Are your investments suitable for your life in France? Your combined investment portfolio should be specifically structured around your risk profile, objectives and circumstances, as well as to provide tax and inheritance planning advantages in France.
Moving to France is the perfect opportunity to have a fresh look at your savings and investments. You need to adjust your tax planning and estate planning to take account of the French tax and succession regimes, and it makes perfect sense to review your investment capital at the same time.
Besides the convenience of getting everything done at once, it is all interrelated anyway. The way you hold your assets can affect your tax liabilities today and what succession tax your heirs will pay. It can also impact whom you can leave the assets to on death and whether they will need to go through probate or can be easily passed on.
If you made a good profit on selling your UK home, or perhaps a business, when moving to France and these funds are sitting in the bank, you may be wondering how best to invest the money to give you better income and growth prospects. Or you may have received an inheritance while living here.
You probably have various investments too, made over the years, whether it is ISAs, company shares, or equity and bond funds. They may have been good decisions at the time, based on your objectives back then, but are they suitable for your life today in France and do they work well together as an overall portfolio?
Start your review by asking yourself a few questions –
1) What are you looking to achieve? Do you need income to help finance your life in France or treat yourself occasionally? Or are you looking for growth, to protect the value of your savings for the long term? Or is it both?
2) What is your time horizon? Do you need your savings to last just your lifetime, or do you hope to pass on wealth to your children? Or are you looking to cash in investments within a few years? Short-term investors should usually consider different options to longer-term ones.
3) What are your circumstances? What are your monthly expenses in France? What pension savings/income do you have? Do you have family to consider? Are you in good health? Do you expect to live here long-term? Are you expecting to buy or sell a property?
4) What currency? Converting Sterling funds into Euros for your expenses in France puts your income at the mercy of exchange rate movements. British expatriates may wish to hold a mix of both currencies, and/or use investment structures that provide currency flexibility.
5) How much investment risk are you really comfortable with? And what level of risk does your current portfolio have?
6) How much French tax are you paying on your investments? What was tax efficient in the UK is unlikely to be tax efficient here, so how much tax could you save by re-structuring your capital?
Your overall investment strategy should be specifically designed around the answers to the above questions, and your portfolio created and managed to meet your circumstances and goals. An ill-fitting portfolio may not work as hard as you need it to, or be eroded by inflation, or too risky for you, or be difficult to access.
Learn more about the investment management service we provide.
Your appetite for risk
Establishing your objectives and determining your risk tolerance are the starting points for a successful investment strategy.
You need to pinpoint the right risk/return balance for your peace of mind, but it is extremely difficult to effectively assess your own risk profile. You will benefit from third-party professional objective guidance – there are some sophisticated ways of evaluating your risk appetite, with some advisers using psychometric assessments. This gives them greater understanding of your attitude to risk and helps position your investments accordingly so your portfolio is neither too risky nor too cautious.
Asset allocation and diversification
Diversification is key to managing risk within a portfolio. Different investments carry different levels of risk, so determine which balance works for your risk profile and objectives.
Your investments need to be suitably diversified to ensure you are not over-exposed to any given country, asset type, sector or stock. By spreading across different asset types (equities, bonds, property, cash) and markets (UK, US, Europe, emerging markets etc), you give your portfolio the chance to produce positive returns over time without being vulnerable to any single area or asset class underperforming.
This can be extended one further step. Utilising a ‘multi-manager’, approach where several different fund managers are blended together, can reduce your reliance on one investment manager making the right decisions in all market conditions.
Tax-efficient investment arrangements
A tax-efficient structure can keep most of your investments in one place, making them easier to manage, and provide protection to help you legitimately avoid paying too much tax. The less tax you pay, the more of your returns you get to enjoy.
Investment income in France is taxed at either a fixed rate of 12.8% or, by election, at the normal scale rates of income tax (currently ranging from 11% for income over €10,777 to 45% for income over €168,994). Social charges are paid on top, generally 17.2% but potentially reduced to 7.5% if you have Form S1 or are covered under the health care system of another EU/EEA country.
There are investment arrangements available in France that provide considerable tax benefits. The advantages of the assurance-vie, for example, include tax-free income and gains rolled up within the policy. When withdrawals are made, only the growth element is taxed and the 30% (or 20.3% if you hold Form S1) rate is available on post-2017 policies (provided they are approved for French tax purposes). From the ninth year onwards, the first €4,600 (€9,200 for a couple) of growth withdrawn is tax-free. Assurance-vie can also provide succession tax savings for your heirs.
Regular reviews
Even if you have re-structured your capital investments since moving to France, it is still important to review your portfolio around once a year to confirm if it remains on track. Your personal circumstances may have changed, or your risk weighting may have shifted as values rise and fall, in which case you may need to re-balance it.
To ensure your portfolio is both tax efficient and suitable for you today and into the future, contact Blevins Franks to spend time with one of our professional financial advisers. They will get to know you, and your objectives, and be able to recommend a highly personalised wealth management plan that covers investing, tax and estate planning.
Contact Blevins Franks today.
