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Saving with irregular earnings

If you have irregular monthly earnings, then how you save and budget for the long term is all in your preparation.

If you are self-employed or a freelancer, you will likely have irregular earnings. Meaning it can sometimes be a little difficult to save and budget, especially when most advice readily available is tailored to salaried earnings.

It’s important to find an approach to saving that works for you and your financial circumstances. This approach should be tailored to how much you are paid and when. In the long run, if you’re prepared to take a more forward thinking approach to saving, it will help you build a better relationship with your finances and not leave you in any sticky financial situations.

First, work out your essentials

Before you even think about budgets and saving plans, you need to know how much you spend on essentials. Just because you earn a different amount monthly, your essential outgoings will remain around the same each month. Think about things like:

  • Mortgage or rent
  • Utility, internet, tv bills etc
  • Travel costs
  • Food shopping
  • Insurance

Add them up and total your essential outgoings.

Secondly, work out what is left over

After you know your essential outgoings, you can work out what you have leftover each month.

Due to your irregular earnings, the amount you have left over will likely change monthly, so it is important to be flexible with your savings and take an active approach to how much you choose to save and when. You should study every paycheck so that you know how much you will have leftover after your essential outgoings have been paid. It’s a great idea to save a percentage of your leftover money each month. This is a great technique to save consistently, realistically and not leave yourself out of pocket.

Time to work out your budget

Knowing what is left is good, but without a budget it can be easy to burn through what’s left. Budgets allow you to maximise how far your money can take you.

With an irregular income, you might want to consider budgeting for your lowest monthly income, as these are the times that you are likely to be the lightest on cash. This will help cover your major costs and make it easier to increase in months when you have more money.

If your money changes significantly seasonally or on a job-by-job basis, you may want to make a budget by dividing your annual income by 12.

Think ahead

If you are self-employed or have significant seasonal changes, it is important to think ahead. Budgeting can give an idea of how long money might last, but you will also have to consider other events in the year when your outgoings may be higher, like Christmas, annual bills or birthdays.

If your income is irregular, planning for much longer periods can actually be easier than trying to condense on a monthly basis. It might be worth planning your payment pattern, for example holding back money for bills later in the year, investing more in your emergency savings, or even raising your pension payments for a few months of the year.

If one month you have higher earnings, think forward to ensure you will be comfortable all year round before splurging.

Split it up

Psychologically, it is much easier to spend money when you can see it sitting in your current account. If you fall victim to this, it may be a good idea to set up a seperate savings account.

It’s a great time to start investing as most high-street savings accounts currently offer low interest rates. But as you build up your wealth you should explore wealth management options and look to diversify your portfolio. Money makes money – but it doesn’t if it’s sitting in a stagnant account.

Set some goals

Saving to simply save can be disheartening. Why not set yourself a few goals?

You might also want to save for certain things, like holidays, new cars or refurbishment, or perhaps even put money away for your retirement. What you save for and how you save is up to you, but setting achievable goals can help you get there faster.

Build in a buffer

With irregular incomes, a cash buffer can be a lifesaver, especially as you may go for a few months without being paid or with lower pay than expected. Normally, it is recommended that people build an emergency fund that can pay between three and six months of bills. Although if you have irregular income, you may want to increase this amount to up to 12 months, as this pot is your plan B if money is slow or something bad happens.

Likewise, a substantial cash buffer could allow you to balance your monthly payments.

Find a place for your extra cash.

If you save regularly, you can build up more money than you need, which means you could be looking for somewhere to put it to work even harder. You may be thinking about investing to unlock more potential from your money.

We can take the stress out of investing and help you decide how much you should invest, and choose investment styles that fit your risk appetite. We’re here to ensure your saving and investment journey works around your irregular income pattern.

Click here to schedule a no obligation initial consultation with one of our advisors.

Lawsons Equity – Independent Financial Advisors Malta

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

The value of investments and income from them may go down. You may not get back the original amount invested.

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here.

Is being a millionaire all it’s cracked up to be in 2021?

Are you familiar with the quiz show “Who Wants to Be a Millionaire”? It was launched in the UK in 1998 and is still around today. The show consists of a series of questions to be answered correctly, to be in with the chance of winning up to €1 million. But why has one million always been the benchmark for being classed as ‘rich’? Why is that the magic number to justify yourself as a wealthy individual?

Why are we striving to be millionaires?

Of course, it’s an aspirational goal. To everyone who has exceeded that magic figure, it would have been a real momentous milestone. Although a figure that would for sure change your life – it’s not always about the figure in your bank account, but instead how comfortably you can live your life – or maybe for some, live a life of luxury.

Being a millionaire isn’t about the figure, it’s the achievement and the lifestyle that comes with reaching it. But do you know what we find funny about the show ‘Who Wants to Be a Millionaire’? It’s the fact that since 1998 they have kept the same prize pot. If they had inflated the prize fund in line with inflation, it would be a little more attractive in today’s world, as we would now be playing for €2,061,689.26.

The reality of owning a million euros is you can now claim yourself as a millionaire (if you wish) and it’s definitely a sign to let you know everyone you’re pretty rich. But just how rich are you in today’s day and age?

Having €1 million in the bank is no mean feat, but it may not make you as filthy rich as you think.

You see, €1,000,000 doesn’t buy what it could have when Who Wants to be a Millionaire? First aired in 1998.

In the past, your €1 million could have bought you 14 average houses, but in 2021, that same amount will only buy you four.

What is the ‘new millionaire’?

The benchmark for being filthy-rich has changed since the 80s and 90s. One million isn’t worth what it used to be.

So what do I need in the bank to be filthy rich? What does the new millionaire look like? Well apparently, in 2021, to make it onto the ‘super-rich’ list, you’ll need to be worth at least €38million. That suddenly puts things into reality, doesn’t it?

Although there may be many millionaires and multi-millionaires, there is also a rise of billionaires, making millionaires seem like a drop in the ocean.

Do you need to be a millionaire to be rich?

Back to what being a millionaire means. A comfortable lifestyle, a healthy pension, not struggling, and being able to pass wealth down as inheritance.

Being rich is being able to spend money without having to rationalise every penny to yourself. It’s having an emergency savings pot built up, it’s financially stable, and it’s having disposable income. Do you need to be a millionaire to be wealthy? No, although it sure wouldn’t hurt!

Click here to schedule a no obligation initial consultation with one of our advisors.

Sources:

https://www.bbc.co.uk/news/business-42904875

Lawsons Equity – Independent Financial Advisors Malta

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

The value of investments and income from them may go down. You may not get back the original amount invested.

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here.

Wealth building – The 3 building blocks of wealth growth

When it comes to building wealth, it is important to understand where you see yourself now and where you want to realistically be in the future. Are you an aspiring millionaire or content with a comfortable lifestyle and health retirement pot?

To one person, wealth may mean having millions sitting in your bank account. For another, it could be a portfolio of property, a nest egg, or to some, simply having enough money to no longer live paycheck to paycheck.

The key thing to understand is, regardless of your ambitions, it is important to focus on wealth growth. There are many ways to do it.

What is wealth building?

Wealth growth and saving your money is effectively the same thing. The only difference is that building your wealth seeks to generate its own income over a certain period. Fundamental wealth creation usually relies on financial planning and advice, so that is why we are here.

So how do you build your wealth?

The simplistic approach to wealth growth is:

  1. Make money
  2. Save money
  3. Invest money
  4. Repeat

Although you may ask, is it that simple? Fundamentally, that is all there is to it. However, our job is to look deeper into what’s involved to give you the best opportunity to build your wealth.

Firstly: Make money

Unless you have been born into a privileged life in which you have enough money to never have to work, you have to make money before you can grow it. This could be your salary or your side hustle. As long as you can make money, you’re on the path to build wealth.

Secondly: Save money

If you make enough money to be financially stable, you should save your money in some capacity. Not only is it wise to have an emergency fund or nest egg for a rainy day, but saving is also an excellent way to fulfil your short-term goals. Many believe that saving is the hardest step in wealth growth, but rest assured that starting is the toughest part.

Monthly budgets are a brilliant way to manage your savings. By setting yourself a personal budget, you can make sure you have small sums of money to tuck away monthly. Regular small savings can become one huge pot over a long enough period. For example, putting away £200 a month is £2,400 yearly – so after five years, you could have saved a whopping £12,000… at that’s before investing it!

Thirdly: Invest money

The initial mentality and habit phases to start your saving journey are difficult for some, and perhaps surprisingly not many people get to this step. The reason for this may be the complexity of investing, with an industry full of jargon and terminology making investments feel unapproachable or inaccessible for many. The second reason is cost, some believing that investing is too expensive for their position, or that you have to be super wealthy to invest. Which couldn’t be further from the truth.

Our wealth managers have made the investment journey as easy and digestible as possible for our clients.

Why is investing the final step?

The longer you invest, the bigger the rewards.

This is all thanks to the wonder called compounding. Compounding is what happens when you reinvest your profits so that that money can make profits of its own. The longer you do it, the more money you could make.

Do you have €10,000 to invest?

€10,000 is a big sum and definitely worth investing and allowing it to grow. We are here to guide you on how to invest your hard-earned money.

Think about your retirement

One option with your €10,000 is to build your retirement savings. Never think it’s too early to start saving in your pension pot. It could offer you a very comfortable retirement if you start investing now. The earlier you stat to invest the longer your money has to grow. If you have already established a retirement pot, adding such a substantial amount could significantly increase your retirement income.

Your next question may be ‘where should I put this money’? Your best option may be a personal pension. You can then choose how much you want to contribute. You depend on where you reside, you receive tax relief on every contribution you make.

Many believe pensions are complicated, but they don’t always have to be. With the help of our team, we do the hard work for you, ensuring you get the best returns on your pension savings.

Consider diversifying your portfolio

There is always a risk when it comes to investing, although there are ways to lower this risk. However, if you invest your €10,000, you should always ensure you spread the risk by diversifying your portfolio. Diversification means spreading your investments so that your exposure to any type of asset is limited. This practice is designed to reduce the volatility of your portfolio over time.

Having a range of investments can be time-consuming, especially if you have a busy schedule. This is where we’re to help. Our highly experienced team can choose the right funds to design your investment plan based on your risk attitude.

Try to think about the long-term

It’s a good idea to stick with your investments for the long run when it comes to building your wealth. The longer the investment, the more likely it will be to generate positive returns.

Take example people who invested in the FTSE 100 between 1984 and 2020. Those who held their investments for any 10-year period have had an 89% of making a gain – and this timeframe includes many market crashes, such as Black Monday in 1987 and the Global Financial Crisis in 2008-09.

In the long run, compounding can also dramatically increase your money. Deciding to invest for a few extra years could help see your pot grow larger. In other words, your initial €10,000 could really see many happy returns.

If you would like further no-obligation advice on wealth building and investing a sum of money, our team is here to help.

You choose how much you want to invest. We will then suggest an investment style which works best for you, your desired outcome, and meets your appetite for risk. Our team do the rest. Click here to schedule a no obligation initial consultation with one of our advisors.

Lawsons Equity – Financial Advisors Malta

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

The value of investments and income from them may go down. You may not get back the original amount invested.

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here.

In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.

The importance of an emergency fund

What is an emergency fund, how much should you have in them, and when is it acceptable to dip into it?

We’re going to explore all this in more detail. Please consider, although some figures may be suggested in this blog, your emergency fund savings should be calculated with your personal circumstances in mind. We’re here to help if you have any questions.

What is an emergency fund?

Simply put, it’s money that you keep tucked away ready to be used if something happens out of the ordinary. This doesn’t mean you need it tucked away in cash ready to grab and run, but it most definitely should not be tied into a long term saving strategy, property or investments.

Your emergency fund needs to be accessible and easy to dip into at moments notice, when you need it most.

Why do I need an emergency fund?

It gives you peace of mind to know an emergency fund is there for any expenses that you may not be expecting. This could be anything from a car accident to an emergency vet bill. Although it also ensures you are covered if you ever found yourself unexpectedly unemployed. If this year has taught us anything, it’s to prepare for the unexpected.

We cannot predict the future, which is why we always need to be one step ahead and prepare for the worst. Your emergency fund is there to help when you need it the most.

How much should be in your emergency fund?

There is no rule or set value. Although it is good practice to cover three to six months wages. You may instead choose to save enough to cover your bills for three to six months instead. To work this out calculates how much you spend each month on your mortgage or rent, bills, food, child care, and transport. Try not to include anything that’s non-essential in these calculations. You only need to cover essentials in an emergency.

So, for example, if your monthly expenses came to €3,000 – including mortgage, food bills, utilities, insurance, and other necessities – then your emergency fund should aim to be at least €9,000 to cover three months or as much as €18,000 if you wish to cover six months.

Although, if those figures seem scary, and you’re nowhere near having those figures tucked away. Fear not, because even a few hundred euros in your emergency fund could help you out of a financial crisis.

When to use your emergency fund?

Having an emergency fund is a terrific start. Although sometimes when an emergency occurs, we face the dilemma whether to dip into the fund or not. If the time comes to use it and you don’t, then it hasn’t fulfilled its purpose.

There are many good reasons to use your emergency fund, typically they’ll be unexpected and immediate costs. We listed a few examples above, but these are by no means an extensive list. Everyone’s emergency fund is personal to them, and every individual has different financial emergencies.

We suggest using your emergency fund to cover any unexpected expenses you face. This fund could be used to prevent you having to take on any debt. Although it is always a good idea to apply common sense before dipping into your emergency fund by asking yourself these questions:

  1. Is it necessary?
  2. Is it urgent?
  3. Is it unexpected?

Where should you keep your emergency fund?

We suggest keeping your emergency fund in an easy-to-access savings account. Ideally, one which offers a competitive interest rate. By doing this, your money still has the opportunity to earn interest, but you will still be able to withdraw the cash quickly in an emergency, should you need to.

This account could be a simple cash savings or even a separate current account. The main thing is the money is kept somewhere different to your everyday spending account – for example, your daily use current account – as this makes the emergency fund tiresome to keep track of and is way more tempting to dip into.

How do I build my emergency fund?

If you don’t yet have an emergency fund and want to start building one, then you’re on the right track. This is the process we recommend:

Plan

Firstly figure out how much you want to have in your emergency fund by calculating your expenses, then decide if you are leaning more towards having three or six months saved. An idea is to foresee three months as your first goal. Then you can continue saving to your six month goal from there.

Save

Small and achievable short term goals are a wonderful way to start saving. Try saving 10% of your monthly income if you can. Even starting with €100 will allow you to gradually grow your emergency fund. The worst thing you can do is commit too much. It can make saving feel way tougher than it needs to be. Another option is to automate a regular monthly amount to leave your account on pay day. This way, you’re not tempted to spend the money or have to remember to manually transfer it.

Monitor

Even if you do choose the automated route, it’s still a good idea to check in on your savings. This is where you could think about adjusting how much you put in to align with your goal and factor in other life events. Once you’ve achieved your goal, you may want to look at putting any excess savings elsewhere, or whether you want to keep building on your pot. Also, remember if you do dip into your emergency fund, you need to top it back up!

When to stop saving into an emergency fund?

This question is tough, as there is no right or wrong answer, and you could keep saving and saving. Although we do recommend putting a cap on your emergency fund and separate all other savings for things like holidays, house deposit, retirement etc. With these longer term saving plans, you are unlikely to need access to the money instantly. Therefore, you are best off-putting these ‘other’ savings into accounts with higher interest rates, locking your money into a long-term account. Our advisors can also give you further advice on how you could invest these separate pots of money, which you could allow to grow over a longer period.

Why shouldn’t you invest your emergency fund?

You will remember one of our first points was to stress how an emergency fund needs to be quickly accessible. When it comes to investing, you have to sell everything you hold to take your money from the investment scheme. This may mean you will not be able to access the money as quickly as you need for emergencies.

Also, you have market fluctuations to overcome. Those same fluctuations that allow your money to grow, can also mean you lose money if you do not sell at the right time. In a current account, if you’ve saved €1,000, then you know you can easily withdraw this amount. But with investing, your €1,000 could be worth that today, but fall to €900 the next.

This change in value could make paying for your emergency harder if you end up losing some of your hard-earned money. Remember, investing is not a short term solution or something you can keep dipping into. It’s a lengthy strategy, and our advice is not to invest your emergency fund. It needs to be there ready to dip into when you need it most.

Click here to schedule a no obligation initial consultation with one of our advisors.

Lawsons Equity – Financial Advisors Malta

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

The value of investments and income from them may go down. You may not get back the original amount invested.

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here

In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.

Small changes that can help you to save more money

Many people believe to have more money, they need a pay rise. But what about making small changes to the way you live your life? We have a few tips which can help you to make a few lifestyle tweaks to aid your saving efforts.

Imagine being paid €1 million a month. If only! Although if you end the month and have spent the full €1 million, then your finances are no more in balance than someone who earns a lot less. Therefore, even if you are earning a salary as large as this, the fundamental steps should still be put in place. You still need to save, you still need an emergency fund and (a healthy) nest egg for a rainy day – just like everyone else.

What we’re trying to get at is whether you’re bringing home €1,000 or €1 million a month. There are lifestyle changes everyone should make to help you make the most of your money.

Compare prices of everything

This one is a bit of a no brainer. But the simple act of making sure you’re paying a fair price for an item can save you a lot of money. The best example being your Wi-Fi bill as you are probably on a rolling contract, which may double or even triple after your first year. Always keep an eye on your bills and pop the contract end date in your calendar. It can be a yearly task to determine how much money you could save. It’s pretty liberating!

Buy quality over quantity

The lowest price is not always the best option. Quality can override cost in some instances. For example, buying cheap fast fashion which will not last is a worse investment than buying a classic well-made piece of clothing, which may be more expensive, but last the long haul. Remember, more expensive does not always mean better quality. Do your research.

Eat before you shop

Shopping on an empty stomach is not good for your calorie intake or your bank balance. Studies show that shopping when hungry can make you more likely to impulse buy not only food, but other items too [1]. So no matter if it’s the food shop or some retail therapy, have your breakfast first to save the pennies and make wise choices!

Budget, budget, budget!

Budgets are the best practice in the financial world. Budgeting gives you a better understanding of your money, where it’s going, and what you have left to spend each month, as well as what you have available to save. It doesn’t have to be complicated, and there are many apps which can aid you in keeping track of your budget. You may surprise yourself when you’re more honest with yourself about what you have and what you’re spending on what.

Get savvy with finance automation

Saving money does not have to be a chore. Instead of actively moving money to a savings account each month, you can set up an automated direct debit to save a certain amount each month. It means you don’t have to think about it, and you can steadily build your savings pot month on month. Before you know it, you could have a healthy nest egg tucked away.

Another tip is to use ‘save the change’ automations on your current accounts. Most banks now offer this feature, which means anything you spend will be rounded to the nearest €, and the remaining money will be automatically transferred to your savings account. So for example, if you buy a coffee for €3.50, then €0.50 will be transferred to your savings account. You will be surprised how quickly it adds up!

Reduce meat consumption

This may be something that not many people consider. Although reducing your meat intake has huge health, economic and environmental benefits. Ethical investors, this is one for you. If everyone in the world followed diet recommendations for meat consumption, then the environmental benefit alone could be worth over €272.3 billion[2].

Sell your unwanted items

Are you a hoarder? Are “I might wear it one day” or “I’ll keep a spare” common place in your household? While many first thought is to either throw away or give to charity. You can make money from your old items online. One person’s trash is another person’s treasure. Facebook selling pages or second-hand apps, such as depop are an excellent place to start.

Don’t keep your credit card in your wallet

Studies show that you’re more likely to spend money using cards than cash. And this is intensified by credit cards[3]. The theory behind this is there’s a delay between spending money and the amount being deducted. So, if your credit card already provides a notification when you spend, this may not help you, but if your bill shocks you each month, then this could be a potential solution. Don’t burn a hole in your wallet… or should we say your finances!

These are not short term fixes

Remember these lifestyle changes are no instant fix or boost in cash. Although if you commit to these changes over the coming months, you will start to notice a difference to your bank balance. It is also important to remember that you need to make these changes and follow them through as lifestyle changes to notice a long term effect to your finances. To discuss your situation, schedule a no obligation initial consultation with one of our financial advisers here. 

References:

1: https://www.forbes.com/sites/kateashford/2015/02/25/shopping-hungry/

2: https://www.theatlantic.com/business/archive/2016/03/the-economic-case-for-worldwide-vegetarianism/475524/

3: https://www.bbc.com/future/article/20191204-does-e-money-make-you-spend-more

Lawsons Equity – Financial Advisors Malta

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

The value of investments and income from them may go down. You may not get back the original amount invested

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licenced by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here

In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.

Why is it important to talk about money?

Talk about money – The last 18 months have been tough for many, and unfortunately millions of people’s finances have been affected by Covid-19. Everyone’s situation is different, some have to tighten their spending a little, while many have unfortunately found themselves unemployed, unable to pay their bills, and in a tricky situation. Although one thing remains the same: talking to those close to you about money is crucial to avoid your financial problems getting out of control.

Why is it important to talk about money?

University College London surveyed 15,000 people in 2015. The results showed that people are seven times more likely to tell a stranger intimate details about their bedroom activities than to discuss how much money they earn. Crazy, huh?

This may be unsurprising, as it has historically been considered rude to talk about money. Although attitudes are slowly changing.

As a company in which we ensure that people have control over their finances, we are the ones who have to reinforce the importance of talking about money. Here are just three reasons why we feel it is so important:

1) To teach financial literacy to younger generations

Studies have shown that the earlier a child is introduced to the responsibilities of money, the better prepared he or she will be to manage it in later life. Earning money and knowing how to budget and save are imperial life skills that can and should be taught from an early age.

This could start by being transparent about your family’s financial situation, allowing children to do mini jobs to earn pocket money, or introducing them to investing and allowing them to watch their own pot of money grow. There are many things you can do to help ensure money isn’t a source of stress for your children as they become adults.

2) To improve our mental health

Financial worries can become a burden on our mental health and lead to survivor mental illness if you do not ask for help when needed. Do not bury your head in the sand. Financial problems do not disappear. It is important to address financial challenges directly by talking to the right people and asking for support.

It can be an empowering and emotionally rewarding experience. The first people to whom you should turn could be a partner, family member or close friend. If you do not have this support network, there are many specialist organisations with whom you can speak in confidence and free of charge.

3) To make better financial decisions

The more honest you are with yourself and your loved ones, the better the final result will be. For example, someone who is ashamed of a poor credit rating can withhold this information from their partner. Until it comes to a joint mortgage application or joint account that could be rejected, but if they had spoken about it earlier, they could have taken steps to overcome the credit difficulties before they want to buy a home.

There are many ways in which you can make better decisions if you have all the information you can give. But it first requires you to be open and honest about your situation and be ready to tackle it!

How to talk about money

Ready to talk finances with your family or partner? Here are a few tips from us:

Prepare for the conversation

Time – The perfect time to talk about money is probably not after work or when bathing the kids. So choose wisely.

Don’t pick a moment when one of you is stressed, tired or in a rush. Instead, choose a moment when you’re both in a chilled environment, feeling positive and have energy. Maybe a Saturday or Sunday over lunch?

Location – While you are encouraged to talk openly about money with your family or partner, you may not feel so comfortable talking about it in the presence of others. So make sure you are at home alone, or perhaps walking or in a quiet area of a cafe.

If you do not live together, you might also want to hold your conversation on “neutral territory” – i.e. not at one of your homes. This can help calm both minds and create a neutral atmosphere.

Talking points or goals – Have you ever left a meeting feeling like it was a complete waste of time? Poor meetings are often the result of unclear agendas and poorly defined goals.

If there are several factors you want to talk about, you should split them into several conversations. In this way, the “agenda” and goals of each discussion should be crystal clear, and give you more time to have a proper conversation. Try not to finish the conversation until your goals are met, or re-schedule some time to discuss it further.

Start the conversation

Once you are clear of what you want to get out of the conversation and have an idea of where and when the best time is to have it, it is time to start.

Bear in mind everyone’s different. Some will be fine talking about money at the drop of a hat, while others might prefer some warning. Suddenly asking “What’s your credit score?” as you’re having dinner after work may not result in the answer you were expecting. If you believe the other person would appreciate a heads-up – and we dare say that many will – think about introducing the idea of talking about money gently and agreeing on a time to discuss it.

However, sometimes waiting for what can be perceived as an “important chat” can cause much anxiety. So you may decide it’s the best approach to just come out and say it. That’s fine too, so long as you do it at the appropriate time and location (as explained above).

It’s likely you’ll know the other person well, so use your judgment to decide the best way forward. Remember:

  • Take turns to speak
  • Be honest
  • Be aware of emotions
  • Agree any further actions

Consider writing down any actions that you need to take before the conversation concludes. This might include:

  • Researching a particular question or topic
  • Calling a bank or loan provider
  • Downloading a credit report
  • Gathering relevant paperwork
  • Seeking help from a support organisation

How to talk to partner about money

Talking to your partner about money can be part of a healthy relationship. Regularly discussing your finances can help you deal with minor problems before they become bigger ones. So try to find time to make it part of your routine, perhaps agreeing to talk at brunch or on a long walk monthly.

If you are in a more urgent situation or requiring a “bigger” discussion, consider following the steps mentioned above. The advantage of knowing someone well is you will probably have a clear understanding, which will allow you to avoid the emotional pitfalls that can get in the way of a productive conversation.

Talk about your finances and don’t be afraid to seek help.

Money can be a confusing and complex area at the best times, and it can be traumatic when you have financial difficulties. In these situations, sometimes talking about money is not enough. Further advice is needed, or perhaps you need a neutral ear for advice. To schedule a no obligation initial consultation with one of our financial advisors, click here.

Lawsons Equity – Financial Advisors Malta

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

The value of investments and income from them may go down. You may not get back the original amount invested

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licenced by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here

In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.

Financial planning post Brexit. How does this impact me?

Now that Brexit is here, EU-resident Britons with UK bank accounts, investments, insurance policies, or a UK-based financial adviser may be restricted in what they can do.

In these times of extensive restrictions and lockdowns, our worlds have become much smaller. Whether or not this will have a long-term impact on your lifestyle, travel and shopping habits as restrictions increase will be a personal matter. With Brexit now in full swing, British citizens living in the EU have valid reasons to “think locally” when it comes to financial plans.

Just as British citizens lost automatic freedom of movement in the EU when Brexit took effect on 1 January, many British financial firms lost the right to offer banking and investment services within the EU.

If you reside in Malta, Spain, Portugal, France, Cyprus or any other EU state, but continue to use a UK bank account, other financial products or a UK financial adviser, ensure you check where you and your money stand.

British financial services and Brexit.

Prior to Brexit, UK firms providing financial services to Britons living in the EU could legally do so through ‘passporting’ arrangements. This meant UK providers– imposed by the Financial Conduct Authority (FCA)– were dedicated to meet the same minimum requirements and consumer protections for EU residents as other EU states.

Now that the UK (and the FCA) are free to set their own policies, the EU has no guarantee that UK firms will meet their requirements. On 1 January, the EU withdrew passporting rights for UK firms– including banks, insurance companies, investment providers and financial advisers.

Presently, some could even break the law by dealing with EU residents.

Does this impact all British financial firms?

This depends on many factors, including how a company is structured and where it is located. Those with headquarters in an EU country can retain their passporting licence and continue to operate as before.

Wholly UK-based firms who want to support EU-resident clients will likely need to restructure and form agreements with the financial regulators for each EU/EEA country they operate in. This is a highly intricate, costly, and time-consuming process, which is not an attractive option for all.

Discussions on financial services are ongoing, so it is feasible that the UK and the EU could still reach an agreement in this area. Some firms may be holding out for this before going through the potentially unneeded expense of restructuring. Others have already withdrawn from the EU markets.

Some major UK banks have notified EU-based clients that they can’t provide them with services after Brexit, and have closed their accounts. Other providers have maintained accounts/policies suspended, but open activity, or are allowing them to continue until the end of their term.

How could this impact you?

If you have a British bank account, insurance policy, investment or other financial product, and your provider has not gotten in touch with you about limited services, ask them what arrangements they have in place for your country of residence.

If your account has not been closed, has it been frozen?

In several cases, while you may retain existing accounts and make withdrawals as an EU resident, you may be limited from adding or moving funds or renewing policies. You may also be unable to apply for new services, like term deposits, bonds, foreign currency management, loans, credit cards and mortgages.

Check if they have the authority to continue to support you as an EU resident if you still use a financial adviser from the UK. In addition to the legal implications and whether you are protected if things go wrong, some financial institutions have stopped accepting instructions from UK (unregulated) providers. If you hold EU-based investments, your planning options can be significantly limited with a UK adviser.

Financial planning after Brexit

Regardless of whether the problem of financial services does not impact you, there are other key benefits in thinking more locally for your finances.

Are you still holding on to UK investments and savings?

Now that UK assets are no longer EU/EA assets, they could potentially attract a higher tax bill within the EU. ISAs are also taxable for non-UK residents in your country of residence.

Do you own UK property?

Don’t forget: EU residents are still in the firing line for UK stamp duty and capital gains tax.

Residents in Malta, Cyprus, Spain, Portugal and France can access opportunities that offer better tax-efficiency for capital alongside other potential benefits, so make sure you review your options.

What about pensions in the UK?

This is not so simple. If necessary in your host country, you might be better off leaving UK pensions in the UK and drawing income. Brexit does not impact the ability to deposit UK pension income into an EU account. It will always be paid in sterling, so the value could be impacted by exchange rates and conversion costs.

Look into whether it might be more advantageous for you to transfer funds from the UK into a tax-efficient structure for your country of residence. This could also unlock currency flexibility and estate planning benefits, but be sure to seek expert, regulated advice to do what is right for you.

Lawsons Equity – Financial Advisors Malta

Considered that Brexit has brought such a seismic transformation in the landscape, it has never been more crucial to ensure that your financial plans are suitable and compliant for your life abroad. Speak to a Lawsons Equity advisor today. We can help you take advantage of well-suited opportunities there are and secure financial comfort for you and your family.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

The value of investments and income from them may go down. You may not get back the original amount invested

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licenced by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here

In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.

How are your savings protected? Bank deposit schemes explained

Bank deposit guarantee schemes in the UK and the EU

European banks offer a deposit guarantee of up to EUR100,000 (₤ 85,000 in the UK). In Jersey, Guernsey, and Isle of Man, compensation is limited to ₤ 50,000. When you have worked hard to accumulate your savings, it is essential to know where you stand if the financial institution holding your money fails. For peace of mind, you ought to identify what investor protection you have with each of the financial institutions you use – banks, investment firms, insurance companies, etc. – in the event of institutional failure. If required, take measures to improve your position.

What is the protection banks offer?

EU banks

Under an EU Directive, each EU country offers a bank deposit guarantee of EUR100,000. Your national deposit guarantee scheme will reimburse your savings up to the limit of EUR100,000 if a bank fails.

If your bank fails, savings above the EUR100,000 could be lost. You may receive further money after any asset distribution as part of the insolvency procedure, but this would depend on the situation of the bank at the time. Deposits are covered per depositor, so couples with joint accounts have EUR200,000 protection.

Bear in mind, the guarantee is per banking group, not per bank account, or even per bank. Some banks with various names form part of the same group, so you have to be cautious.

Under specific circumstances (for example, after selling a property), you may be entitled to higher protection for temporary high balances. You have to check at your local scheme to ascertain what the higher guarantee is and how long it is considered “temporary” (for example, in France and Spain it is only three months).

Savings – National deposit guarantee schemes.

Malta: Depositor Compensation Scheme.

Cyprus: Deposit Guarantee and Resolution of Credit and Other Institutions Scheme (DGS).

Spain: Fundo de Garantia de Depósitos de Entidades de Crédito ( FGD).

France: Fonds de Garantie des Dépôts et de Résolution ( FGDR).

Portugal: Fundo de Garantia de Depósitos ( FGD).

Timetable for savings protection payments in the EU

France and Cyprus aim to make the amount payable within 7 working days.

In Spain and Portugal, the time frame decreased from 15 working days to 10 from 1 January 2021, and will be 7 from 2024.

UK Banks

In the United Kingdom, accounts in regulated banks are safeguarded by the Financial Services Compensation Scheme (FSCS). The amount protected should be the same as provided in the EU and is currently ₤ 85,000.

As in Europe, protection is per depositor (so accounts in joint names are protected up to ₤ 170,000), and per banking institution. An institution is not the same as a bank; Halifax and Bank of Scotland, as an example, belong to the same institution.

Timing of savings protection payments in the UK

The FSCS aims to pay compensation within seven days of a bank or building society failing, though more complex cases will take longer.

The impact of Brexit.

According to the FSCS website, there is currently no plan to change the ₤ 85,000 limit post Brexit. It also explains its protection “is not dependent upon the depositor’s place of residence, but where the bank, building society or credit union holds the deposit”.

Nothing changes for UK nationals living in the EU with savings in a UK-authorised bank.

Since January 1, 2021, the protection of deposits held in EU/EA branches of UK firms has now been covered by the local EEA deposit guarantee scheme in that country, and is no longer covered by the FSCS.

UK offshore centres

Banks in the Channel Islands and Isle of Man are not covered by the UK scheme, even if they are divisions of UK banks. Instead, you would have to rely on their local guarantee schemes, which offer less protection.

Jersey and Guernsey

The limit to depositor compensation schemes in Jersey and Guernsey is ₤ 50,000, capped at ₤ 100 million in a five-year period. They intend to pay compensation within three months of a bank failure.

Isle of Man

The Isle of Man’s Depositors’ Compensation Scheme (DCS) offers compensation of up to ₤ 50,000 for covered banks.

There is no time limit for payment of compensation. The amount of compensation paid and the timing of payment will depend on the size, asset quality, and profile of the failed bank, and the amount of funding contributed.

There is no standing fund for the DCS. Contributions fund and required if.it from covered banks which participate in the DCS and the Isle of Man Treasury, capped at ₤ 200 million for a 10-year period.

Luxembourg’s ‘Triangle of Security’

Luxembourg offers effective protection for life assurance policy holders. The foundation of its ‘Triangle of Security’ investor protection program is the legal requirement that an independent custodian bank must hold all clients’ assets approved by the state regulator.

The bank is required to lend securities to its clients – investment funds, shares, bonds, etc. – so that they are off the balance sheet. These securities remain in segregated client accounts if the bank fails. 100% of the policyholder’s securities are therefore protected.

This does not include deposits in cash, cash held in monetary funds is treated as securities and is therefore protected.

Regardless, you should always make sure that you have adequate diversification throughout different investment assets. This decreases risk and increases the potential for enhanced returns.

As always, your savings and investment choices should be based on your personal goals, circumstances, time horizon and risk profile.

Protection of your investments and savings

Many savers with more substantial deposits have spread them over more than one bank. It results in more paperwork, but is worth it for peace of mind. Others have chosen to move capital into arrangements which offer a higher level of investor protection than banks can offer.

If you have an investment bond issued by a Luxembourg-regulated insurance company, your investment assets will be protected if the insurance company fails.

Lawsons Equity Financial Advisors Malta

Talk to Lawsons Equity for tailored advice on asset protection, effective diversification and tax-efficient investment arrangements that are available to you in your country of residence. To schedule a no obligation initial consultation with one of our financial advisors, click here.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

The value of investments and income from them may go down. You may not get back the original amount invested.

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to offer Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries, click here.

In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.

Will your UK pensions fall into the lifetime allowance tax trap?

If you have several pensions in the UK, have been saving for many years or have a generous company pension, you could be at a higher risk of 25% or 55% lifetime allowance tax charges after recent measures.

One key outcome of the 2021 UK budget was that the lifetime allowance for pensions (LTA) was frozen at its existing level for at least the next five years.

This measure alone is estimated to net the Treasury approximately ₤ 990 million by 2026, pushing an extra 10,000 people over the threshold.

With LTA tax charges of up to 55%, make sure you are not caught unprepared.

What is the lifetime allowance?

Since 2006, the UK government has capped how much money you can hold in combined pension benefits without paying additional tax. Originally ₤ 1.5 million, the LTA peaked in 2011 at ₤ 1.8 million before progressively dropping to ₤ 1 million in 2016. Tracking inflation since then, the March 2021 Budget cancelled this year’s scheduled increase, freezing the LTA at its current level of ₤ 1,073,100 until at least 2026.

Who is impacted by the lifetime allowance?

While the current lifetime allowance of ₤1,073,100 sounds high, it does not just catch the super-rich.

All UK pension benefits outside the State Pension are taken into consideration, including everything built up over a working lifetime. After many years of pension contributions, compounding interest, investment growth and tax relief, the limit may be closer than you think.

For ‘final salary’ (defined benefit) pension schemes, the typical measure of value is 20x the annual income due. In general, this will mean that people with pensions worth ₤53,655+ a year will be impacted today.

What are the lifetime allowance charges?

As soon as the total pension funds exceed the allowance limit, an additional tax is payable when you access your money, technically called a “benefit crystallisation event”.

How much you pay out depends on the way funds are taken out – the rates are:

55% for lump sums;

25% for income or transfers to an overseas pension.

At best, the cost of being in excess of the LTA can be a quarter of your money, at worst over half.

Being a non-UK resident does not provide any protection. Typically, under the double tax agreement, residents of countries like Portugal, Spain and France are not liable for UK taxes on British pensions (except government service pensions).

For anyone who exceeds the allowance, these rules do not apply: the LTA tax is first applied in the UK and can’t be claimed back.

How do you check your LTA position?

Calculating how much of your allowance you have used is not always simple, particularly for final salary pensions, so you ought to check your position with your provider or pension adviser. HM Revenue & Customs (HMRC) will first test your allowance status when you start withdrawing your pension, then each time you access money and when you turn 75. All lump sums paid to your beneficiaries will also be subject to the LTA test and subsequent tax charges if you die before the age of 75.

How can you safeguard your pensions from the lifetime allowance?

You could obtain a higher limit by applying for LTA ‘protection’ from HMRC, but this usually has stringent conditions attached, so take advice.

Expats have the option of transferring UK pension funds to a Qualifying Recognised Overseas Pension Scheme (QROPS).

You will not be taxed on the transfer if you transfer one or more UK pensions to a QROPS and your total benefits are below ₤ 1.073 million. However, make sure the QROPS is within the European Economic Area (EEA), otherwise you would still lose 25% through the ‘overseas transfer charge’.

When in a QROPS, funds are out of reach of LTA charges, no matter how much you have or how you access it. A suitable QROPS can also offer tax-efficiency, currency flexibility and estate planning benefits.

An alternative option is to take your UK pension as cash and reinvest it in a tax-efficient, compliant setup in your country of residence. Again, this can unlock various other benefits not usually offered with UK pensions.

Evaluating your pension options.

Prior to making major pension arrangements, it is important to take regulated, customised advice to avoid pension fraud and to find the most appropriate strategy for you.

What if you are currently over the limit?

Although you would trigger an immediate 25% LTA charge if you transferred to a QROPS, the funds become immune to further charges.

If you instead transferred to a UK scheme, like a Self-Invested Personal Pension (SIPP), you would not trigger immediate taxation, but the funds would remain liable, with future charges increasing as funds increased.

The 25% or 55% LTA charges would then become payable any time you take benefits, and also apply to any beneficiaries inheriting the pension.

If you are over or close to the LTA threshold, think about acting sooner rather than later. Your pension funds should continue to grow while the lifetime allowance stays frozen, so you could possibly avoid unneeded taxation by taking steps now.

Even if your pension benefits are within the allowance or you are not yet ready to access them, it is a good idea to assess your situation.

Lawsons Equity can help you explore your options and take advantage of tax-efficient opportunities to secure a comfortable retirement.

To schedule a no obligation initial consultation with one of our financial advisors, click here.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.

Lawsons Equity – Financial Advisors Malta

The value of investments and income from them may go down. You may not get back the original invested amount.

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licensed by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries, click here.

In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based.

Pension options for expats. Should I transfer my UK pensions abroad?

Should I transfer my UK pensions?

Broken down, British expats have the following options when managing existing UK pensions.

1: Leave the UK and retain your workplace or private pension with a UK provider

2: Transfer the UK pension funds into an International SIPP.

3: Transfer the UK pension funds into a Qualifying Recognised Overseas Pension Scheme (QROPS).

There are other choices and variations, of course, but typically the options come back to these. QROPS can allow people to take substantial benefits from their pension, including avoiding UK tax by transferring their pension into a QROPS.

While transferring to a QROPS can provide currency advantages, tax efficiency and flexibility in estate planning, to British expatriates, the question our advisers get frequently asked here at Lawsons Equity… is it right for everyone?

QROPS is widely thought about as the answer for UK Expats. It’s by no means a one-size-fits-all approach.

Qualifying recognised overseas pension schemes (QROPS) explained.

QROPS is a classification for international pension schemes that comply with HM Revenue & Customs (HMRC) regulations to receive transfers from UK-registered pension schemes.

Established in 2006, QROPS allows British expatriates to simplify their affairs by taking their pensions along with them. Schemes only make the HMRC list if they meet comparable conditions to UK pensions, like not being typically made available prior to the age of 55.

QROPS Qualifying Criteria: Is a QROPS suitable for you?

You may be eligible for a QROPS if you meet the following criteria:

  • You have a pension of any value (excluding state pensions).
  • You plan to live abroad or are currently living abroad.
  • You do not plan to return to the UK, or you will be out of the UK for at least 5 years.
  • You have not already bought an annuity.
  • If yours is a final salary scheme, the scheme should not be already in drawdown.

Qualifying recognised overseas pension schemes (QROPS) and tax efficiency.

At present, EU residents can transfer UK pensions tax-free to a QROPS-based EU/EAA scheme. Transferring to a QROPS outside the EU alliance will activate a 25% UK ‘overseas transfer charge’.

The UK budget on March 3rd 2021 did not include modifications to QROPS, so transfers to EU/EAA-based QROPS continue to be tax-free for EU residents at present.

Now that the UK has departed the EU alliance, this 25% tax charge could be extended to capture EU transfers in the future.

When in a QROPS, funds are protected from UK taxes on income and gains, and no longer count towards your lifetime pension allowance (LTA). If you are already over the limit when transferring, 25% of the excess is charged, but funds are immune from further lifetime allowance penalties.

Examining the lifetime allowance and overseas tax charge.

Once you start taking benefits in your country of residence, qualifying recognised overseas pension schemes (QROPS) funds only become taxable.

How QROPS in Malta are taxed.

Malta has a long reputation for economic and political stability. It is a full member of the EU and has double taxation agreements with many leading nations. Malta’s QROPS as a result offers all the benefits of offshore pension planning, without risk associated with some other financial centres.

The Malta Financial Services Authority regulates its QROPS, and offers 0% inheritance tax, up to 30% as a tax-free lump sum, and a range of investment possibilities. The island also offers ‘third party’ QROPS; allowing investors to live any place they wish.

How QROPS in Spain are taxed.

When taking or accessing qrops lump sums and income from the UK pension, the general Spanish income tax rates apply to residents of Spain. These vary regionally, but tend to start at between 18.5% and 21.5%, and rise to a top rate in between 45.5% (Madrid) and 54% (Comunidad Valenciana).

Residents of Spain can find alternative tax-efficient choices for the reinvestment of pension funds, so speak to a Lawsons Equity adviser to find the most appropriate approach for you.

How QROPS in France are taxed.

Usually, UK pension and QROPS income is taxable in France at the income tax scale rates. For 2021, these start at 11% from EUR10,085, peaking at 45% for income over EUR158,122 (3%/ 4% surcharges apply over EUR250,000/ EUR500,000).

Under certain conditions, it is at present possible to take your entire pension fund as lump sum and pay only 7.5% tax with an uncapped 10% allowance.

Pension income in France also attracts 9.1% social fees (7.4% for pension income under EUR2,000 per month/ EUR3,000 per couple), unless you have EU Form S1 or are not affiliated with the French health care system.

For French residents, the reinvestment of pension funds into a suitable guarantee, a specialised form of life assurance, in which the underlying investments do not attract tax in France, could be more advantageous than a QROPS.

How QROPS in Portugal are taxed.

Portuguese residents who access QROPS or British pension income will face progressive income tax rates of 14.5% to 48% in 2021, unless you have non-habitual residence status (NHR). Under NHR, QROPS/UK pensions are taxed at a flat rate of 10% in Portugal for the first ten years.

You can continue to receive tax-free QROPS and foreign pension income for the remainder of your ten-year NHR period if you qualified for NHR before the regulations changed in April 2020.

You could find alternative tax-efficient choices for reinvesting pension funds as a Portugal resident if you do not have NHR status or your term has expired.

Qualifying recognised overseas pension schemes and flexible access.

While pensions in the UK can be limiting, many QROPS allow you to take as much cash or income as you want, and whenever you want.

You could draw a higher income in early retirement when you are most active, and reduce it in later years. You could take a lump sum and preserve the rest for emergencies, or pass it on to your beneficiaries.

This flexibility also has more potential to exhaust your money – unlike a Defined Benefit “final salary” UK annuity or pension, which provides a guaranteed income for the rest of your life.

Qualifying recognised overseas pension schemes, diversification and investment choices.

Qualifying recognised overseas pension schemes usually offer more choices than pensions in the UK regarding how your cash is invested, and are not as overexposed to UK assets. You can choose a flexible investment plan in a range of funds that suits your situations, objectives, timeline and risk appetite.

Qualifying recognised overseas pension schemes and estate planning flexibility.

Many pensions in the United Kingdom are payable to your spouse only after death. QROPS offers the option to include other beneficiaries. Rather than passing away with you or your spouse, your pension wealth could be passed on to any identified beneficiary, even across generations.

QROPS might also offer some protection from UK inheritance tax when pension assets are passed on to non-UK resident beneficiaries, even though they might still be subject to local succession tax.

Qualifying recognised overseas pension schemes and multi-currencies choices.

While pensions in the UK only pay in sterling, several QROPS allow you to withdraw and invest funds in more than just one currency. This is a huge advantage for British citizens living abroad, as it removes currency conversion costs and minimises dependence on pound/euro exchange rates.

Qualifying recognised overseas pension schemes and freedoms from UK legislation.

Funds in a QROPS are no longer regulated by UK pension laws, and are typically protected from future adjustments to UK regulations.

Be warned that unless you have transferred before 9 March 2017, you might continue to be subject to UK regulation and taxation if you move outside the EEA within five UK tax years of the transfer date.

Where the transfer falls within the unauthorised payment policies, tax penalties of up to 55% on the transfer value might apply. Even if you have transferred funds before the policies change.

Need QROPS advice? Let us help you.

Overseas pension transfers are complicated and a key target for pension fraud, so do not undervalue the significance of regulated advice. You should examine your variety of options to find the most appropriate pension solution for your specific situation.

All the same, you will need professional advice to find a suited product, understand cross-border tax issues, and essentially ensure your long-lasting financial security and safety in this ever-changing pension landscape.

Lawsons Equity’s qualified independent advisers will answer any questions and provide impartial guidance which will help you with the below:

  • Understanding the benefits and drawbacks of a QROPS.
  • Determine if a QROPS is suitable for you.
  • Discover all the options available to you as an expat or UK resident.
  • Get clarity on fees or costs associated with a QROPS.
  • Get a second opinion about their advice if another adviser contacted you.

To schedule a no obligation initial consultation, click here. We look forward to hearing from you.

Lawsons Equity Malta

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

The value of investments and income from them may go down. You may not get back the original amount invested

Lawsons Equity Limited is a company registered in Malta with company number C49564 and licenced by the Malta Financial Services Authority as Enrolled Insurance Brokers under the Insurance Intermediaries Act 2006, and to provide Investment Services under the Investment Services Act, 1994.

Lawsons Equity Ltd have passported their services across the EU. To see a full list of countries click here

In the United Kingdom, Lawsons Equity Limited is deemed authorised and regulated by the Financial Conduct Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authoritys website.

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