across the spectrum newsletter june 2010
TRANSCRIPT
Issue 2 2010 June � TAX EFFICIENT SAVINGS...1
� RECOMMENDATIONS ..... 2
� THE LUXEMBOURG STATE PENSION UPDATE .............. 3
Across the spectrum Tax Efficient Savings
Many of our Luxembourg based clients have
two main concerns:
1. The low deposit interest rates they receive.
2. How can they save in a tax efficient and
effective manner?
With interest rates at historic lows bank
savings and deposits are not keeping pace with
inflation. Many of us have to save for the
future, either for our pension provision or for
our children’s further education.
Putting this in perspective, a study by
Liverpool Victoria in November 2007 said that
University costs increase at approximately
7.5% per annum, (the current level of inflation
for educational costs). This was further
supported by an article in The Sunday
Telegraph, (26th August 2007), which stated:
“School fees have risen 41% in the past 5
years”
So the question we have to ask ourselves is
whether or not by leaving our money in banks,
will we be able to meet all of our future
financial planning goals?
One solution is to look at saving through a life
assurance wrapper.
A wrapper is effectively an “investment
platform” through which an enormous range of
underlying investments can be purchased.
“Many thanks for your recent presentation, concise, clear and informative. The realistic example of what the Luxembourg State Pension actually is and how it can be calculated certainly clears up the
mystery surrounding this hot topic. Please keep my colleagues and myself informed of any changes to
the system!” – Alan Botfield, Director, Orangefield Trust
"Thank you again for your helpful Luxembourg State Pension presentation last week. We have indeed
received nothing but positive comments from the staff, I'm glad you're helping several of them
personally." - Matthew Dwyer, Staff Delegation, ISL
“Cleared up a few myths and mysteries, and learned some new useful facts. I came out of the
presentation feeling like a pension’s expert myself.” – Carol Kahn, RDF Development, Clearstream
Whilst the wrapper will be provided by a life
assurance company, it is important to note
that you are not paying a premium to
purchase additional life assurance (although
life cover can be added to some contracts).
Regular premiums can be paid monthly,
quarterly or annually. Other contracts are
available for single premiums, (lump sums),
and also for ad hoc contributions.
So what are the benefits of saving within a
wrapper here in Luxembourg?
1. All investments grow within the wrapper
free of income tax and capital gains tax.
2. As the wrapper is considered a life
assurance contract it is not affected by the
European Savings Tax Directive, and
therefore not taxable.
3. The premiums you pay could be tax
deductible (subject to personal
circumstances). 4. You have access to investments perhaps
only available to institutional investors.
5. Lower minimum entry levels in
underlying investments.
6. Access to some of the top fund managers
in the world.
7. The flexibility to change your investment
strategy at any time.
8. The ability to access your funds if
required.
9. Higher bank rate. E.g., there are currently
bank rates offered within the wrappers of
4.25% per annum.
10. Security.
Michael Doyle David O’Donoghue
[email protected] [email protected]
+352 691 128 026 +352 621 522 511
TSG Insurance Services S.A.R.L. (Luxembourg Branch) RCS Luxembourg: B 95136 - 11, avenue Guillaume, L-1651 Luxembourg.
TSG Insurance Services S.A.R.L. Siège Social: 34 Bd des Italiens, 75009 Paris
« Société de Courtage d'assurances » R.C.S. Paris B 447 609 108 (2003B04384) Numéro d'immatriculation 07 025 332 - www.orias.fr
Luxembourg State Pension
Update, (non-EU)
As most people are aware, to
receive a Luxembourg State
Pension, you must make at
least 10 years of pension
contributions across EU
member states, Canada or the
USA, (there are also
agreements with a few other
non-EU countries).
Recently we have been
inundated with questions as
to what will happen to
people’s state pension fund if
they return to their home
country and they don’t
satisfy the 120 month rule as
Luxembourg has no pension
convention with that country.
For example, what would
happen if you have worked
in Australia or New Zealand
for most of your life and then
moved to work in
Luxembourg for three or
four years before returning?
Well, there are two options
for you.
The first is to do nothing at
all. With this option, when
you reach age 65 you will
receive a refund of your
contributions including any
indexation.
The second option is to
Your no-obligation
pension report
If you are interested on a
personal basis in exactly what
you will receive in retirement
then please send an email to
michael.doyle@spectrum-
ifa.com and we will contact
you to arrange a meeting on
an individual basis and offer
you a no obligation report,
which shows you the earliest
age you can retire and also
what your benefits will be if
you decide to work until 65.
continue making a minimum
voluntary contribution of
€270 per month from your
home country until you
satisfy the ’10 year rule’.
Following the second option
will guarantee you a pension
for life from Luxembourg.
Everyone’s circumstances
are different and you should
always seek Independent
Advice before making any
financial planning decision.
Here at The Spectrum IFA
Group we offer a no
obligation Financial Review
before offering any advice.
This information is based on our current understanding of the
Luxembourg State Pension System
after our own research and our meetings with CNAP, (the
Luxembourg Pension Office).