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Equity Release Warnings
Gwilym Rhys-Jones
Adviser and Investigator
Costa del Sol Action Group
http://www.costa-action.co.uk/
There are various Equity Release products on offer in Spain which purport to provide a safe release of capital. The loan is provided by banks such as Landsbanki, Danske, Mees Pierson, ABN Amro, HSBC and Rothschild.
The Spanish versions would never be recommended in the UK as they all fail to meet the safeguards recommended by the UK’s Financial Services Authority (“FSA”) or those standards recommended by SHIP (see www.ship-ltd.org.). Unfortunately Equity Release in Spain is unregulated, unlike in the UK.
In the UK, when the loan is made, you can spend the monies exactly as you wish. This is not the case with the Spanish arrangements whereby you can only use a proportion, usually up to 25% of the monies. The other 75% or so must be invested and used as security for the loan, alongside a charge or mortgage on your property in Spain.
Despite the Spanish sales brochures, you are at risk to lose your home which makes the Spanish schemes of high risk. Some IFAs and lenders skirt around this real risk by making statements such as:
“The annual interest... is paid from the income produced from the investments.”
“…the loan can only be called in if you are in breach of the terms and conditions of the loan.”
This is misleading. In Spain, unlike the UK, you must meet the interest repayments. In the UK there are no interest payments to be made. Thus if interest rates were to rise, your investments and Spanish property valuation were to fall, and you were struggling to pay the interest, then the lender can demand that you sell your home and the investments to repay them.
This might sound like a scaremongering story, but this is exactly what happened in the UK in the late 1980’s and why the Spanish schemes are now banned in the UK.
The promoters state that as the asset is outside of Spain, there will be no SST. They omit to explain that SST will remain payable where:
a) The asset is left to a Spanish resident such as your spouse
or b) the asset is a life assurance wrapper sold in Spain (even where a foreign assurance company is involved). The Spanish tax authorities have issued a statement to this effect.
Read the Small Print The above reasons are why some promoters state:
“We can take no responsibility for any adverse consequences…or for failure to produce any taxation or other benefits described in this document….”
In other words, even they realize that there are problems, and they don’t want to be sued.
The deduction of the mortgage loan from a foreign lender will not automatically be given by the Spanish authorities. Unless the obligation to repay the loan is properly documented in Spain in such a way that it meets certain requirements, the loan is not deductible.
Thus the worse consequence could be that instead of saving SST, the scheme increases it. This would happen because the asset created by the loan is chargeable to SST, whilst the loan itself would not be deductible.
The UK schemes state that in the event that repayment on death (or earlier) from the property sale proceeds are inadequate to repay the loan, then the lender loses out; no claim can be made against the other assets of the estate for the deficiency. This is known as a “no negative equity guarantee”.
This safeguard is not available in any of the Spanish schemes, yet all UK schemes provide it.
The Spanish home is a Euro asset, but the loan you take out under the Spanish schemes could be in any other currency. This is a recipe for disaster. If the loan was taken out in a currency such as Swiss Francs and strengthens by, say, 35% against the Euro, whilst the value of your investments and property fell, you could face a substantial loss. Of course, you could take out the loan in Euros, but the other risks mentioned above still make the Spanish scheme untenable.
The Residents Certificate
John Carrington, from Ciudadanos Europeos, comments on the new Residents Certificate.
I note the problems being experienced in some parts of Spain with obtaining the Resident Certificate.
Since the abolition of the residencia it has become apparent many 'foreigners' are increasingly finding problems of proving their identity. My residencia expired in April and thus I have seen first hand the problems. The British do not have a National ID card and even if they did, like many other countries, they would lose their right to it on moving to Spain. This means the only legally accepted ID is a passport: very difficult to carry at all times. Again with the Brits it means when the passport becomes ‘dog-eared’ one must apply for a replacement. A UK passport can only be obtained in Madrid and thus the overall cost, including courier service, is around 200 euro. I am seriously considering applying for Spanish Nationality, thus renouncing my British Nationality, so that I can have an ID card.
For about 10 years I have worked as a volunteer translator with the National Police and the Guardia Civil in Malaga. Many times I have seen officers taking denuncias refuse to accept photocopies of passports, residencias, national driving licences and various other ‘ID documents’ which people have produced, insisting they return with their original documents. I accept some officers are more understanding and will on occasions waive the legal requirement for the original passport.
The Residents Certificate, which has a highlighted warning, printed in two places, that it is not proof of identity, seems to be a worthless piece of A4 paper. Almost nobody I have spoken to can understand why the residencia was abolished. What was needed was a simplified method of application and immediate issue. At Fuengirola in Malaga, it is anticipated that a machine, which will produce a Spanish ID (DNI) instantly, will shortly be operating. It probably could have produced residencias too!
Having supported the abolishment of the Residents Card can I now suggest we use the same efforts to have a replacement for it introduced so we are not ‘second class citizens’ required to carry passports as proof of ID having been deprived of our residencias!
The lack of Foreign Languages in Spain
Per Svensson
Ciudadanos Europeos
http://www.c-euro.org
Spain is one of the most international countries in the world. In all parts of the international scene it plays and demands an important role. Today, in almost all Regions of Spain, there is strong international representation.
More than any other European country, Spain is a country depending on international tourism, with more people working in this sector than any other. One might think after more than a generation in this situation, the knowledge of foreign languages would be widespread.
A study published by the Eurobarometer on “The Europeans and their languages” reveals that 51% of all citizens of the present EU speak English, which has, to all effects, become the dominant European language, for studies, work, culture and tourism. There are today 400 million people in the world speaking English as their first language and another 1,100 million speaking it as a foreign language. It is ridiculous that the European Union is run on bureaucratic proportional thinking, enforced by nationalists and the politicians who cannot communicate in a foreign language.
An investigation by the Berlitz School revealed that 49.5% of the Spanish agreed that today it was very important to speak a foreign language, 42.8% accepted it was quite important. 5% thought foreign languages were of only little importance, whilst 1.1% considered they had no importance. The resistance to learning foreign languages is found only among those with a low standard of education.
However, with 92.3% of the population agreeing to the importance of learning a foreign language, why is it that 56% of the Spanish admit to not speaking any other language than their own and only 22% can speak English? This places the number one tourist country in Europe on the fourth spot from the bottom when it comes to knowledge of English. The European average is 38%.
The reasons
My personal ranking of the reasons for this very unfortunate situation among the Spanish, is as follows: 1) The politically motivated campaign of the nationalists, in regions like the Basque Country, Catalonia, Valencia, Baleares and now also Galicia to force a regional language on the population and especially the school children. Teachers are required to be fluent in their regional language, in addition to Spanish. Their ability to teach in English is of less importance. How shall the children be able to learn English, only as a third language?
2) The lack of exposure to spoken English, due to the dubbing of all foreign language films, including reports and short films on the TV, into Spanish instead of using subtitles. Nowadays the nationalists are even enforcing dubbing into their regional language.
Luckily the nationalists have not succeeded in regionalising the Internet, with its strong reliance on English.
3) A false national pride that Spanish is a world language and thus the foreigners coming to Spain should learn Spanish. I am on record as advocating foreign residents should learn Spanish and not form foreign language-speaking ghettos in Spain, but I have also explained to the Spanish that it is often difficult for elderly people to learn a new language (if that was not so, why have all Spanish not learnt to speak English?). It is ridiculous to expect tourists coming for a week or two to bring with them Spanish in their suitcase, in addition to Catalan, Valenciano, Mallorquin….?
The solutions
What children do not learn in school, language institutes of all kinds and forms try to teach the adults who have already run into the language barrier, while a number of travel agencies specialise in language courses abroad. Last year more than 100,000 Spanish travelled abroad for such courses, mostly with very poor results. Some have started to study English up to 10 times, without being able to overcoming the handicaps that some narrow-minded politicians placed in their cradles.
Spain needs less nationalism and nationalist politicians and a consensus among the political parties and in society on the need to give the next generation a fair chance in their international future. One must be pragmatic and accept English is already the means of communication in Europe and the world.
I can write this because I am one of those lucky people to be born in country exposed to many languages. I am Norwegian and not English, speaking mainly German at home. |
