I’m a big believer in investment bonds, and many of my clients here in Spain hold them, in particular Spanish compliant investment bonds created by companies including The Prudential, SEB, Lombard and Old Mutual International / Quilter PLC.
Spanish compliant investment bonds offer great tax efficiency – as an example, a net return of 7% per annum would actually double your investment over 10 years thanks to the gross roll-up (compound growth) these bonds allow you to benefit from. (As always, returns aren’t guaranteed, and the figures given are for illustration purposes only).
Alongside that, if your bond is appropriately advised and designed for you as a resident here in Spain, it will also be fully tax compliant, meaning it is effectively taxed at source, and under most circumstances you won’t have to declare the bond itself on the Modelo 720, or indeed your annual gains or income.
Within a bond you can hold a fully diversified portfolio, and if that portfolio is advised through Chorus you will also benefit from our promise that we only use FCA regulated funds, that guarantee no hidden fees or commissions.
The following video explains exactly how all bonds, including those from Prudential International, SEB, Lombard International and Quilter PLC are taxed, and exactly what you need to know before signing up:
So, with all these advantages, where can a bond fail to provide what you’d expect as an investor?
Firstly, the annual charges. Did you know that you could be paying more for exactly the same bond depending on which firm you sign up through? I’ve seen people commit to annual charges of as much as 1% a year for as long as 5, 8 or even 10 years on a bond. That’s an unnecessarily high charge, and if you’d taken that exact same plan through Chorus, you would be paying far less, and all our recommendations are made without a tie-in. High annual fees and a long tie-in can mean your adviser receiving 7-12% in hidden commissions. This can have serious long-term implications on your returns.
You also need to be very aware of the investment funds your advisor uses within your bond. As I’ve been saying for many years here in Spain, the use of commission paying funds is prolific. This can mean rather than having a diverse portfolio of funds from the likes of Rathbones, Investec, Prudential, Royal London etc, your portfolio instead has a handful of low quality investments. They often have high hidden fees that you may be unaware of for many, many years. It can be incredibly hard for you to identify such funds.
A well put together Spanish investment bond can offer so many advantages and can be a fantastic long-term investment solution, but sadly many advisors here in Spain fail to put them together with their client’s needs at the forefront of the advice.
Your long-term financial security is simply too important to risk not asking enough questions, getting a second opinion, or signing paperwork until you’re 100% sure you’re getting the best possible deal and the best possible investment advice.
Do you have an existing Spanish compliant investment that may not be performing as expected, or are you considering a new investment here in Spain? Contact me today to review a plan or provide a like-for-like quote. Ensure you are getting the best value and advice possible. Initial advice is without charge or obligation, and when we do charge we’ll fully disclose all fees, including what you pay us for our service – no hidden commissions guaranteed!