Spring is a time of new beginnings and looking forward to the future. This year, it also brings the original deadline for the UK’s departure from the EU.
Despite recent events, it is still unclear whether the UK will actually leave on March 29 or if the EU will agree an extension to delay the onset of Brexit until later in the year. While there is little appetite on both sides for a no-deal Brexit, we still need to be prepared for this possibility. If a deal is agreed, we can expect the planned transition period to keep things largely the same until at least the end of 2020.
Whatever happens, now is a good time to think long-term about how to secure your chosen lifestyle in the Algarve and protect your family as best you can from anything the future may bring.
Planning to protect your wealth
Good wealth management starts with establishing your goals, including your income and growth needs. An experienced financial adviser is best placed to independently assess your risk appetite before building a diversified portfolio of investments to achieve your objectives within your risk tolerance.
If you are resident in Europe but keep most savings and investments in sterling, you will be more vulnerable to exchange rate risk, especially as Brexit unfolds.
Explore investment options that offer flexibility to choose the most favourable currency for your income when you need it.
Also, do not underestimate the importance of tax planning on your wealth. Make sure your arrangements are structured appropriately for your life abroad and take account of tax reforms in Portugal, the UK and anywhere else that may affect you.
The key is to find the right balance of risk and return for your peace of mind, and to make sure your savings and investments are structured as tax-efficiently as possible for your unique situation.
Planning to maximise your pensions
Britons today have more choices than ever for what to do with UK pensions, so spend a little time reviewing your options. For many expatriates, it makes sense to bring their pensions with them by transferring UK pensions funds to a Qualifying Recognised Overseas Pension Scheme (QROPS). Transfers to EU/EEA-based QROPS are currently tax-free but this could change after Brexit. The UK has already brought in a 25% ‘overseas transfer charge’ for other transfers, so could use shedding its EU obligations as an opportunity to recoup more taxes from expatriate citizens.
QROPS can offer significant benefits but will not suit everyone. You may find it more beneficial, for example, to reinvest UK pension funds into Portuguese-compliant investment arrangements, or even leave your UK pension where it is. Before making a decision, take care to review the best course of action for your particular circumstances with personalised, regulated pensions advice.
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 understand the succession laws and inheritance taxes in Portugal and anywhere else you have assets and heirs. Also, make sure you review the pros and cons of using the EU succession regulation ‘Brussels IV’ for your cross-border estate planning.
You need a strategy that achieves your wishes while making the process as straightforward and tax-efficient as possible for your chosen heirs. And don’t forget your own needs; consider the tax implications to find the optimum solution for your wealth during your lifetime too.
Planning for the unknown
Although we have seen much uncertainty with Brexit, the reality is that things can change at any time that are beyond our control. Remember: tax rules are subject to change in any country, especially as governments come and go. Could a change of UK government, for example, impose more taxation on Britons who have built up their wealth, or remove allowances for UK nationals abroad? Could Portugal extend their ‘wealth tax’? Will losing EU citizenship mean new tax liabilities?
While you cannot account for what’s unknown, if you have a robust wealth management plan in place and undertake regular reviews, you will be in the best position to adapt accordingly.
Whether it is investments, tax, pensions or estate planning, take specialist, cross-border advice to ensure you do what works best for your personal situation, today and for the future.
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.
By Adrian Hook
Adrian Hook is a Partner of Blevins Franks and has been providing holistic financial planning advice to UK nationals in the Algarve since 2007. Adrian is professionally qualified, holding the Diploma for Financial Advisers. | www.blevinsfranks.com