When retiring to France, you must think about…
Many Britons want to retire to France as it is the destination for a pension abroad. Many options are available for your pension in France. Depending on the type of pension you have taken out, there may be many ways to improve its fund and learn more information about it. So, here we suggest what to do and what to avoid. The international pension scheme, better known as a QROPS (Qualifying Recognised Overseas Pensions Scheme), can enable you to arrange the funds and income to be in Euros.
Can I transfer my pension fund from the UK to France?
Yes, but we do not recommend you do so. Indeed, you can transfer your pension benefits into a French personal pension area (PERP). Generally speaking, these pensions issued by these schemes possess a much better value for money, rather than offering you a lump sum to transfer into an alternative pension. Therefore, we would recommend to you that benefits be kept within the scheme. However, the legislation entitles you to receive from a French PERP only in the form of an annuity. Please realize that transferring your money into the French scheme is not, currently, a simple task.
What is an annuity?
In a nutshell, an annuity is where the fund is exchanged for a guaranteed income, and payable for life. You can add certain conditions, such as:
– A pension to your wife/husband in the event of your death (following the same methods of life insurance)
– A requirement to increase the payment of your pension
– A minimum payment period (to ensure some return of the fund in the event of premature death)
Please remember that all these conditions reduce the starting income as the insurance company is taking on more ‘risk.’ Moreover, as your income will be transferred in Euro, this does give rise to a very real possibility that you will be exposed to currency fluctuations. Currently (mid-June), one Sterling = 1.24 Euro. The best exchange rate in a year and a half!
Have a state pension forecast
You should consider obtaining a basic state pension forecast. You can obain it either in writing or on the internet. The latter is a much quicker and practical solution. If you are not granted a full UK state pension, because you must have paid previously the National Insurance contributions for at least 90% of your working life, you can make voluntary additional contributions.
The French tax liability specificities
First of all, you have to pay tax in France, as French residents, and you cannot decide where you must pay tax. Some UK pensions will remain subject to UK tax (e.g. civil service), but you must still declare these to your French tax inspector who will analyse the UK tax paid when assessing your liability to French Income tax.
One quirk of the French taxation system is the favourable treatment of pensioners. In France, only 90% of your income is taxable as any pension income – up to a maximum of €34,460 – is awarded of 10% abatement. Ideally, you should speak to an independent financial adviser who can advise you on your retirement planning, and on any inheritance tax complications of France.