by Sam Kelly DipPFS, EFA, BA (Hons),
Without fail, every time there’s a new piece of legislation or an update that may affect Brits living in Spain, certain financial advisory companies will shape it into something to encourage you to send your hard-earned money to them!
We saw this very obviously with the Modelo 720 in Spain, where financial advisers, left right and centre, would use our lack of familiarity with this simple form to encourage you all to move your monies into ‘compliant investments’. Now, compliant investments in themselves, for example ‘Spanish Compliant Investment Bonds’ can be very useful products for those looking to invest, but moving monies into them that you didn’t intend to invest, simply to avoid completing a simple asset declaration, may not be the best advice.
We then saw my industry having a field day with Brexit! Over the last few years there’s been a rush to try to encourage people to move their money into trusts, QROPs, all sorts of exotic (and often expensive) arrangements – basically anything outside the UK. As if the UK would suddenly prevent those living in the EU from having a pension or some savings! There are Brits living all over the world who still have UK based pensions, bank accounts, savings etc. The idea that those of us living in the EU will suddenly lose access to ours is simply not true.
The latest trend is back to good old QROPs! QROPs, which are overseas pensions recognised by HMRC, are an effective pension vehicle for certain clients. For example, if you are approaching your pensions Lifetime Allowance (currently £1,073,100) then Chorus may well recommend a QROPs because this may offer significant benefits. However, for most of you, a UK SIPP designed for Brits living overseas should likely provide you with everything you need. You can enjoy a well-regulated and flexible pension product without the need for a QROPs. Chorus clients would generally pay around £500 per year more for a QROPs than a UK SIPP, so we must ensure this additional cost is justified. With other firms in Spain, we’ve seen clients pay over 6% in layered (and possibly hidden) fees on their QROPs, which is why we always urge caution before moving your pensions to such arrangements.
So, right on cue, I’m seeing adverts scaremongering people to move their pensions out of the UK on the basis that UK based pensions ‘may’ be exposed to Wealth Tax… one day… possibly… in our post-Brexit world! Let’s be clear here, there is a small risk of this, but would you really consider a significant financial decision based on something that is very unlikely to happen? Beyond that, do we really believe that Spain, a country that has been embracing Brits for decades, that has employed thousands of people to help Brits with their residencias etc, would introduce such damming and illogical legislation against an essential group to Spain’s economy? Come to think of it… I suspect many of you may think they would! But let me reassure you, Spain has never demonstrated any negative bias to us Brits here and I cannot imagine them being motivated to do so in the future.
Let’s be practical here, if such legislation were ever confirmed, then clearly Chorus would assess those of our clients potentially affected and take the appropriate action. If that meant moving our UK SIPP clients to QROPs, then we would work with those clients to find the best, lowest price solution, ensuring no client is left out of pocket. We would certainly not be moving them to a QROPs layered with unnecessary fees, product tie-ins, hidden commissions etc.
Financial advice should always be appropriate and client focussed, not a ‘one-solution-fits-all’ approach where every client is encouraged to go into the same products, the same funds, possibly even an unnecessary trust. Our industry should focus on low cost, transparent, high quality advice and ensure each client has their individual needs considered.
If you want to seek a second opinion on your savings, pensions and investments from a company who guarantee no unnecessary or hidden fees, and a 100% ethical and client-focussed approach, then contact me direct Chorus Financial on firstname.lastname@example.org, +34 965 641 163 or visit www.chorusfinancial.es for more information.
Interesting point about the Wealth Tax.
I understood that Spain does not use trusts and so does not recognise them. If QROPS are actually trusts, are you sure that they are not also to be included in a Wealth Tax declaration?
I am looking at the Wealth Tax rates. For many, with declarable wealth at under about 1.3 million EUR, even if a UK pension was included (which I am not sure will be the case), the fees on the insurance bonds and investments sold with a QROPS would be greater than the Wealth Tax.
Happy to be proved incorrect, if I am , but I think some financial advisers are indeed using Brexit to up QROPS sales.