Key financial planning steps on your retirement journey in France

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06.12.22
Retirement in France

Are you fulfilling your dream of enjoying your retirement years in France?   Whether you’re in the planning stages and looking forward to the day you can finally move, or have recently arrived and are familiarising yourself with life in France, there are various financial planning stages to work through.

Your financial journey starts (or started) with researching the move, and while it continues throughout your life in France you can take most of the steps early on so you no longer need to worry about your financial and estate planning, other than some regular maintenance.

Here are the key steps expatriates should take on their journey.

1) Understand the tax implications of spending your retirement in France

Once you are a tax resident in France, you become liable to French tax on your worldwide income, gains, and real estate wealth.

You are considered a tax resident if your main residence/home is in France, or you spend more than 183 days here a year (it’s your principal place of abode), or your principal activity (occupation) is in France, or it is the country of your most substantial assets. If you meet both French and UK tax residence criteria, ‘tie-breaker’ rules establish where you pay tax.

France uses the split-year approach; you become a resident from the day you arrive if you intend to live there indefinitely.

2) Timing your move to save tax

The French tax year runs from January to December, whereas the UK is April to April. The two countries apply different capital gains tax rules and rates.

It is therefore worth weighing up whether it is more tax efficient to sell your UK assets while still a UK resident, or wait till you are resident in France, then time your move accordingly.

Learn more about taxes in France by downloading our free guide.

3) Structure your assets to minimise tax in France

A potentially costly mistake is assuming what was tax-efficient in the UK is the same in France. ISAs, for example, lose their tax-free status once you are no longer a UK resident and the interest, dividends and gains may attract French tax.

While the headline rates of tax can look high, the French tax regime does present attractive tax mitigation opportunities. The way you hold your assets can make a significant difference to how much tax you pay.

4) Research how UK pensions are taxed in France

For residents of France, UK state pensions, occupational and personal pensions, and annuities are taxable in France, not the UK.

Government service pension income, however, remains liable only to UK tax and is not directly taxable in France (you still include it as part of your taxable income but then receive a tax credit).

Pension lump sums are taxable in France, normally at the scale rates of income tax plus 9.1% social charges. However, if you take your whole pension fund at once (or there is no possibility to take a further capital sum from the same fund) and the pension contributions were made into a contributory scheme, then you may be eligible for a special 7.5% rate (plus social charges).

You do not pay social charges on pension income if you are not subject to the French healthcare system and/or you have Form S1.

5) The QROPS option

Once resident in France, it may be possible to transfer certain UK pensions to a Qualifying Overseas Pension Scheme (QROPS). These can provide flexibility to take income in euros, more freedom to pass benefits to chosen heirs, and protection from further UK lifetime allowance charges.

But pension rules frequently change so you need to keep up-to-date. In any case, always take regulated advice before making pension decisions to protect your benefits.

Download our free guide to learn more about your pension options after retiring to Europe.

6) Reviewing your savings and investments

Once you’re retired and living in France, your circumstances and objectives completely change from when your working days in the UK.  It’s likely that your risk tolerance is lower too.

This is the perfect time for a completely fresh review of your savings and investments. Ensure your overall portfolio is suitable for you today, is designed to meet your aims and current risk appetite, and that you have adequate diversification to reduce risk.

Consider what currency to hold your savings in – keeping assets in Sterling puts you at the mercy of conversion costs and negative exchange rate movements. It may be sensible to have a mix, so look for investment structures that allow flexibility.

7) Don’t forget estate planning

The French succession regime varies significantly from the UK’s. French inheritance tax is completely different and France also imposes forced heirship, though you can plan ahead to get round this.

This makes it essential to review and adjust your succession planning to be effective and achieve your wishes under the French system.

8) Returning to the UK?

There may come a point in your retirement journey where you decide to move back to the UK.

Early planning will help make your move as seamless and tax-efficient as possible. Give yourself enough time to reorganise your financial affairs in advance, not only for your peace of mind, but to ensure the financial implications of your return work in your favour.

With your tax and estate planning carefully structured around being a French resident, these need to be modified accordingly when you leave.  If you transferred UK pensions into a QROPS or made pension decisions based on French taxation, you will need to establish the best way forward.

Retirement in France – A helping hand

Cross-border wealth management is complex, with all the different various elements potentially having an impact the others. For example, how you own assets can have repercussions on what tax you pay and your estate planning options.  Speak to a specialist adviser who can provide a strategic financial plan for the whole process from your planning stages in the UK if you haven’t moved yet, ensuring you do everything at the right time, right through your retirement years in France, and should you decide to return to the UK in future.

Blevins Franks has been helping UK nationals retire to France for more than 45 years. Our advisers live locally, have an in-depth knowledge of the French tax regime, and receive support from our in-house specialists.

Contact Blevins Franks today.

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.

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