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What are your UK pension options in France today?
2019-10-08 Eleanor Moore 0 Tax and Finance
Pensions are often the key to long-term financial security, so take care to review your options.
Defined contribution’ or ‘money purchase’ pensions
From age 55, members of these schemes can usually:
- Take the whole fund as cash – 25% will be tax-free in the UK.
- Make cash withdrawals – a quarter is free of UK tax each time.
- Take regular income through ‘flexible drawdown’, leaving the remainder invested.
- Take a regular income for life through an ‘annuity’.
Expatriates can transfer UK pensions to an EU-based Qualifying Recognised Overseas Pension Scheme (QROPS) tax-free. QROPS advantages include more estate planning flexibility and freedom to take income in euros or sterling.
Beware that QROPS benefits can vary significantly and a 25% UK tax charge applies to transfers outside the EU/EEA – and may extend to EU/EEA transfers post-Brexit. So if you are considering transferring, take specialist advice.
‘Defined benefit’ or ‘final salary’ pensions Here, your employer guarantees a proportion of your salary for the whole of retirement. While you cannot usually withdraw cash, you can transfer funds to a defined contribution scheme or QROPS. Traditionally, this has been considered less beneficial than a pension for life. However, some providers have been offering higher than usual ‘transfer values’. Sensibly reinvested, a one-off sum could potentially provide a retirement income that exceeds the original annual payment, but it is crucial to fully understand the consequences before giving up lifetime benefits.
**Taxation ** While 25% of cash withdrawals can be taken tax-free in the UK, French residents attract French income tax from 14% to 45%. However, it is possible to limit French tax to a fixed rate of just 7.5% if you take the entire fund in one lump sum. Pension income and lump sums are also generally subject to French social charges of 9.1%, unless you hold EU Form S1 or have not joined the French healthcare system. The exception is UK government service pensions, which remain taxable in the UK only (although the income is included when calculating your French final tax rate). Making your pensions last If you choose to take pension benefits as cash, make sure you have a reliable plan to fund your long-term future that suits your personal situation and goals.
To avoid pension scams, check that any company you are dealing with is regulated by the UK Financial Conduct Authority (FCA). Your adviser should take account of your needs, objectives, personal circumstances and risk appetite to find the best solution for you and your family. Take steps to explore your options now – before Brexit potentially changes the landscape – to establish your best approach for a prosperous retirement in France.
*Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice. *
Article brought to you by By Bradley Warden, Blevins Franks.
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