Pensions and healthcare in France

21.08.18
pensions-healthcare-france

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

Many UK nationals living in France do not realise that their tax bill on UK pensions could be adversely affected by their healthcare provision. By delaying registering for the French healthcare system, it can be possible to limit taxation to just 7.5% when taking a lump sum.

If a client is considering moving to France to retire, what they do with their pension funds and how they cover healthcare costs are key issues to resolve. In France, the two are also inextricably linked from a tax perspective.

Most UK expatriates in France want peace of mind that themselves and their families have access to healthcare and that the costs are covered. Registering with the French system is therefore often high on their priority list. However, it is crucial to consider the impact on their pension fund before they register for healthcare.

If a client is thinking of cashing in their UK pension as a lump sum, accessing French healthcare could cost them 9.1% of their pension in social charges. As a result, it may be better to wait until they have transferred their pension and take out private medical insurance in the meantime.

How UK pensions are taxed in France 

With the exception of government service pensions (which remain taxable in the UK), a UK national resident in France receiving pension income is taxable solely in France at the income tax scale rates of up to 45%.

Where it becomes more interesting is the taxation of pension lump sums. Unlike the UK – where you can take up a quarter of your pension as a lump sum tax-free – they are fully taxable in France (with exceptions for sums taken because of an ‘accident of life’).

In general, regular lump sums received from a UK registered pension are taxable as pension income if received while French tax resident. However, you can avoid the scale rates and instead benefit from a fixed rate of just 7.5% if you take your UK pension as a single lump sum.

Social charges on pension income and lump sums

Social charges are an incredibly important part of France’s tax collection, and more is raised annually from these taxes than income tax. As with all income in France, social charges are payable on top of income tax. The rate for pension income is 9.1% in 2018 (increasing from 7.4% last year).

However, a UK national does not have to pay social charges on pension income/lump sums, if:

1. They hold EU Form S1 (issued by the UK’s Department for Work and Pensions at retirement age for those who are due a UK State Pension)

and/or

2. They do not have access to the French healthcare system.

Therefore, if a client is thinking of taking a lump sum from their pension, it may be sensible for them to delay joining the French healthcare system where doing so results in significant savings on social charges – particularly if they are taking the whole pension at once.

In this case, it might would be more beneficial to take out private medical insurance until the pension funds are received.

While taking pension wholly as cash is an option, it needs careful consideration and specialist advice to make sure it is the right move. It is a particularly attractive option in France. As well as the potential low tax rate, French residents have the opportunity to invest funds into an assurance-vie policy that offers many tax and estate planning advantages; drawing down upon this annually could replace the potential pension income.

Blevins Franks offers specialist, personalised pensions advice to help expatriates find the most suitable course of action for their individual circumstances and objectives. We have pension, tax and investment research experts working together with local advisers in France to create personalised wealth management solutions.

 

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; individuals should seek personalised advice.

 

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; individuals should seek personalised advice.