The New Year is a good time to review your tax and financial planning, but don’t just focus on 2019 – you need to plan ahead for the future.
This New Year, take time for a financial review to check your tax, wealth management, estate planning and pension arrangements will benefit your family in 2019 and beyond.
January is a time when many people reflect on the previous 12 months and look ahead to what the coming year will bring. You may set goals for the year, such as exercising more, taking up a new hobby or planning a dream holiday. When it comes to financial planning, however, focusing on just one year is not nearly enough, you need to plan ahead for the future.
While you should always consider current developments that could impact your finances, good wealth management is all about establishing your goals, both short and long-term, then setting up a strategic plan to achieve them.
Living in France? See our article ‘New Year financial planning for France’
Planning for a financially secure retirement
For many of us, the ultimate goal is to be able to enjoy our dream retirement. If this involves living in Europe or at least spending a lot of time there, you will want to make the most of what your chosen country has to offer. With life expectancy increasing, hopefully you will have plenty of time ahead of you to do so.
Not only are people living longer, they are also enjoying a lifestyle that is more active (and arguably more expensive) than previous generations. And while this is very welcome, it means we need to ensure our money comfortably lasts as long as we do.
Many retirees favour low-risk, ‘safer’ investments like bank deposits, but if you have potentially decades to fund in retirement, this is actually risky. Slowly but surely the cost of living increases every year and can erode your spending power over the longer term. Your savings need to earn enough to keep pace with inflation, which is a struggle with today’s low interest rates.
See our article ‘Can you afford the cost of living longer?’
British expatriates who keep savings in Sterling also need to factor in exchange rate risk, as currency movements can sometimes make a noticeable difference to the amount of income you receive.
Start by establishing what your goals are (what income and capital growth you need etc.), and obtain an objective analysis of your risk profile. Working with an experienced and regulated adviser, you can then build a portfolio, with a careful spread of investments across asset classes, regions, market sectors and companies, designed to achieve your goals within your risk tolerance. The key is to find the right balance of risk and return for your peace of mind.
Planning to maximise your pensions
Today’s pension landscape is quite different from a few years ago, so spend a little time to establish the best course of action for your funds. Following on from the 2015 pension freedoms introduced a few years ago, 2017 saw the introduction of the UK’s 25% ‘overseas transfer charge’. There was also a change to the rules for Qualifying Recognised Overseas Pension Schemes (QROPS) which would affect your UK beneficiaries if you die over age 75.
With more choices than ever these days, great care must be taken to ensure you make the right decision to protect your retirement savings. Weigh up all your options and the tax implications and opportunities in your country of residency, to establish the best course of action for you.
See more about your pension options
Planning to protect your wealth from tax
When considering your income needs you also need to factor in taxation. It is important to review your tax planning to make sure it is up to date and takes account of any tax reforms in your country of residence, the UK and anywhere else that affects you.
Planning for the inevitable
Life expectancy may be increasing, but don’t use this as an excuse to put off estate planning – or you risk leaving it too late.
Again, start by defining your goals. Who do you want to inherit your estate, and in what amounts? Do you want to plan how and when they receive their inheritance? You then need to research the succession laws and inheritance taxes in your country of residency and anywhere else you have assets and heirs. You need to understand the EU succession regulation ‘Brussels IV’ and the pros and cons of using this for your cross-border estate planning.
Take advice on how to achieve your wishes for your heirs, based on the inheritance laws and taxes in your country of residency and the UK, and to make the process as straightforward and tax-efficient as possible for them. At the same time, consider the tax implications of your options, to find the optimum solution for you.
Planning for Brexit
We cannot talk about planning for 2019 without mentioning Brexit. Amidst so much ongoing uncertainty, this is a good time to consider if you need to adjust your financial planning.
Read our article ‘How to get your finances Brexit-ready’
If you are living abroad, your financial planning should be set up for your country of residency. Do you own too many UK investments? Are all your savings in Sterling, putting you at mercy of exchange rate swings? Are you hoping to transfer your pension out of the UK? Be aware that many speculate the UK could widen the 25% ‘overseas transfer charge’ after Brexit to tax pension transfers within the EU.
Interestingly, we are now coming across more people in the UK who are looking beyond Brexit to what will happen next. They are concerned that a change of government could impose a new taxation policy which would impact the wealth they have worked hard to build up in preparation for their retirement. Even if there is no change at No. 10, are tax rises on the middle classes still a possibility?
If you dream of living in Europe and are worried about what may happen in the UK, perhaps now is the time to start exploring your options for a tax-efficient move. Even if you cannot leave the UK yet, it would be good to have a plan in place, especially if it is one that could help you move sooner rather than later. Speaking to an advisory firm experienced at helping UK residents move to your country of choice should provide a wealth of useful information and advice.
Whether it is investments, tax or pension planning, seek professional advice to ensure you do what works best for your personal situation. Blevins Franks can provide holistic solutions to give you peace of mind that your financial affairs are in order, for today and the future.
Blevins Franks has locally-based advisers throughout Spain, Portugal, France, Cyprus, Malta, Gibraltar, Monaco and the UK.
Contact your local Blevins Franks adviser
All information in this article is based on Blevins Franks’ understanding of legislation and taxation practice at the time of writing; this may change in the future. It should not be construed as providing personalised taxation, investment or pension advice. You should take advice for your circumstances.