Spain – The Sun still Shines and Lifestyle is Healthy

Spain is great  for holidays, working, living & retirement

The beaches are clean, the Mediterranean is still blue, the food is fresh, lots of cheap flights, great deals on hotels and apartments but forget all that the headlines are bad! UK Press always give SPAIN a hard time

Personal Experience 

We bought our first house in Spain on 7^th June 2002; it was memorable for another reason. It was the World Cup in Japan and South Korea, England played Argentina and won 1 – 0 thanks to a penalty by David Beckham.

I thought I’d write down a few reasons why we bought and let you, the reader, decide whether some, all or none of the factors still apply. This is random in no particular order;

• The climate is great and the sun shines all year round
• It’s two and half hours from home
• The flights are cheap if your dates are flexible
• We love the lifestyle, street markets, restaurants, entertainment, the beach and I could go on
• House prices are cheap compared with the UK
• A second home is for the long term, especially retirement
• The exchange rate is more favourable than it has been
• We needed and easily got a 50% mortgage
• We found someone reliable to look after the place when we are not there, giving peace of mind
• The family think it’s a great idea

I could go on but I think those 10 reasons cover most of why we bought in Spain.

The fundamentals haven’t changed and there are bargains to bought. There is now also plenty of evidence that people like the concept of Rent before you Buy.

So here are three ideas

• Rent before you buy in Spain

• Always get Professional Advice

• BEAT the BANK get better rates for foreign exchange

Viva Espana

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

PS

From the ‘Guardian’ in 2013

Spanish have the HIGHEST healthy life expectancy in Europe

Read the article

Explaining terms and expressions - Mortgages

Explaining terms & expressions is important but nothing beats Regulated and Qualified Financial Advice

·       Cut through the jargon

·       Check Further Reading

·       Beware: Unauthorised ‘advisers’ about!

Advice
A recommendation about the most suitable mortgage for you made by an adviser. Remember that mortgage advice is regulated in the UK but not regulated in Spain. To receive a recommended adviser click here. Always be wary of advisers who want a large up front fee.

Annual statement
A statement from your mortgage lender, sent every year, showing among other things, the repayments made and the outstanding balance owed.

Approval in principle
A certificate which some lenders will give you that shows the amount they will probably be prepared to lend you. This is not a guarantee, but can be helpful when signing up with estate agents. Since the advent of the credit crunch, these are much more difficult to obtain.

Buy-to-let mortgage
A loan taken out to buy a property which is intended to rent to tenants.

Capital
The amount available to borrow, or borrowed, to help buy the property.

Capped mortgage
A mortgage that has a maximum limit on the interest rate to be paid during a special deal period.

Cashback mortgage
A mortgage that comes with a cash sum (often a percentage of the amount being borrowed).

Deposit
The amount of money being put into buying a property (not including the mortgage money being borrowed).

Discounted mortgage
This has a discounted variable rate of interest for a set period, after which the rate will increase.

Early repayment charge
A charge payable if the mortgage deal is settled ahead of time.

Fixed rate
An interest rate that is fixed (i.e. it doesn't move up or down) for a set period of time.

Income multiples
The factor by which earnings are multiplied to find out how much can be borrowed.

Interest
The charge made by lenders to borrow the money.

Interest rate
The figure that determines how much interest is paid. 

Interest-only mortgage
A mortgage where you only pay the interest charges of the loan each month. This means you are not reducing the loan amount (or capital) itself, and this will need to be repaid in some other way.

Loan-to-value
The percentage of money you want to borrow compared to the cost or value of the property.

Mortgage
A loan which is secured against the property.

Mortgage broker
A mortgage broker helps clients to understand the various mortgage types and deals available. To receive the recommendation of an excellent Mortgage Broker please email me.

Remortgaging
The process of changing your mortgage for a different one, without moving home. In the right circumstances this might be done to find a more competitive arrangement.

Repayment mortgages
A mortgage that pays off both the home loan and the interest at the same time.

Standard variable rate mortgage
A loan at the lender's normal mortgage rate – i.e. without any discounts or deals.

Secured Loan
A mortgage is a secured loan. This means that if you fail to repay it, your lender may be able to sell your home to get its money back.

Survey
A report on the condition of the property being purchased.

Tracker mortgages
A mortgage with an interest rate that is usually linked to a particular rate that is set independently from the lender and moves up or down with it. The most common tracker mortgages in Spain are Euribor linked. Euribor is the wholesale money market for Euros.

Term
The length of the mortgage.

Valuation
A brief inspection, for the benefit of the lender, of the home being purchased. This is to make sure they are not lending more than the property is worth and that the property is suitable security for the mortgage. It also checks that the property exists!

Please remember that in Spain, unlike the UK, mortgages are NOT regulated products. This means that that you must be careful who advises you. If your first instinct is to use a bank then you will not get advice, merely a product sale. Maybe a comparison from a recommended adviser. Please email me for a contact.

Explaining terms and expressions - Investments

Explaining terms & expressions is important but nothing beats Regulated and Qualified Financial Advice

·       Cut through the jargon

·       Check Further Reading

·       Beware: Unauthorised ‘advisers’ about!

Asset allocation

This is the spread of investments across the asset classes.

Asset classes 

The underlying investments – for example, shares, bonds, property and cash deposits.

Bonds These are loans made to a company (often called Corporate Bonds) or the Government (often called Gilts).

Capital
The money you invest.

Capital growth
Any increase to your original investment after costs, charges and depreciation have been taken into account.

Collective investment scheme
A way of pooling contributions from lots of people into a single investment fund.

Contracts for Difference (CFD)
An agreement between two people to settle at the close of their contract the difference between the opening and closing price of a company's share price.

Cooling off period

A cooling off period is defined as the period of time you're allowed, after signing an agreement, to cancel it without incurring a financial penalty. This does not normally apply in Spain.

CNMV

Comision Nacional del Mercado del Valores is the principal financial services regulator in Spain and responsible for authorising investment products. A CNMV adviser can be recommended, please click here

Coupon
A bond's fixed rate of interest as a percentage of its nominal value.

Debt securities
Another name for a bond.

Derivatives A right or an obligation to buy or sell another type of asset – such as a share or a bond – to someone else at a specific date and time in the future.

DGS

Direccion General de Seguros y Fondos de Pensions is the Spanish regulator for insurance products which can be marketed in Spain. Email me to be referred to an authorised adviser.

Diversification
Spreading your investments across different asset classes, or different types of investments within an asset class

Equities
This is another name for shares in companies.

Friendly Societies These are similar to mutual life assurance companies but with different tax rules.

FCA 

The Financial Conduct Authority - the UK's financial services regulator.  For a recommended adviser click here

Gearing The use of borrowing potentially to increase the amount you get back, but can also increase the risk.

Gilts

These are bonds issued by the Government.

Gross

Before tax has been deducted (as opposed to 'net', which is after tax has been deducted).

High-yield bond funds
The same as bond funds but investing in higher-risk bonds that offer a higher interest rate.

Investment or Insurance Bonds
These are pooled investments or lump-sum life-assurance investments. They can also be called Life Assurance Bonds and With-Profits Bonds.

Investment Trusts
A pooled investment. The investor is buying shares in a company that invests in other investments. The Investment Trust has shares and is quoted on the stock exchange. It is a closed-ended fund as there are a set number of shares available

ISA
Individual Savings Account is a UK tax-efficient way of saving or investing, with limits on how much you can pay in each tax year. These are not available to UK non-residents.

Life assurance investment
A pooled investment offered by a life assurance company.

MiFID

Markets in Financial Instruments Directive is the EU legislation which covers investment intermediaries and their activities. It also enables, for example FCA approved advisers to be' passported' into other EU countries such as Spain

Net asset value (NAV)
An expression used with investment trusts to mean the value of the fund's underlying assets.

Nominal value
Sometimes called the face value; this is the cost of the bond when it is issued and the amount you get back at the end of the term.

OEIC

Open-Ended Investment Company, this is a type of open-ended investment fund.

PEP 

Personal equity plan – a wrapper for investments. No longer available as all PEPs have now automatically became stocks and shares ISAs.

Pooled investments
A way of putting various levels of contributions from lots of people into a single investment fund. There are different types and they work in different ways.

Rate of return
This is the change in the value of your investment taking into account both income and growth.

Rating
This is a formal opinion of an organisation's investment quality and credit risk.

Redemption date
Usually associated with gilts or bonds, it is the date (set in advance) when the gilt or bond will be repaid by the issuing government or company and you will receive the nominal value of the bond.

Shares
These are the stake or share in a company.

Stocks

These are often linked directly to Shares, but have the same meaning.

Tax year
In the UK, the tax year is from the 6thApril in one year to the 5th April in the next year. In Spain the fiscal year is the same as the calendar year

Unit trusts
A pooled investment, which is an open-ended investment that gets bigger as more people invest and smaller when they take money out.

With-profits funds
A type of fund available within a life assurance investment. The investor shares the return from these investments and the profits and losses of the company (if it's a mutual) or the with-profits business fund (if it's a plc).

Most Investment Advisers, including the ones that I recommend, will be happy to cut through the jargon. Email me for a recommendation.

David Goodall

Financial Pages in Spain

EMail

The UK Government wants the Elderly to Emigrate!

There are clear indications that they do. Changes to ISA’s & Pension Annuities will be welcome in the UK, to working people and the retired but overall it suits the Government if the elderly emigrate

I realise that it sounds unlikely but there are reasons behind my view. Spain has many lifestyle advantages and those retired or near retirement might be encouraged to emigrate for the following reasons;

·       QROPS

Qualifying Recognised Overseas Pension Schemes are for the BENEFIT of people emigrating or planning to emigrate from the UK.

After the recent reviews it was thought that the Government was discouraging transfers of pensions out of the UK. In reality, the changes announced in the last two Budgets are a warning shot to those who would seek to ‘misuse’ UK pension funds.

Whilst the new rules which, effectively, abolishes annuities will be welcome in the UK, QROPS which follow UK rules will also provide a benefit to UK expats too!

There is nothing which discourages retiring abroad. Please email me for more personal information

·       QNUPS

Qualifying Non-UK Pension Schemes benefit those who emigrate but would otherwise have a UK Inheritance Tax liability. It is necessary because UK IHT is based on ‘Domicile’ not ‘Residency’. Domicile is much more difficult to shake off!

This is a classic case of ENCOURAGING emigration. For more details please email me.

·       Taxation policy

I was somewhat shocked by George Osborne’s statement in Budget 2012 that there would be a review of age-related tax allowances. In reality the budget made the following two changes which negatively affect the over-65’s

1.     Those already in receipt of the Over 65 Age Allowance will see this ‘frozen’ for the following 3 years. In the past this allowance has been index-linked to counter the effects of inflation

2.     From 6^th April 2013, for people reaching the age of 65, the age allowance is scrapped! This means that anyone born after 5^th April 1948, will NOT receive the Age Allowance

Taking away age-related tax allowances might just be the ‘final straw’ for some people!

Readers should also be aware that this policy contrasts greatly with Spanish taxation policy. It’s too complex to explain here but individuals and couples can get professional advice by sending me an email and I can put you in touch with the right person. However, the Spanish system assumes that part of the retirement income is ‘capital’ which is untaxed and the minority is ‘interest’ which is taxed. This means the effective tax rate in Spain is MUCH LOWER than the UK when income is based on a pension or annuity.

• National Health Service (NHS)

The cost of treating elderly people is MUCH higher than that of younger citizens. That has been clear for many years but as the population lives longer, the cost will grow substantially. I cannot verify this but I was told that the cost of Healthcare for the over 60’s is TEN TIMES HIGHER than the under 60’s.

• Net Migration

The UK Government made pledges that it would reduce net migration, that is the difference between people leaving and immigrants.

This is important to the Conservatives under pressure from UKIP.

It suits the Governments statistics if more people emigrate.

It is very important that anyone contemplating moving to Spain should seek professional advice. I can give this guarantee that any professional that I refer you to WILL NOT charge an upfront fee.

Professional advice will have a cost but no advice could cost you everything

You might like also to read these posts from my Blog;

QROPS 2014

QNUPS 2014

Rent before you Buy

The Best Value for Money

Please enjoy Spain and remember if you are in the UK and elderly, your Government wants you to emigrate!

David Goodall

Financial Pages in Spain

Email: davidgoodall.spain@gmail.com

Spanish ISD and UK IHT - Comparison

As the old saying goes ‘Like chalk and cheese’

• Impuesto sobre Sucesiones y Donaciones (ISD)

• Inheritance Tax (IHT)

• There is no Double Taxation Treaty or Agreement between Spain and the UK on these inter-linked but very different taxes

This will only be a short article because it is vitally important that you get Professional Advice

What are the principal differences?

	Spanish ISD	UK IHT
Married Couples: When is tax payable?	On First Death	On Second Death
Are Rules applied Nationally?	There are Regional differences but these only apply to Spanish residents. Non-residents only get National rules	Yes, all rules are based on a set of UK laws
Who pays the tax?	The beneficiaries pay any tax due	The Estate of the Deceased pays any tax payable
Does the tax rate change according to who is the beneficiary?	Yes	No
Who pays on what assets?	Spanish resident beneficiaries pay on worldwide assets, whilst non-residents pay only on Spanish sited assets	UK domiciled deceased Estates pay on worldwide assets. Residency is NOT an issue
Will Tax Planning reduce or eliminate the tax payable?	Yes	Yes

Please note that only one answer is common to both ISD and IHT. Tax Planning is vital

Additional reading is also recommended;

ISD in more detail

Spanish Inheritance Tax

Five Spanish Taxes affecting Non-Residents

Non-Resident Taxes

Please email me with any query you may have or to be referred to a Specialist Professional for advice

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

Explaining Terms and Expressions - Pensions

Explaining terms & expressions is important but nothing beats Regulated and Qualified Financial Advice

·       Cut through the jargon

·       Check Further Reading

·       Beware: Unauthorised ‘advisers’ about!

A Day
6 April 2006 was the day the UK Government pension simplification rules came into effect.

ASP - Alternatively secured pensions
At the age of 75 an alternatively secured pension would allow an individual withdrawal of income, similar to an unsecured pension fund such as income drawdown

AVCs – Additional Voluntary Contributions
A pension top-up for an occupational pension scheme. The scheme members pay contributions into an arrangement run by the employer to boost the main pension.

FSAVCs – Free-Standing Additional Voluntary Contributions
A pension top-up policy for an occupational pension, but separate from the employer’s pension scheme and normally run by an insurance firm.

CNMV
Comision Nacional del Mercado del Valores is the principal financial services regulator in Spain and responsible for authorising investment products. A CNMV adviser can be recommended, please click here

DGS
Direccion General de Seguros y Fondos de Pensions is the Spanish regulator for insurance products which can be marketed in Spain. Email me to be referred to an authorised adviser

FCA
Took over from the FSA in April 2013. The Financial Conduct Authority is the UK's financial services regulator. The FCA also ‘passports’ authorised advisers to operate in Spain. For a recommended adviser click 

Group Personal Pension
A type of personal pension offered by some employers but not classified as occupational (see money purchase pension).

Lifetime annuity

A lifetime annuity converts money from a pension fund into pension income, which is taxable. There are different types to suit different circumstances and generally treated favourably for tax purposes in Spain.

MiFID
Markets in Financial Instruments Directive is the EU legislation which covers investment intermediaries and their activities. It also enables, for example FCA approved advisers to be' passported' into other EU countries such as Spain .

Money purchase pensions
Some occupational pensions and all personal, group personal, stakeholder, FSAVCs and some AVCs are money purchase pensions. The contributions are invested in, for example, the stockmarket or bonds. The size of the fund depends on the contributions and how well the investments perform. At retirement, there is a choice of options to provide you with a retirement income.

Occupational pension
These are only available through employers and run by pension scheme trustees. There are two types – salary-related (defined benefit) and money purchase (defined contribution).

Pension Liberation
It should be made clear that Pension Liberation is illegal. Typically, unauthorised advisers offer access to your pension before the statutory retirement minimum age of 55. Proven cases attract a penalty of up to 55% of the funds liberated.

Personal pension
A pension policy taken out by an individual from an insurance company or another financial institution and into which personal contributions are made. It may also be offered by employers.

Protected rights pension
This is the part of a pension fund which was used to contract out of the UK State Second Pension (SERPS or S2P) that must be used to buy a protected rights annuity.

QNUPS -  Qualifying Non UK Pension Scheme, which meets the criteria set by the regulations the UK government brought out in February of 2010. This means that for a UK or non-UK resident, there is an opportunity to make contributions to overseas schemes, established as QNUPS, with the knowledge that those funds will be sheltered from UK IHT. Individual advice should be taken in all circumstances from a regulated and authorised adviser. Please email for a recommendation. Also see reading below

QROPS - Qualifying Recognised Overseas Pension Schemes
These became available from A-Day. It is a pension scheme set up outside the UK that is regulated and recognised for tax purposes as a pension scheme in the country in which it is located. QROPS have been established in various countries across the world, many in jurisdictions with beneficial tax rules. For specialist advice click here Also see reading below

Salary-related pension scheme (final salary or defined benefit)
A type of occupational pension. The amount of pension you get is worked out on your salary at or near retirement, or when you left employment, and your pensionable service.

Stakeholder pension
A type of personal pension that has to meet certain standards set by the UK Government. An individual can take one out or it may be available through an employer, but is not classified as occupational. 

State Pension
The UK Pension Service (part of the Department for Work and Pensions) will pay the basic State Pension based on an individual’s National Insurance contribution record. In addition, individuals may also qualify for the State Second Pension based on their own earnings and National Insurance contributions.

State Second Pension
The State Second Pension is an additional State pension paid on top of your basic State Pension. This was called SERPS. Self-employed people cannot build up a State Second Pension.

Tax-free lump sum
More accurately, tax free cash should be called Pension Commencement Lump Sum (PCLS). This is an amount of cash set by tax law which you can take at retirement free of tax under UK rules. Salary-related occupational pension schemes may have different rules on the amount of tax free cash you can take.

Unsecured Pension (Income Drawdown)
This is an alternative to buying an annuity but provides an income whilst the pension is still invested. At age 75, the unsecured pension must cease and be replaced by either a Lifetime Annuity or ASP. For non UK residents or those intending to become non-resident, QROPS could be another alternative.


Pensions Advisers, including the ones that I recommend, will be happy to cut through the jargon. Email me for a recommendation


Further reading

QROPS 2015

QNUPS 

La Torre Fx – Foreign Exchange



David Goodall
Financial Pages in Spain

davidgoodall.spain@gmail.com