European countries it’s normal for 50% of the population to be in work, in Spain it’s only 40%.
Ideas on how to solve the problems being explored
These range from not putting a cap on contributions (this would generate more income in the short term, but mean more pensions payable in the long run). A more popular idea is to allow those people retired to still work and receive their entire pension, which would generate increased state contributions. Gaining more support is the change to stop those who are not contributing to the system to not receive state pensions/handout, such as widows and orphans. These would instead be funded from current tax revenues.
In essence Spain may have to look at what many other countries are changing, such as making people contribute for more years and lower percentages to effectively cut the average pension payments. As well as increasing Social Security contributions. But what does remain clear is, if you are ONLY relying on the state to fund your retirement, you could be looking at grave consequences.
To talk through what your retirement looks like, and what you can do to shape it, feel free to contact Chris.
(Source ‘The Corner’ Fernando Barciela)

Changes to QROPS from 9th March 2017

By Chris Burke - Topics: Pensions, QROPS
This article is published on: 23rd March 2017

23.03.17

The UK Government announced major changes to Qrops schemes as from the above date (note this does not affect those who already have a Qrops). In essence, anyone who is resident outside of the EU/EEA or not living in the country where their Qrops is based (limited options here) will be taxed at 25% of the value of their pension, if this occurs within 5 years of starting a Qrops (i.e. becoming non UK resident).

So for example, Chris Burke moves his pension from the UK into a Qrops on the 30th March 2017 to a scheme based in Malta (one of the most popular places to hold your Qrops due to its strict regulation). In 2021 (4 years time) Chris decides he is moving to Dubai. He would be taxed 25% on the value of his Qrops.

Why is the UK doing this?

Well, there are many reasons and you would think Brexit is one (many people leaving the UK and perhaps taking their pensions with them). Qrops is also very popular due to its potentially tax efficient and security aspect of securing your UK pension (this is not the case for everybody so good advice is needed). You would also have to look at the potential taxes the Government would raise from this, there are many Qrops based schemes around the world and by limiting where you can hold your pension greatly affects those that can move it.
So to clarify, UK pension transfers to QROPS requested on or after the 9th March 2017 will be subject to a 25% tax charge, unless;
1. The QROPS is in the EEA and the Member is also resident in an EEA country.
2. The QROPS and Member are in the same country or territory. This is a limited if negligible part of the market.
3. The QROPS is an employer sponsored occupational scheme, overseas public service pension scheme or a pension scheme established by an international organisation.
Draft Guidance confirms that for the purposes of these measures, the EEA includes Gibraltar, which is considered part of the EU as a part of the UK.