With Brexit imminent, how can British expatriates living in France secure their future when it comes to residency, pensions, savings and investments?
Now that Britain’s divorce from the EU has officially begun, will we soon know more about what Brexit means for expatriates in France?
Not quite. Triggering Article 50 has just set off the two-year countdown for agreeing the terms of Britain’s relationship with Europe beyond 29 March 2019. The only thing we really know is that from that date the UK will no longer be an EU member, whether agreeable deals have been reached or not.
While we have to wait and see how negotiations unfold, here are four key steps you can take to future-proof your financial situation now.
1) Consider securing your residency
There are under two years left for current residency and freedom of movement rules. While a fresh reciprocal agreement between France and the UK should evolve to protect expatriates in each country, we must expect the new rules to be less favourable than today. If you are UK resident and want to continue living in France, now is the time to take steps to secure your position.
2) Review your pensions
Based on current law, Brexit should not affect how you can access or transfer UK pension funds. The UK’s new ‘Overseas Transfer Charge’, however, could indicate things to come post-Brexit.
Since 9th March, you face a 25% tax on UK pension funds transferred to a Qualifying Recognised Overseas Pension Scheme (QROPS) based outside the European Economic Area (EEA), unless you live in the same jurisdiction. All other QROPS transfers remain free of UK taxation, although liability lingers for a full five tax years after the date of transferring.
Currently, this will not affect expatriates in France moving pensions to a QROPS based here or in another EEA area, such as Malta. But many think the UK government may use Brexit as an opportunity to recoup revenue from UK nationals abroad with widespread penalties on overseas transfers. They may also change the rules to make it harder to take advantage of today’s high transfer values for ‘defined benefit’ (final salary) pensions. So consider acting now, under current rules, before the tax-free window of opportunity closes.
However, it is crucial to carefully explore your options and use a regulated provider to avoid pension scams and establish the right solution for you.
3) Diversify, diversify, diversify
When it comes to investing, many expatriates favour British assets, like UK bonds or FTSE shares. Not only could this approach overlook opportunities available in France, it can generate overexposure to UK assets. While markets have proved quite resilient to Brexit news so far, we cannot predict how the UK economy will continue to react. In uncertain times like this it is more important than ever to have a well-diversified portfolio.
You should minimise risk by spreading investments across countries, currencies, regions, asset types and market sectors. By limiting your exposure in any one area, you are better placed to ride out market turbulence – Brexit-related or otherwise.
4 Look for currency flexibility
With the fortunes of the pound and euro so tied up with Brexit developments, it is a good idea to reconsider the best currency mix for you. Living in France, ideally you should receive some income in euros to reduce your dependency on exchange rates.
One solution is to use structures that allow you to hold investments in multiple currencies. You could, for example, invest in sterling now and switch to euros when rates are favourable, with flexibility to choose the currency of your withdrawals.
In any case, you should regularly review your affairs to ensure your assets and investments remain suitably diversified and tax-efficient for your unique situation. Not only can your circumstances, objectives and appetite for risk change over time, uncertain times like this can also unlock opportunities.
The ticking of the Brexit clock offers one more compelling reason to fine-tune your financial planning. As an expatriate it is essential to understand the cross-border implications and be fully prepared so you can continue enjoying your life in France, whatever Brexit brings.
Any questions? Ask our advisers for help.
The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual should take personalised advice.