What do I do with my UK Pension when I move to France?
It’s a question we’re often asked at The Good Life France and we put it to financial expert Jennie Poate. She told us about a real life case study, one that she finds covers a common issue for expats moving to France. We’ll call her clients John and Jane Price. They moved to France in 2016 taking early retirement to live the good life and have the time to do things they enjoy – like cycling on the quiet roads of Dordogne…
Jennie says: I met with John and Jane at their lovely house in the Dordogne, they had bought it outright with cash raised from the sale of their UK property and had a sum of money set aside for renovation and living costs. At 53, Jane is unable to take her pension early (she has a pension pot worth £100,000 with a UK provider and she will need advice in 2 years’ time when she can access her pension early if she wishes to. John will be 55 this year and therefore can access his pension. He also has a pension pot worth £100,000 with a UK Advisor.
John told me that he wants to take his pension now so that the couple have money to live on while they’re renovating their house and settling into their new life. Though they understood that the UK pension rules changed in 2015, they had struggled to find an advisor in the UK to explain what their options are now they’re living in France.
As an expert in both UK and French financial matters, I asked them questions about their financial needs and requirements and then took them through the options available to them.
Annuity
This is where, in exchange for your pension fund, an insurance company will provide a monthly income until death (some products additionally offer a pension to a surviving spouse). I explained that with this option, he could draw down 25% of the fun tax free, known as a Pension Commencement Lump Sum (PCLS) and a fixed amount of income for life.
Annuity rates have been particularly poor of late as they are based on interest rates. If John took this option in the UK, the PCLS would be tax free. However as he is a French resident, he would have to pay tax.
John asked me if could take the whole fund as cash.
Take your Pension in Cash
Well, yes, I told him. But, there are tax implications that need to be considered, both with the UK and French tax authorities. In the UK the first 25% is tax free, then the rest is either taxed at 20% or 40% (depending upon your UK tax rate). In France it would be taxed at a set 7.5%. The pension may well be taxed in both countries and he would have to apply for a refund from the UK. John will need to decide whether he would want all the cash with a tax charge, or the ability to draw on the funds as and when required. The latter is taxed at his marginal rate of tax in France, but as they would be taxed as a couple, the first €9790 each would be added together and no tax would be taken.
Drawdown funds
John could move his pension pot to a different structure altogether. For many UK pension pots, this is certainly an option. BUT only if it is in your best interest to do so, you need to check carefully that you won’t lose certain benefits with your existing policies when you move it. A ‘drawdown’ fund may be a great option and there are several types available including ‘QROPS’ (Qualifying Recognised Overseas Pension Scheme) and ‘SIPP’(Self-Invested Personal Pension). With some of these produces you can stop and start for income, and take cash depending on need. This can suit your circumstances when you may need more or less income or a cash injection, and the fund is still yours – you haven’t relinquished control
One benefit of a QROPS is that you may have a higher tax free Pension Commencement Lump Sum (PCLS ) than under a UK scheme – 30% as opposed to 25%.
Pension Income in France
John and Jane were worried about how much tax they would have to pay on their pension income as well as inheritance tax which they heard was high in France.
Pension income in France is taxable but is not subject to the dreaded CSG or ‘social charges’. The amount remaining in the fund after death is not subject to inheritance tax.
Our meeting over, I studied John and Jane’s requirements carefully, and as with all clients, recommendations undergo several stages including rigorous compliance checks to ensure that their best interests were considered. It can take a while to do this but it’s really important that as an advisor I have all the facts, and as clients John and Jane know that they’re getting the best advice and recommendations for their circumstances and future.
John and Jill are living their dream life in Dordogne and we wish them much happiness.
The financial advisers trading under Beacon Wealth Management are members of Nexus Global (IFA Network). Nexus Global is a division within Blacktower Financial Management (International) Limited (BFMI). All approved individual members of Nexus Global are Appointed Representatives of BFMI. BFMI is licensed and regulated by the Gibraltar Financial Services Commission and bound by their rules under licence number FSC00805B.
