Expatriates in Portugal are facing a new financial environment. They need to understand how the changes impact them personally, what their options are and how to recognise what will achieve the results they are looking for.
You have probably heard the so called ancient Chinese saying “may you live in interesting times”. It sounds like a blessing but is actually a curse. It is, in fact, neither Chinese nor ancient, but still a useful way of summing up the financial environment facing expatriates in Portugal today.
From a financial point of view, interesting times could both be negative – throwing up pitfalls and increasing risks, and positive – creating new opportunities.
This is a tricky landscape to navigate, and expatriates need to understand how the changes impact them personally, what their options are and how to recognise what will achieve the results they are looking for and where the traps lie.
For your financial security, and that of your heirs, you want to make the right decisions today to have peace of mind for the future. Professional guidance is essential.
2015 changes
2015 started with a program of income tax reform in Portugal, including new legislation to tax fiscal structures like trusts. There was limited time between the announcement in mid-December and the new rules starting on 1st January, but some advisers were able to respond quickly and guide clients accordingly.
This does not mean that you could only make changes before the end of December, just that that would have had some benefits. It is not too late to review your tax and estate planning now and consider the best way forward for your personal circumstances and aims.
All major countries have tightened their law for such structures over recent years. There has also been a significant move to automatic exchange of information, which will start across around a 100 countries over the next few years. Besides any tax implications, this is the end of financial privacy, and governments will be able to track our wealth like never before.
The other key change affecting UK nationals is the UK pension reform from 6th April. This opens the door to a whole range of opportunities, but with more choice comes more responsibility. You need to ensure that whatever you do, your pension savings continue to provide financial security throughout your retirement years.
The pension freedom centres mainly on defined contribution schemes, rather than defined benefit (final salary) schemes. You could potentially transfer from a defined benefit to a defined contribution scheme, but could lose valuable benefits so this would need to be very carefully considered.
Taking advice
In such a changing environment, you need to take up-to-date expert advice.
When choosing your adviser, besides looking at whether the firm specialises in all the financial planning areas of concern to you, you may also wish to consider how they are regulated. Using a regulated adviser generally provides peace of mind.
Blevins Franks Financial Management Limited, for example, is a UK incorporated company, fully authorised and regulated by the UK’s Financial Conduct Authority (FCA), with all of our client facing advisers qualified under this regime. While Portugal has its own very robust regulation system, Blevins Franks chooses the UK’s FCA as its key regulator since it is considered one of the most rigorous and professional regulators in Europe, and most importantly is perhaps better suited and more culturally compatible with our clients. This option is afforded through Article 56 of the Treaty on the Functioning of the European Union which allows the freedom of movement of services within the Union. Blevins Franks Financial Management is therefore regulated to provide investment and pension advice in both the UK and Portugal, which is an optimal solution for British expatriates who need financial planning involving both countries.
Qualifications and high professional standards are also very important. The FCA now requires all advisers it regulates to have obtained the Diploma for Financial Advisers. This involves considerable professional study, various examinations and continuous personal development.
There are other factors to consider when choosing an advisory firm, and where and how a company is regulated may not be the deciding factor for you. However for certain transactions you should be looking for a UK regulated firm. For example, under the UK pension rules, you can only transfer out of a defined benefit scheme if you have taken advice from a UK FCA regulated firm.
Whether it is pensions, tax or estate planning, the key thing is to make sure you have all the facts before you make a decision, and weigh up the pros and cons of each option. It is definitely worth taking the time and effort to get it right.
3 March 2015
