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What can I do to minimise any potential impacts of a tough Brexit process?

By Amanda Johnson - Topics: Article 50, Assurance Vie, BREXIT, Company Pension Schemes, Defined benefit pension scheme, Final Salary Pension, final salary schemes, France, QROPS, Retirement, United Kingdom
This article is published on: 11th May 2017

11.05.17

This is a question many expatriates are mulling over, now positioning for the upcoming negotiations has started. First and foremost, I remind my customers that the process to leave the EU is widely anticipated to take the full two years set out in article 50, so the only immediate areas people should focus on are changes in the U.K. and French budgets.

As the negotiations progress however, there are steps you can take which will ensure that any effects to you are minimised:

  1. Does your adviser work for a French registered company, regulated in France?

Working with adviser who operates and is regulated already under French finance laws means that any change in the UK’s ability for financial passporting will not affect you.

  1. Is your Assurance Vie held in an EU country, not part of the U.K.?

Again, any issues the U.K. may have to solve regarding passporting are negated by ensuring your Assurance Vie is already domiciled in another EU country.

  1. Have you reviewed any U.K. Company pension schemes you hold, which are due to mature in the future?

The recent U.K. Budget saw the government levy a new tax on people moving their pensions to countries outside the EU. There is no certainly that this tax will not be extended to EU countries once the U.K. has left the union.

The process of leaving the EU is very much unchartered waters and whilst I certainly do not recommend anyone acts hastily, a review of your financial position in the next few months may avoid future headaches.

Whether you want to register for our newsletter, attend one of our road shows or speak to me directly, please call or email me on the contacts below & I will be glad to help you. We do not charge for reviews, reports or recommendations we provide.

“How dare they move abroad and take their wealth with them!”

By David Hattersley - Topics: BREXIT, Elections, Residency, spain, Theresa May, United Kingdom
This article is published on: 19th April 2017

19.04.17

Taken from a (fictional) script of a new episode of “Yes Minister”, re-introducing the following cast.

Chancellor of The Exchequer: The Right Honourable Jim Hacker
Permanent Secretary to the Treasury: Sir Humphrey Appleby
Principal Private Secretary to Jim Hacker: Bernard Woolley

Sir Humphrey, bursts into the office of the Chancellor, unannounced, hot, bothered, angry and ranting.

Sir Humphrey: The PM has just announced another election, What is that woman playing at !!. Heavens above it was only weeks ago that we spent ages working on the Budget, which may never come into effect, or at least until it becomes law, by which time we may, heavens forbid, have had a change of government, and have to start all over again. Teaching newcomers about the real facts !!!!!……. How can I run the nations Treasury on that basis????. It reminds of the last time a lady PM was in charge, daring to throw her hand bag around dictating what we could and couldn’t do. It created chaos. We have only just managed to get back to a kind of orderly sensible running of this department and the Civil Service. What is the point of having a Cabinet if you don’t share the information first.!!!!

Bernard: Sir Humphrey, please calm down a little. To be fair, it’s only a few months since the Minister was appointed. It’s not as if he fully knows the ropes yet. Besides, we tried to contact you this morning at your office, immediately after the Cabinet meeting, but were told that you were at your club having breakfast with old friends from Oxford and were not to be disturbed as you were talking about important issues in relation to the Budget.

Sir Humphrey: Minister you should have let me know earlier. Surely the PM must have known that she was going to make this U – turn, despite saying only a few months ago she wasn’t going to have a General Election until 2020. That’s the trouble with politicians, changing their minds, to the whim of the public at a moment’s notice. We seem to be moving to the policies of our neighbours in the EU, in particular Greece, France and Italy along with the US where a populist trend or tweet is considered grounds to react without the calm sensible order to the stability that we in the Civil Service desire.

Jim: The Cabinet meeting was held this morning. This U turn was only discussed this morning. It was felt that it was in the best interests to enable the PM to be elected as the leader of the party best in the position to negotiate a favourable exit. We needed to do this as soon as possible, so that stability is returned quickly. You seem to forget the previous lady P.M., whom you deride, and may I remind you, “Was not for turning”, who was then thrown out of power by a small number of people, and the electorate was not given the chance to vote . This is democracy at its finest, I think the PM should be applauded for taking this risk, as we all are.

Sir Humphrey: calming down…..mumble mumble, …… Minister I suggest we look at the best way to ensure that the best bits of the Budget that can be carried forward and that we can get some additional revenue coming into the State coffers without too much difficulty.

Jim: Mmm, I am a little concerned that perhaps some elements are a little too hasty and need further thought and consideration. We need to consider that the UK is still part of the EU, and is still subject to the freedom of movement of goods and services as enshrined by the EU/EEA constitution.

Sir Humphrey: In the mean time Minister, due to the election and additional delays we still need to make things harder to protect against a possible net capital outflow for those that are bringing forward plans to retire overseas. I was talking this morning to the FCA, along with the friends from Oxford who are either CEO’s of product providers concerned about retaining their funds under management, along those who are trustees of UK pension schemes. Maybe in two years time we will be well shot of the EU and bothersome elements of the EEA, and can then treat ex pats and the Europeans that move back to their original country as one. As for the Scots we are bribing them with more money than we can afford to stay within the UK. However they seem intent on holding another referendum to leave the Union and join the EU. In that event we can borrow President Trump’s brilliant idea by rebuilding Hadrian’s Wall to stop those heathen coming in. And that can be paid for by increasing the duty on their Scotch.

Bernard: errmmm can I remind you Sir Humphrey, that if what is left of the Union leaves the EU, and just stays in the EEA , then what is left might not get the benefits of the subsidies of the Common Agricultural Policy. That could mean that things like Scottish Salmon, Lamb, Beef and Irish butter from remaining members will get these subsidies whilst what remains of the UK won’t as we will have lost the benefits of the CAP.

Sir Humphrey: Look , after all it was the English electorate that voted to leave and they will have no sympathy with any of them whatsoever. This is especially after that brilliant campaign by the Daily Blurb to stop winter fuel payments to pensioners living in the sunny Costa’s.

Jim: Didn’t they have snow on the Costa’s recently, that seems pretty wintery to me !

Sir Humphrey: Yes, but Minister , that is once every 30 odd years, a one off .

Jim: About the same number of years since there has been snow in London on Christmas Day then!!!!! Their homes are not built for winter, and those that live 10 kms inland have had to suffer cold winters regularly.

A by now exasperated Sir Humphrey: You haven’t given me the chance to explain the wider picture….. We have to take a long term view. The best bit Minister is when 70% of the ex pats return to be with children & grandchildren, or illness, and they eventually need residential care. They will have to pay for this, but not via HMRC taxation, more a sort of stealth tax. Most won’t realize this as it is not direct taxation, but capital assets have to be liquidated to pay to local Social Services under the Care Act. This leaves a maximum of £23,350 per individual that cannot be used for this purpose. It avoids the pesky IHT rules and allowances, with very little being passed to the next generation. That means that they too will have to work longer and harder, still paying tax of course, without the help of a legacy. That solves the problem of demographics, we have to take the longer view. So we hit them on the way out and on the way back in a triple whammy for daring to retire abroad, and not staying to pay taxes in this glorious country of ours as it moves back to its former glories. After all the opportunities we have given to the great British public over the years, for some of them, how dare they move abroad and take their wealth with them. Ungrateful peasants.!!!

Jim: Doesn’t that discriminate against the very idea of freedom and choice, they took a risk. I remember the 60’s and early 70’s when one was limited to the amount of money one could take out of the UK under exchange controls, for those lucky enough to go on holiday abroad in those dark days. My parent’s passports were stamped accordingly to prevent capital flight and a further fall in Sterling. It is wrong, to return to those dark old days and take that freedom away, that’s not playing cricket.

Sir Humphrey: Yes Minister ,but we will also potentially lose further tax payers when some of the companies in the City relocate part of their operations to Europe, along with research companies that may relocate to Scotland so that they still benefit from EU grants. Someone has to pay for that loss and we have to be realistic and find a way that is politically acceptable to the remaining electorate and protect our interests’ as a result of an additional loss to the countries coffers. I know it may not be cricket, but that is a just a game, to which incidentally I will thoroughly enjoy watching from the members pavilion at Lords , after meeting up with the ex leader of UKIP who has just been nominated as a member. Perhaps you’d like to become a member too Minister, I am sure that could be arranged.

Jim: Sir Humphrey, I am pleased for you as a civil servant that you are to be able to spend 5 days off watching a Test Match live. As a working politician I still have the dispatch boxes to go through, and attend to the needs of my constituents. So I am lucky to watch the one hour highlights on TV, so I will have to decline your offer. And there is a minor chance that unlike you I might be out of work in a few weeks time, can’t afford to be a member of Lords, and revert back to a real job.

Moving away from fiction lets deal with the facts

Factual time line.
UK Statutory Residents Test . Finance Act 2013. Note how helpful it is for those coming in, and how difficult it is for those leaving in relation to tax.

UK sited residential property held by ex pats once tax resident abroad. Finance Act 2014. From April 6th 2015, any gain from that date in the value of the property thereafter, upon sale will be liable to UK Capital Gains tax, and as such the gain will be paid directly to UK HMRC.

Care Act 2014.Statutory testing of benefits for care .Introduced two stages April 2015, & then April 2016. The April 2016 element included a revised increased of the thresholds re residual capital and was deferred in April 2015 until at least April 2010 when it will be reviewed again.

FCA ruling. April 2016. Advice and the report required on the potential transfer to a QROP of a Defined Benefit Pensions can only be carried by a UK regulated IFA who charges fees upfront.

Finance Bill March 8th 2017. A potential tax surcharge of 25% of the pot after transferring a UK pension to a QROP.
( Qualifying Recognized Overseas Pension ) Exemptions apply to this particularly if you reside in EEA/EU for five complete tax years after the transfer is completed. A review of all QROP’s providers to see that they match the new rules, in particular those that are outside the EU/EEA area. The rules are more onerous for non EEA / EU residency of both individual and provider. In addition as a “foreign pension” paid to a returning ex pat a QROP will no longer benefit from 90% of this being liable to UK income tax. It will revert to a 100% with immediate effect.

An unusual element of the bill was the fact that it came into effect on the 9th March, allowing no time for those plans already in progress. It is unusual to take such a draconian step and not allow sufficient time for those cases in the process of being progressed to be halted in such a manner.

March 29th 2017. The date the UK formally triggered Article 50 to leave the EU. This has already negated the EU element of the EU/ EEA referred to above re QROP’s.

April 18th 2017 Announcement of UK General Election for June 8th 2017.

A further note is that UK HMRC will still allow personal allowances on taxation of assets held in the UK for non-resident UK citizens living abroad within the EEA. This was dated the 7th April 2017, direct from UK Gov HMRC website. Whether that will continue in the future, will be dependant on the outcome of Brexit negotiations, and that is the great unknown. If you follow the logic applied to the above and the UK does leave the EEA, you have been given at least advance warning.

Most of us as regulated advisers in the EU have come across some UK providers of all manner of, Unit Trusts, ISA’s and Pensions in particular making life extremely difficult too.

So action is required , one has to say immediately, before it is too late. Finally my thanks to the BBC and Antony Jay/Jonathan Lynne for the original Yes Minister,and in particular that episode where Sir Humphrey extols the virtue of the UK remaining in the EU. Thank you for the inspiration to write an updated version that is current, possible and satirical.

Banks start plans for Brexit

By Chris Burke - Topics: Article 50, Banking, BREXIT, europe-news, spain, United Kingdom
This article is published on: 22nd March 2017

22.03.17

After U.K. Prime Minister Theresa May set a date to trigger the formal mechanism for quitting the EU, within weeks some of the worlds Big investment banks will begin the process of moving London-based operations into new hubs inside the European Union.

The biggest winners look likely to be Frankfurt and Dublin. Those people familiar with the plans, asking not to be named because the plans aren’t public, include the Bank of America, Standard Chartered Plc and Barclays Plc. To ensure continued access to the single market they are considering Ireland’s capital for their EU base. Meanwhile, Frankfurt is being eyed by Goldman Sachs Group Inc. and Citigroup Inc respectably others said.

Dublin shares similar laws and regulations as its U.K.neighbour and is the only other English-speaking hub in the EU. Whilst Frankfurt is a natural pick, given a financial ecosystem featuring Deutsche Bank AG, the European Central Bank and BaFin.

Executives want to have new or expanded offices up and running inside the EU before the U.K. departs in 2019. With banks increasingly expecting a so-called hard Brexit – the loss of their right to sell services freely around the EU from London.

It is thought London could lose 10,000 banking jobs and 20,000 roles in financial services as clients move 1.8 trillion euros ($1.9 trillion) of assets out of the U.K. after Brexit, according to think tank Bruegel. Other estimates range from as much as 232,000 jobs to as few as 4,000.

QROPS Pension Transfer

By Chris Webb - Topics: Company Pension Schemes, Final Salary Pension, final salary schemes, Pensions, QROPS, Retirement, spain, United Kingdom
This article is published on: 20th March 2017

20.03.17

If you ever worked in the UK, no matter what your nationality, the chances are you were enrolled in a private pension scheme. The UK government continues to tweak legislative changes affecting the expat’s ability to move this pension offshore. On the surface, these changes appear to limit transfer options, but in reality they have strengthened the legal framework offering expats continuing advantages.

Background

When you leave the UK your private pension fund remains valid but is frozen, or deferred, until you reach retirement age. The pension income you then receive is taxable in the UK no matter where you are based in the world. Once you die the pension will continue in the form of a spouse’s pension if you are married; otherwise it will cease. When your spouse dies, all benefit payments come to an end.

If you take any part of your fund and then die before you fully retire, a lump sum can be paid to your spouse.
In April 2006 Her Majesty’s Revenue and Customs (HMRC) introduced pension ‘A’ day. This liberalised UK private pensions and allowed people leaving the UK to transfer them overseas, often to a new employer. In doing this the UK complied with European legislation which allows all citizens the freedom of movement of their capital. Thus ‘Qualified Recognized Overseas Pension Schemes’ (QROPS) were born.

Recent Chamges 2017

During the March UK budget there was a very unexpected announcement regarding pension transfers out of the UK. The headline was :

“HM Revenue & Customs (HMRC) has announced that Qualifying Recognised Overseas Pension Schemes (QROPS) transfers for individuals not in the European Economic Area (EAA) will be hit with a 25% tax charge”.

At first glance it sent shockwaves through all concerned with pension transfers, after a moment to digest the news it became much clearer that there were exceptions to the rule, detailed below:
1. The QROPS Trustee is in the EEA and the client/member is also resident in an EEA country (not necessarily the same EEA country);

2. The QROPS and the member is in the same country; or

3. The QROPS is an employer sponsored occupational pension scheme, overseas public service pension scheme or a pension scheme established by an International Organisation (for example, the United Nations, the EU, i.e. not just a multinational company), and the member is an employee of the entity to which the benefits are transferred to its pension scheme.

It is also important to understand that if a client was to move outside of the EEA within 5 years of the transfer then the tax rate would apply.

In most of the cases I deal with this new tax ruling will not affect the transfer. Since moving to Spain all but one of the transfers I have implemented are EU based.

Implementation

QROPS are not necessarily the right thing in every single case. In order to decide whether it would be advantageous to transfer your pension or leave it in the UK, with the intention of drawing the benefits in retirement, please contact me so that I can carry out a personalised evaluation. There may be compelling arguments, outside of the evaluation alone, which are often overlooked and may affect you in the future.

One of these is that a large number of UK schemes are currently in deficit to the point that they will be unable to pay future projected benefits. This would mean that even though it looks as though there are arguments to leave your UK pension in situ it may actually be wiser to transfer it.

In order for you to make the best decision you need to professional advice on what would be the best situation for you. This will entail seeking details of the current UK schemes, including transfer values, the types of benefits payable to you and options going forward when you get to a retirement date and when you die.

Advantages & Disadvantages of a Transfer Between a QROPS and a SIPP

Advantages

Lump Sum Benefits
QROPS – If you transfer your benefits under the QROPS provisions to a Malta provider, in accordance with the rules of this jurisdiction, you may be able to take a pension commencement lump sum of up to 30% (unless you have already taken this lump sum from the UK pension). Under the current HMR&C (Her Majesty’s Revenue and Customs) rules to qualify for the lump sum option you must be age 55 or over. Your remaining fund is then used to generate an income without having to purchase an annuity. The 30% pension commencement lump sum is only available once you have spent 5 full, consecutive tax years outside of the UK (in terms of tax residence), if you are within the first 5 years, we strongly advise you to limit the pension commencement lump sum to 25%. From 6 April 2017 this 5 year period has been extended to 10 years.

SIPP – The maximum Pension Commencement Lump sum from a SIPP would be 25%.

No Liability to UK Tax on Pension Income
QROPS – This will be paid gross and you declare the income in the country you are resident in as long as the QROPS jurisdiction has a Double Tax Treaty (DTT) with the country that you are resident in. Transferring under the QROPS provisions ensures that, if tax is due on pension income, it will only be taxable in the country of your residence.
SIPP – This should be able to be paid gross, although many clients find this to be a very awkward process to solve as the pension company does not always talk to the HMRC and therefore at least for the first year or two the pension is paid net of basic rate tax and sometimes even on an emergency tax basis. This can be reclaimed, but will involve more paperwork than that of a QROPS.

No Requirement to Purchase an Annuity
There is no longer a requirement to ever purchase an annuity with either your UK pension or in the event you make a transfer under the QROPS provisions. Therefore the rules below are the same for a QROPS and a SIPP.

With both a QROPS and a SIPP the maximum age you must start to draw an income is from age 75. The Pension commencement Lump Sum must be taken by this age or the option to take it after this age is lost.

The budget changes in the UK has meant that from April 2015 the restrictions imposed from drawing a pension income from a UK Pension Plan will be scrapped. This means that investors will be able to take the whole of their pension as a lump sum if they wish from age 55. The first 25% would be the standard Pension Commencement Lump Sum but the remaining amount would be subject to your marginal rate of income tax. The Malta QROPS have now followed these changes to allow full flexibility also.
This would not be possible with a Final Salary pension. It would need to be transferred to a SIPP or QROPS to utilise these options.

Secure Your UK Pension Pot

Some defined benefit schemes in the UK are in deficit. Since the deficit forms part of the balance sheet of the company, this can present a huge risk to your pension fund.
Transferring your UK benefits to a SIPP or QROPS provisions could enable you to have full control of these funds without worrying about the financial situation of your previous employer.

Ability to Leave Remaining Fund to Heirs

QROPS – All death benefits will be paid out from the Malta QROPS with 0% death tax no matter what age an individual is.
SIPP – The recent UK Budget has changed how death benefits will be paid to their heirs in the future. If death occurs before age 75 then any remaining balance in a pension fund can be paid tax free to any beneficiary. Otherwise if a member passes away after the age of 75 then there would be a tax charge, any lump sum benefit would be subject to the beneficiaries marginal rate of income tax.

A transfer under the QROPS provisions will allow the member to leave lump sums without deduction of tax to heirs no matter what age they pass away, so it is clear and simple. (this is not applicable to Defined Benefit schemes). The below table shows the situation more clearly.

Defined Benefit Plans

UK Pension –
(generic pension benefits)
Scenario Death Benefits
SRA Married couple 1st to pass away 50% income to Spouse
Married couple 2nd to pass away 0% of total plan
Single but with grown up children 0% of total plan
Lump sum to future heirs 0% of total plan

 

QROPS- Malta
Scenario Death benefits
SRA Married couple 1st to pass away 100% of fund value to any beneficiary
Married couple 2nd to pass away 100% of fund value to any beneficiary
Single but with grown up children 100% of fund value to any beneficiary
Lump sum to future heirs 100% of fund value to any beneficiary

SRA – Selected Retirement Age

The tables are based on the usual death benefits being taken in retirement. Some plans may have slightly different death benefits which may be higher or lower than 50% income provided on death and guaranteed periods for the first 5 years. Please check the exact benefits within your scheme for a full exact comparison.

Currency
A standard UK pension will usually only be invested and pay benefits in Sterling, which means the member runs an exchange rate risk in respect of pension income, in addition to incurring charges in converting the pension payments to the currency of their country of residence.
A transfer under the QROPS provisions means that the pension payments can be made in the local currency, thus potentially eliminating exchange rate risk.

Lifetime Allowance Charge (LTA)

QROPS – There is no LTA charge within a QROPS so transferring larger plans to a QROPS may not be caught in this reduction in the future. Careful planning will be needed with your adviser if you are close to the limit in the UK. (a transfer to a QROPS is a crystallisation event, so will be tested against the LTA at that stage, any benefits above the LTA at time of transfer will be subject to a 25% tax liability.

SIPP – This is a restriction on the total permitted value of an individual’s total accrued fund value in UK registered pensions, currently £1m. Those who exceed this value face a potential tax liability of 55% on the excess funds on retirement at any time when there is a “benefit crystallisation event” that exceeds the LTA. A benefit crystallisation event is any event which results in benefits being paid to, or on behalf of, the member and so includes transfer values paid to another pension scheme, as well as retirement benefits.

Disadvantages

Charges
QROP & SIPP If you have a pension(s) with a combined transfer value of less than £50,000 then the charges may be prohibitive.

Loss of Protected Rights
QROPS & SIPP – A transfer may result in the loss of certain protected rights, including Guaranteed Annuity Rates, Guaranteed Minimum Pension, a protected enhanced lump sum, or rights accrued under a defined benefit scheme. (These are shown in the section “Analysis of Your Existing Pensions”).

Returning to the UK
If you return to the UK, then the QROPS administrator will have to report this ‘event to HMRC and the pension scheme will become subject to UK pension regulations again.
If it is your intention to return to the UK in the near future then a transfer under the QROPS provisions is usually inappropriate. If this was the case then we can help with our UK SIPP offering which may be more appropriate.

UK PUBLIC SECTOR PENSIONS, BREXIT AND ITALIAN CITIZENSHIP

By Gareth Horsfall - Topics: BREXIT, Italy, Pensions, public sector pensions, QROPS, Retirement, United Kingdom
This article is published on: 1st March 2017

01.03.17

I was watching a nature documentary with my son the other day and we were watching the foraging activities of grizzly bears in North America.

It was interesting from the perspective that they will forage across huge distances in search of different food types to ensure they get the proteins, minerals and vitamins they need to stock up for the long winter ahead of them.

In some ways this behaviour reminded me of the foraging that I sometimes embark upon, across the internet, to ensure that you have all the information you need to weather the seasons ahead. We have lived through some spring and summer seasons, metaphorically speaking, but politically we seem to be entering autumn and possibly winter, depending on your point of view of course. I imagine for those people I know who voted BREXIT, that this is a new dawn. However, I will stick with my view for the purposes of this blog.

FORAGING
I was foraging through the internet last week in search of some information on UK pensions and happened to stumble across an Italian fiscal website which had a summary of the Italian tax treatment of pensions from around the world.

To my surprise, my eyes fell across the following statement in relation to pensions paid from Argentina, UK, Spain, the USA and Venezuela:

‘Le pensioni private sono assoggettate a tassazione solo in Italia, mentre le pensioni pubbliche sono assoggettate a tassazione solo in Italia, se il contribuente ha la nazionalità italiana.’

WHAT DOES THIS MEAN?
In short, and what caught my eyes was specifically in relation to the tax treatment of public section pensions in Italy.

…….le pensioni pubbliche sono assoggettate a tassazione solo in Italia, se il contribuente ha la nazionalità italiana.’

(Public sector pensions would be those defined as local Government, doctors, nurses, police, firemen, armed forces, teacher etc).

If you are a holder of one of these types of pensions and are resident in Italy, you will likely know that under the double taxation treaty with the UK, in this case, that public sector pensions are only taxed in the UK, for those who are no longer UK resident and are therefore not subjected to taxation in Italy.

However, the above statement implies that if you are an Italian national then this pension would be taxed in Italy. (Taking into account any double taxation credit that would need to be applied). Therefore, Italian tax rates would apply and the pension would not benefit from the application of the UK personal allowance, in Italy, either.

This is clearly important, given BREXIT, and the number of people who were considering or making application for Italian citizenship as a means of resolving the issue of residency. Italian citizenship would define you as an Italian national and tax would apply to a UK public service pension.

DOUBLE TAXATION TREATY
Without wanting to take the words of a website as hard evidence, I did some more foraging and can confirm the words of the double taxation treaty (UK/Italy) as follows:

(2) (a) Any pension paid by, or out of funds created by, a Contracting State or a political or an administrative subdivision or a local authority thereof to any individual in respect of services rendered to that State or subdivision or local authority thereof shall be taxable only in that State.

(b) Notwithstanding the provisions of sub-paragraph (2)(a) of this Article, such pension shall be taxable only in the other Contracting State if the individual is a national of and a resident of that State.

THE BREXIT PROBLEM JUST KEEPS GETTING BIGGER
So, here we have another BREXIT problem which has now arisen as part of further investigation. I would suggest that Italian citizenship, for those with UK civil service pensions, needs to be thought out carefully and planned financially, before any action is taken.

How safe is your bank?

By Pauline Bowden - Topics: Banking, Investment Risk, spain, Uncategorised, United Kingdom
This article is published on: 27th January 2017

27.01.17

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 / Company Account       50,000GBP / NIL
      UK       75,000GBP
(from 31st January 2017, proposal by
Government to increase to 85,000GBP)
      Spain       100,000euro
      Jersey       50,000GBP
      Guernsey       50,000GBP
      Gibraltar       100,000euro

Many people in this area of Andalucia have bank accounts in Gibraltar, the Isle of Man, Guernsey or Jersey. Of the above list, apart from Gibraltar, these jurisdictions 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.

Theresa May addresses Brexit

By Chris Burke - Topics: BREXIT, spain, Theresa May, Uncategorised, United Kingdom
This article is published on: 25th January 2017

25.01.17

Theresa May, given one of the hardest Prime ministerial assignments perhaps of all time, gave her anticipated speech of the UK’s plans to leave the EU.

Why was it so hard?

When you have a referendum vote decided by only 2%, you have almost two equal sides to please. Those who voted to leave the EU, and those who were against it. Rather than alienate them and make them feel bad that the UK is going to leave the EU, like any good leader she had to try and get them feeling positive that, although they didn’t want it, perhaps there is lots to feel optimistic about leaving the Euro. A tough job in anyone’s book.

What did she say?

It was more of a case of what she didn’t say. Like a poker player, there was no way Theresa was going to give away to the other ‘Players’ what cards she was holding, how she was going to play them and perhaps most importantly which were her ‘Trump’ cards. What she did though was tell everyone what Britain was and wasn’t going to accept and how it would be done.

What information did she give away?

She will not settle for a bad deal for Britain, and she is prepared to walk away from the negotiations if she feels the deal is not right for the UK. Indication was also given that any agreement that was reached would be voted on by UK Parliament. She also confirmed that Britain will leave the EU’s single market – despite backing membership less than a year ago – to regain control of immigration policy and said she wants to renegotiate the UK’s customs agreement and seek a transition period to phase in changes. Her 12 point plan which starts with confirming leaving the EU and ending in a smooth, orderly Brexit, had recollections of a speech Hugh Grant gave in the film shown at every Christmas, ‘Love Actually’. It was very strong, very direct with clarity and highlighting the fact that Britain will not be bullied or pushed around. It is perhaps a strange comparison but it was arousing, just like the film, nonetheless.

How did it go down?

In essence very well. Theresa gave an assured, strong performance which the markets reacted to and she made it credible that Britain can still be a ‘Great’ force outside the EU. Whether this is the case has to be seen, but 50% of the reason why people react in life is their perception. And on this evidence, the people’s perception was good. Both from inside the UK and in the EU, most interestingly.

Residency rights in Brexit negotiations examined

By Spectrum-IFA - Topics: BREXIT, EU Select committee, europe-news, Exiting The EU Select Committee, Italy, Spectrum-IFA Group, The Exiting the European Union Committee, Uncategorised, United Kingdom
This article is published on: 19th January 2017

19.01.17

Yesterday on 18th January The Exiting the European Union Committee met in the ‘Boothroyd Room’, Portcullis House, London. The committee looks at the rights of EU citizens living in the UK and UK nationals living in EU member states as part of the negotiations for exiting the EU.

Witnesses in attendance included Gareth Horsfall from The Spectrum IFA Group, representing Expats living in Italy.

The Purpose of the session

The questioning focuses on the terms of reference for the inquiry, in addition to:
The concerns of EU citizens currently living in the UK, and UK nationals currently living in the EU
What approach the UK Government should take in the negotiations to safeguard the rights of both EU nationals in the UK and UK nationals resident in the EU
The process for identifying and clarifying the status of EU nationals in the UK

Witnesses in attendance

  • Nicolas Hatton, Founding Co-chair, the3million
  • Anne-Laure Donskoy, Co-chair, the 3million
  • Barbara Drozdowicz, Chief Executive Officer, East European Resource Centre
  • Florina Tudose, Information and Outreach Coordinator, East European Resource Centre
  • Debbie Williams, British citizen resident of Belgium
  • Gareth Horsfall, British citizen resident of Italy (The Spectrum IFA Group)
  • Sue Wilson, British citizen resident of Spain
  • Christopher Chantrey, British citizen resident of France

The session was broadcast on Wednesday 18 January 2017, from the Boothroyd Room, Portcullis House.
The recording can be viewed here

A full commentary from the session can be viewed on the Guardian Newspapers website here

Pensions Time Bomb

By Gareth Horsfall - Topics: Final Salary Pension, final salary schemes, Italy, Pensions, QROPS, Uncategorised, United Kingdom
This article is published on: 3rd November 2016

03.11.16

It could be said that uncertainty is the nemesis of good long term financial planning and living in today’s world you could be forgiven for throwing your hat in and tucking yourself away for a few years: Hard Brexit, Soft Brexit, Donald Trump, Italian Constitutional Referendum, German and French elections, the rise of nationalism, and the list goes on.

However, time always marches on and we either get left behind or plan forward. No one has ever complained to me (yet) about finding ways to legally save tax, finding ways to save money, getting better investment returns, or having more money then they had planned for.

So with this in mind I want to return to a subject which I have touched on a few times before but which has been hurled back to the top of the financial planning priority charts:  UK Final Salary Pension Schemes.

This article is specifically for anyone who holds any type of corporate final salary pension plan. (It does not relate to the UK state pension or UK government pension schemes, eg Teacher, Doctor, Army etc).

Starting with the bad news

I want to break some bad news to holders of those historically ‘gold plated’, final salary pensions schemes. The schemes that promise you a certain level of income based on your last few years salary level with your employer.

They are no longer gold plated!

This is quite a complex area to try and explain, but let me try and sum it up in a nutshell.

When the population starts living longer and the pension scheme can’t ask anymore contributions from the new members (without crippling them financially), then the cost of looking after the existing retirees for a much longer time than the scheme had anticipated (due to medical advances), becomes much greater than the net new money being put into the scheme.

If this were a family, it would be in debt. A mortgage, it would have defaulted. A company, it would have gone bankrupt.

Another problem is that these pension schemes need such a secure income stream to pay the retirement incomes of the retirees that they have to invest the scheme assets in safe, but incredibly low yielding asset such as Government Bonds.

And there you have the problem. If you make very attractive promises to retirees, based on your calculations many years ago, but the financial landscape changes dramatically during that time, then your original calculations are now totally obsolete. More money out than coming in spells TROUBLE!

Examples:
If you want to know how bad this situation is, then take a look at these figures. (These show the market value of the company in billions, versus the liability of their long term pension obligations, ‘IN BILLIONS’. The figures are staggering)

      VALUE       PENSION LIABILITY
BAE Systems       £15.802bn       £29.236bn
RSA Insurance       £4.332bn       £7.126bn
British Telecom       £36.657bn       £51.210bn
Sainsbury       £4.946bn       £7.696bn
Rolls Royce       £10.572bn       £11.564bn
RBS       £39.954bn       £35.152bn

These are the worst in the UK. If these companies had to legally honour their pension liabilities, they would be bankrupt.

But, let’s not be silly about things. The Government would never let companies like this go bankrupt, so they allow them to continue to operate the pension funds off their balance sheets.

And, to make it even more enticing they allow them another ‘get out clause’…outright default!, right into the UK Pension Protection Fund. A UK Government run scheme which guarantees to pay the pensions (up to certain limits) in the event that the company says it can no longer do so.

The burden moves to the taxpayer!

However, as low interest rates and retirees living longer wreck their long term calculations, more and more pension schemes are opting to close down and place their members under the Pension Protection Fund. As more and more members apply, the burden becomes greater on the UK public purse.  Do they cut the maximum amount of pension you could receive? What about the benefits you might lose?

These are all very serious questions for people who are currently members of final salary pensions.

However, there is some potential light at the end of the tunnel. A transfer away from the scheme, with a lump sum from which you can invest and take income from, as though you had your own personal pension.

The advantages and disadvantages have to be weighed up but with more schemes in financial difficulty there is a distinct possibility that it might be worth your while.

NOW! is the time to find out the value of your pension

Low interest rates and stress on the pension fund means that transfer values out are at historical highs. The companies are happy to rid themselves of you and will pay handsomely to do so, and the low interest environment means the transfer out values are much higher than you might imagine.

But low interest rates will not continue forever. Brexit and the fall of GBP will create inflation and that means interest rates will have to rise.

Get the information now before it is too late

Lastly, let’s leave things on a good note. If the benefit of transfer out is clear and present after an analysis of the situation, then you can also pass your income onto your spouse/partner, and/or leave the asset to your family on death. The benefits are not lost when you die.

There are benefits on both sides of the argument and we provide a FREE analysis to advise our client whether to transfer or not. If you want to look into this area of your retirement plans and potentially secure your long term income stream, then you can contact me

 

The Brexit or Invoking the Law of Unintended Consequence.

By David Hattersley - Topics: BREXIT, spain, Uncategorised, United Kingdom
This article is published on: 28th October 2016

28.10.16

Since the Brexit vote most news has been about potential Trade deals, and Sterling’s fall. However it perhaps has gone unnoticed, that from a variety of differing scenarios with outcomes by no means certain, a Constitutional crisis could be gathering steam.

It all stems back to the European Referendum Act 2015, that didn’t consider the variety of outcomes and was legally non binding. In addition, the power of the Royal Prerogative that was curbed when King John signed the Magna Carta in 1215 is being used by the Government, and in essence his successor Theresa May, to make or break treaties with other countries including the EU, in this case invoking Article 50 without the need for it to be passed into law via an Act of Parliament.

Critics of this say that the 1972 Act (based on the UK joining the Common Market) ceded power from the UK Parliament and allowed EU law to pass into UK law. This gave the British people protection under a new constitution based on EU law (based on Napoleonic Law). The UK has never had a written constitution that protects it citizens and gives them certain rights. It is being argued by a variety of bodies via legal challenges against the PM for using the Royal Prerogative to take away rights bestowed to Parliament. Some go as far to say “enforced removal” of citizenship rights from 65 million people would be “completely unprecedented “in modern democracy. Expat campaigners are also arguing that the “rights enjoyed by British citizens beyond these shores are so fundamental that legislation is required to take them away”.

The legal challenge has been mounted to the process of withdrawing the UK from the EU without a vote in Parliament and is going to the High Court, to be heard within the next two weeks. If the government lose due to Judges imposing their will (note unelected!), it would then be ironic for this eventually being heard by the European Court of Justice, the UK’s next step .

If the UK government win this current legal challenge on the basis “ Respecting the outcome of the referendum and giving effect to the will and the decision of the people “, that too could lead to further challenges for whom the right to vote was taken away i.e. a large percentage of Ex Pats and those Europeans citizens in the UK.

Additionally, working on that basis could give credence to Scottish Independence should they have a 2nd referendum and vote to remain in Europe. The same could be said of Northern Ireland, which has its own Parliament as well, and perhaps even Gibraltarians, as they overwhelmingly voted to remain.

The other major crisis in the making is the “Great Repeal Bill” debate that is due to be put to the House next year. A number of scenarios could occur. Many M.P.’s supported remain and the government still has deep divisions within its ranks. With only a majority of 10 seats in the House, a loss could force a vote of confidence, an early election, and a greatly disenchanted and potentially a disenfranchised electorate that voted to leave.

If they win then it passes to the House of Lords, who overwhelmingly wished to remain in the EU, and should they vote against it, take note Leave campaigners, an unelected body voting against the wishes of the majority!!

The Law of Unintended Consequence reigns supreme, or quite simply chaos. It makes Spain’s recent political turmoil insignificant, and I wonder how many of those that voted to leave or indeed did not vote at all, would have wanted these potential outcomes.

What would be even more ironic would be that the UK Government, in its current format, with many of the Ministers that supported the Leave campaign in positions of power, having to go to the European Court of Justice to overrule either singularly or both the UK Judges or the House of Lords to push through the Brexit, whilst at the same time preside over the breakup of the Union.