Monday, 24 February 2014

Financial Healthcheck

If someone referred you to an unqualified quack doctor you wouldn’t thank them for it, would you?

Well here’s a deal: I’ll never send you to an unqualified, unregulated financial adviser and I will check them out beforehand. Also, I promise you there will be NO upfront charges.

The peak year for house purchases by UK & Irish citizens in Spain was 2006. Expanding equity in main residences fuelled the desire to buy second homes, many with the specific intention of retiring to Spain. Let’s call it living the dream!

Many emigrated with the specific intention of making Spain their permanent home. Why is this important? Many non-residents are also affected. Let’s look at what has changed since 2006

Major Changes
How many of you readers are affected by one or more of the following changes?

  1. Exchange rates
I made a comparison of mid February 2006 to 2014. Using a sum of £500, say a monthly income or pension the exchange rate reduced. €734 in 2006 became €601 in 2014.

You may think there is nothing you can do but there are options.

  1. Interest rates
If you have savings or investments based on interest rates, you won’t need me to spell it out. Have you considered any alternatives?

Interest rates that affect us are set by the European Central Bank and Bank of England. Both have stated that interest rates will remain low for the foreseeable future.

  1. Mortgages
If interest rates are low, this must be good for mortgages, so you would think. However, there are two factors which cloud this issue;

    • Because of past mistakes, which lead to bank closures, it is still very difficult to get a mortgage.
    • Many people, especially those who borrowed high percentages often can’t get out of deals they made in earlier years. If you are paying more than 2.25% you definitely need a review

The mortgage market has changed substantially since 2006.

  1. UK Pension Schemes
If you have emigrated or plan to, then it helps to know and understand your existing scheme. The rules which are ‘set in stone’ in the UK may be very different if you seek a transfer. This often surrounds retirement age. There have been many changes in the past few years with new ones planned.

One of the values of a Financial Healthcheck is for the adviser to understand and tell you exactly what you have now and to compare with the alternatives. The Financial Conduct Authority (FCA) which took over from the FSA is very strict about pension transfers. You should fully understand your rights & options.

  1. QROPS
Qualifying Recognised Overseas Pension Schemes

The concept of QROPS became available in 2006 but did not really have a market until 2008. Along the way, there have been three major changes and the early 2008 schemes are hardly recognisable today.

If you looked at QROPS before and rejected it, you might do well to look again. If you have a QROPS from before April 2012, you definitely need an independent review. Without obligation, you can find out more.

Remember QROPS is a UK pension transfer and NEEDS regulated specialist advice.

  1. QNUPS
Qualifying Non-UK Pension Schemes were launched in 2010, specifically to exempt funds from UK IHT. Though written as a pension scheme, the rules are very flexible. One of the major advantages is the opportunity to put existing assets, including property, into a QNUPS. Another is having much more freedom over income than a traditional scheme.

QNUPS is not for everyone but your eligibility will become clear during your Financial Healthcheck.

  1. Spanish-compliant Investment Bonds
Because the tax systems are different in all countries, funds in Investment Bonds can have major advantages when written under Spanish rules. This is especially true in respect of income. Remember that in the UK ‘income’ includes interest even if you made no withdrawals.

Anyone with bank, building Society or other interest-bearing funds needs to consider this option, as part of an overall review.

  1. UK IHT & Spanish ISD
This subject is so complex that it cannot be dealt with in a paragraph.

The headline topic for me is that Spanish ISD is levied on the death of the first spouse or partner. It’s bad enough becoming a widow(er) without having to pay a tax too!

It’s also important to understand the difference between residency and domicile which affects these two taxes in a major way.

One factor which affects most UK expats and property owners in Spain, unlike other taxes there is NO double taxation agreement between UK & Spain on Inheritance Tax.

This is just a sample! When did you last review your finances? Can you get better arrangements? Can you save money? Can you cut your tax bill?

Whatever your objective, you can get help. A Financial Healthcheck, without obligation and no upfront fees can be arranged with a regulated & authorised adviser. If the advice involves a pension transfer, an approved (by FCA) consultant will check your suitability.

YOUR Financial Healthcheck
Please send me a few outline details, so that I can source the right adviser for you. In particular, the subject(s) you want to discuss, age(s), your concerns and the area where you live. It will also help if you can give a contact number and the best time(s) to call. Please email me

After checking out where you stand, with peace of mind you can get back to living the dream!

Further Reading
More detailed information can also be accessed from Financial Pages in Spain;

Please feel free to email me on any aspect of financial information, UK or Spain

David Goodall
Financial Pages in Spain