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It is that time of the year when many people make New Year resolutions to improve their life in one way or another. Whether or not you make resolutions, this is a good time to consider whether you need to review your financial planning.

To protect your financial security through retirement, and achieve your wishes for your family and heirs, you need to have a strategic tax and wealth management plan in place. This should cover your savings and investments, tax planning, pensions funds and estate planning. These should all be set up to work together to preserve your wealth over the long-term and meet your objectives.

You need to consider any recent global and local developments that may affect your finances in the coming year, as well as have a long-term strategy. Any changes in your personal circumstances could also warrant a review.

Once you have assessed your situation and financial planning, you will be able to discuss any necessary adjustments with your financial adviser.

Savings and investments

2016 was certainly an interesting year, with Brexit and US elections. More recently the Italian referendum could add uncertainty for the Eurozone and financial markets. Diversification is more important than ever, and you need a long-term strategic asset allocation plan which is specifically designed around your circumstances, needs and risk profile.

Diversification gives your portfolio the chance to produce positive returns over time without being vulnerable to any single area under-performing. There are various levels you should have in your investment portfolio –

  1. Asset allocation – spreading your capital across different asset classes (equities, bonds, real assets, property, cash etc).
  2. Diversification across geographical areas, sectors, company size etc.
  3. Owning equities and bonds issued by a range of companies (for example through owning a selection of funds).
  4. Utilising a multi-manager approach where you diversify across managers and styles.
  5. Currencies.


The starting point should be to obtain a clear and objective assessment of your appetite for risk, to make sure your portfolio is suitable for you.

Remember that as asset prices rise and fall, your portfolio can shift away from the one designed to match your risk profile and objectives. You should review your investments around once a year to rebalance it if necessary.

Tax planning

Make sure your investments are placed in the most suitable arrangement to limit your tax liabilities. Take advice from someone who is well-versed in the nuances of Cyprus taxation. It is important that your tax planning is up-to-date and designed to take advantage of tax planning opportunities in Cyprus.

Another incentive to review your tax affairs is the global automatic exchange of information regime under the Common Reporting Standard is now in force. The Cyprus tax authority will receive information on every resident of Cyprus, without having to ask for it. Cross-border tax planning can be complex, so you need to ensure you are declaring income and paying tax in the right country.

Estate planning

The first step is to establish your goals. Who would you like to benefit from your estate? Are you happy for them to have control over the money? When should they receive the fund? How much tax will they have to pay on their inheritance?

You then need to obtain specialist advice to ensure that your estate plan is specifically set up to achieve your wishes for your heirs.

Cyprus imposes a forced heirship regime under its Wills and Succession Law. The majority of an estate must pass to the surviving spouse and children, in defined proportions.

UK nationals can override this rule and apply British law to their estate through the 2015 European Union ‘Brussels IV’ regulation. However, it is unclear how this works in practice and it could add costly delays to the probate process. There are alternative options to ensure your estate is distributed as you wish, so you should take expert advice to establish the most suitable for your individual circumstances.

Pensions

Now is a good time to review your options, especially if you have a final salary (‘defined benefit’) pension.

Today’s historically low interest rates and market uncertainty makes it harder for providers to afford promised pension payments. In a bid to offload pension liabilities, transfer values are at record highs, with members being offered pay-outs up to 40x the annual income due on retirement. Properly managed, such high transfer values can outweigh the benefits of drawing a guaranteed pension for life, but they may not be available for long. Before making any decisions, make sure you fully understand the long-term implications of giving up the right to a fixed salary for the whole of retirement.

It may be beneficial to reinvest UK pension savings or transfer to a Qualifying Recognised Overseas Pension Scheme (QROPS) to unlock tax-compliant opportunities in Cyprus. However, QROPS tax benefits vary greatly between providers and jurisdictions and will not suit everyone. Carefully assess your options and use a regulated provider.

Did you know the UK lifetime pension allowance was slashed in April? Now, if your UK pension funds (excluding the State Pension) exceed £1 million, you are liable to 55% UK taxation when taking cash or 25% on income, wherever you are resident. Those close to this limit should consider HMRC ‘protection’ options or transferring to a QROPS before attracting tax penalties.

If you decide to transfer, act soon as the window of opportunity may be limited. Some speculate that following Brexit the UK government may make withdrawals more difficult, or start taxing pension transfers for non-residents. Amidst so much uncertainty, it is more important than ever to take personalised advice on the best approach for you and your pension savings.

Whether it is investments, tax or pension planning, seek advice to ensure you do what works best for your personal situation. Use an adviser who can guide you on all these aspects and provide holistic solutions so you can have peace of mind that your financial affairs are in order.

Any questions? Ask our financial advisers for help.

The 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. All advice received from any Blevins Franks firm is personalised and provided in writing; this article should not be construed as providing any taxation and / or investment advice.