A recent case study from one of our Partners in France highlights how important it is for British expatriates to receive pensions advice specifically tailored for their circumstances in France.
Every individual’s circumstances are different and each person’s situation needs to be looked into carefully so that the best advice is given. When you take financial advice, make sure it is personalised for your situation and the fact that you are living in France.
We were asked to give advice recently to a lady we will call Mrs A, which highlights some of the pitfalls people may need to be aware of.
Sadly, Mrs A’s husband had died at the age of 67. He had a private pension in the UK that had been paying him an income. Their UK adviser gave the widow the option of taking the fund as a lump sum or carry on receiving an income.
If she had elected to take the lump sum, this would have been free of both inheritance tax and income tax in the UK. In France it would have been treated as a payment from husband to wife, so no French succession tax or income tax would have been due.
Her adviser was not familiar with the rules in France and so did not advise Mrs A of this and she chose to take the income. This remains free of taxes in the UK, but it is all taxed as income in France – 14% in her case.
There is a second issue. When Mrs A dies, what is left of the pension fund will go to her children. Whilst again this would not be an issue in the UK, in France the fund will be liable to succession tax – 20% in this instance, but could be up to 60% if she had been leaving the money to step-children.
When we reviewed her situation, it was immediately clear that Mrs A had not been given the best advice for her circumstances. She already had an assurance-vie and was still under the age of 70. If she had elected to take the lump sum rather than the income, she would have had the following benefits in France:
Fortunately, this case had a favourable outcome. We were able to assist Mrs A in challenging her UK financial adviser, who agreed to fully recompense her. However, it highlights how important it is that the advice that you receive is designed for your circumstances in France. Although some UK advisers may be ‘passported’ to offer advice to expatriates living abroad, they do not always have a comprehensive understanding of the French tax regime.
The area of pensions can be particularly complex and whether you are resident in France or the UK can have an impact on your options and the amount of tax you pay. Make sure you are best placed to enjoy your retirement in France with cross-border advice that is tailor-made for you.
In our follow-up article, It's the differences... we look at a case study that shows how the tax treatment of UK pensions can vary greatly according to the actions you decide to take.
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 is advised to seek personalised advice.