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Investment planning should be a continuing process to ensure your investment aims are still right and your investments correctly aligned with those objectives.

5-year Plan, 10-year Plan, 30-Year Plan. Do you have yours? - Published August 2017 by Raoul Ruiz Martinez

Dr Shigeaki Hinohara, the eminent Japanese longevity expert, died recently aged 105. His advice helped make Japan the world leader in longevity. I was fascinated to read that he still kept a date book with space for 5 more years of appointments.

Should you be moving here to Portugal, attracted by the Non-Habitual Residence program, or are you already a couple of years into your tax exempt 10-year program?  Planning ahead 5-10 years, at the very least, is sound advice.  Even if you are a normal, or permanent, Portuguese tax resident and feel you have missed out, it would appear that there are equal tax-efficient planning opportunities for those with private pension income. 

One question you need to consider is whether or not you have a suitable pension structure in place to optimise these mainstream benefits under a Portuguese tax residence, NHR or otherwise.

In the UK, traditional company pensions and personal pensions offer an attractive, tax-efficient way to save for retirement.  They don’t typically offer you a great deal of investment flexibility. You may have the choice of a range of funds but exactly how many and how good will depend on the scheme and, usually, these are unlikely to offer many unusual or adventurous options. 

For savers who want to combine the tax breaks from pensions with a more hands-on approach to investment, the obvious choice may be a self-invested personal pension (SIPP). Essentially, SIPPs can invest in almost anything you’d want to hold, although your choice of investments will depend on what your SIPP provider offers and your own attitude to risk and capacity for loss.

SIPPs are commonly divided into two main types: full SIPPs and platform SIPPs. A full SIPP is one that offers a wider range of investments: as well as shares, bonds, funds and cash.  This can also include assets such as direct investment in commercial property. A small number of full SIPPs also allow you to hold unlisted shares, although caution is needed to avoid breaching HM Revenue & Customs (HMRC) rules on how much you own of a company and how diversified the other shareholders are – falling foul of these rules will incur penalty tax charges. 

One of the most interesting features of a full SIPP is that it can borrow money to buy certain investments. For example, it can take out a mortgage to part-fund the purchase of a commercial property. When the property is then rented out, this income would go to the SIPP and be put towards mortgage repayments and the cost of servicing the property.

There are a limited number of investments that either cannot be held in a SIPP without incurring penal tax charges or where it will be extremely different to find a SIPP administrator that permits them due to past problems and mis-selling scandals. The most notable of these is undoubtedly residential property, which cannot be held directly, though you could invest in residential property through a fund. Direct investment in tangible moveable assets is also off limits. This is essentially intended to stop investors holding art, classic cars, wine and other assets that are capable of personal use inside their SIPP.

For other nationals or individuals who have built up their savings outside of the scope of an existing private pension, for example, by investing in property or historically without access to a long-term savings plan or well-established pension marketplace, your hard earned wealth can be gifted or, more precisely, contributed to an international pension plan.  Essentially such an established plan is viewed as something similar to a full SIPP. 

Converting your savings into pension assets will create highly tax-efficient income under a Portuguese tax residence, regardless whether or not you are under NHR or a normal tax residence.  That’s good news for any of you who feel you have missed out on the NHR opportunity.

It is without question that you must take both tax and pension planning advice.  Ensure that you have researched the market carefully in terms of the historical and future stability of the jurisdiction, the statutory and regulatory protections in place and that, ultimately, the pension provider has considerable experience, a proven track record and sizeable assets under administration to date.  This will leave you free to take more of Dr Hinohara’s advice in longevity and just have fun!

All statements concerning tax treatment and their benefits are based upon our understanding of current tax law and practices both of which are subject to change in the future. Levels and bases of reliefs from taxation are also subject to change.  This article is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific investments or course of action.

Raoul Ruiz Martinez is a resident and independent consultant for Finesco Financial Services Ltd., Glasgow and advises clients on private financial matters in both the UK and throughout Europe under the MiFID regulation. Finesco Financial Services Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Some of the services provided are not regulated by the FCA because they are not included within the Financial Services and Markets Act 2000.

Raoul has a weekly radio feature (Raoul’s Rant) on the Owen Gee Solid Gold Sunday Morning Show as well as the Money Minute programme on the weekly Si Frater’s Breakfast Show, both on KissFM Portugal.