Sunday, 25 February 2018

The clock is ticking to lock-in residency benefits in France post-Brexit



British expatriates in France should act now to secure residency and take advantage of healthcare and pension opportunities before Brexit changes the rules.

This month’s Chinese New Year celebrations bring to mind a Chinese proverb that never dates: ‘dig the well before you are thirsty’. In other words, make sure you plan for your future needs early, before it becomes too late.

Such wisdom has particular relevance amidst today’s Brexit uncertainty. Despite many unknowns, now is the time for Britons living in France to take action to protect their position. We explore what you can do to secure the key areas of residency, healthcare and pension benefits in a post-Brexit world.

Residency and Brexit


December brought reassuring news for expatriates as the UK and the EU27 agreed to maintain existing residency rights for Britons settled in the EU. A joint statement confirmed that citizens “lawfully residing” on both sides can continue "to live, work or study as they currently do under the same conditions as under Union law".

So as long as you are legally resident in France at the Brexit cut-off date, you should keep the right to stay and access the same benefits as today for as long as you remain resident.

The most secure position is permanent residence, available after a period of five continuous years living in France. While you will not qualify if you have lived in France for less than this, you may still be considered French resident for tax purposes. If you have not already registered at your local tax office, do so urgently to ensure your position is formally recorded. You could also consider applying for a ‘carte de séjour’ – although some Britons have been told they need not apply yet as this document is not required for EU citizens, it is still legally possible to obtain. This can help demonstrate that you are legally resident in France before the Brexit cut-off date and therefore eligible to benefit from the citizens’ rights agreement.

Those thinking about moving to France should act fast. While it may seem like Brexit is still a long way off, there is already an administrative backlog for residency applications and a surge of interest is likely closer to the cut-off date. Even if you would prefer to wait until more practical Brexit details are known, it is a good idea to relocate and start the residency process – as an EU citizen under current rules – as soon as possible. Post-Brexit, we can expect the requirements, time and expense for acquiring residency to be much less straightforward than today.

Securing healthcare


Under the existing Brexit deal, settled residents can continue receiving reimbursements for certain healthcare costs. This means the Form S1 system will carry on providing free cover in France for British pensioners, and holders of the European Health Insurance Card (EHIC) remain eligible for free or reduced healthcare when visiting another EU country on a temporary basis, such as holidays.

To secure residency in France, you may be asked to show evidence of ‘comprehensive’ health cover. If you do not hold Form S1, you may therefore need to join the French healthcare system (a process that can take weeks) or prove you have sufficient private health insurance to qualify. Note, however, that being affiliated to the French social security system has potential tax implications, so take advice to assess your options.

Pension options


The UK has committed to continue yearly cost-of-living increases to State Pension payments for retired Britons living in the EU post-Brexit. As a result, British pensioners in France will receive annual increases linked to the ‘triple lock’ – whichever is highest out of the rate of inflation, earnings or 2.5% – until 2022.

When it comes to private pensions, current opportunities may not survive Brexit. Today, UK pension contributions and growth both benefit from tax relief in Britain, and can potentially be accessed by expatriates without paying UK tax (under double tax agreements). While this is unlikely to change with Brexit, the government may want to stem the flow of UK pensions abroad and keep more funds within taxable range.

Currently, it is possible for French residents to transfer UK pension funds to a Qualifying Recognised Overseas Pension Scheme (QROPS) in the EU or European Economic Area (EEA) tax-free. Doing this can unlock tax efficiency, estate planning advantages and currency flexibility. However, since 9th March 2017, transfers to QROPS outside the EU/EEA attract 25% UK taxation (unless you live in the same jurisdiction as the QROPS).

Post-Brexit, the UK could potentially limit how expatriates in France can access their pensions by widening this taxation net, or by making it harder to cash-in UK ‘final salary’ pensions tax-efficiently. Consider acting now under current rules, but take personalised, regulated advice to ensure a suitable approach and avoid pension scams.

A realistic timeline


Although the Brexit date is currently set for 29th March 2019 – and could potentially be extended by a transition agreement – it is sensible to work towards a much shorter deadline. If you cannot take action immediately, make sure you have put processes in place by September 2018 to allow at least six months before the Brexit clock runs down (pension transfers may need even longer).

Even if you are already permanently resident in France, do not wait for the final Brexit details to be confirmed before reviewing your situation. With just a few months of certainty left, now is the time to explore your residency, estate planning, investments, pensions and general tax planning options.

With suitable planning – done early – you can make sure you are in the best position possible to continue enjoying your life in France as you do today. A locally-based financial adviser who understands the interaction between both the UK and France can help you take advantage of opportunities and find the best solutions tailored for you as an expatriate, during the Brexit countdown and beyond.




Article courtesy of Blevins Franks

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 are advised to seek personalised advice.

Blevins Franks accepts no liability for any loss resulting from any action or inaction or omission as a result of reading this article, which is general in nature and not specific to your circumstances. 


Thursday, 1 February 2018

What can expatriates in France do with their UK pension in 2018?

What are today’s options for expatriates in France with UK pensions and what can you do to ensure financial security in retirement?

When it comes to pensions, your long-term financial security is at stake, so take care to do what is right for you and your family. Expatriates also need to consider the tax rules and implications in France.

Start by understanding the options available for different pension types.

‘Defined contribution’ or ‘money purchase’ pensions


These pensions are made up of what you have paid into the scheme alongside employer contributions, tax rebates and investment growth. Examples include individual or group personal and employer pensions and Self-Invested Personal Pensions (SIPPs).

Since the pension freedoms of 2015, members of these schemes can usually do the following from age 55:

  • Take the whole fund as cash – 25% (the ‘Pension Commencement Lump Sum’ - PCLS) will be tax-free in the UK.
  • Make cash withdrawals when you want – unless you have already taken the PCLS, a quarter is free of UK tax each time.
  • Take regular income through ‘flexible drawdown’, leaving the remainder invested.
  • Take a secure, regular income for life through buying an annuity
Expatriates also have the option to transefr Uk pension funds to a Qualifying Recognised Overseas Pension Scheme (QROPS). QROPS benefits include flexibility to pass pension benefits to chosen heirs and to take income in Euros instead of Sterling. Once in a QROPS, funds are protected from lifetime pension allowance penalties and future UK taxation.

However, QROPS benefits and rules can vary between providers and jurisdictions, and a 25% UK tax charge applies on transfers to QROPS outside the European Economic Area (EEA) or Gibraltar. As transferred funds remain liable for five UK tax years, you risk being penalised if you become tax resident in a non-EEA jurisdiction within that period. It is important to take professional advice to first establish if transferring is suitable for you and then navigate the complex options.


‘Defined benefit’ or ‘final salary’ pensions
Here, your employer guarantees a proportion of your salary for the whole of retirement. As benefits last a lifetime and are often generous, these are viewed as ‘gold-plated’ pensions.

While you cannot usually withdraw cash from these pensions, you can transfer it to a defined contribution scheme or a QROPS. Traditionally, this has been considered less attractive than drawing a guaranteed pension for life. However, today, some struggling providers are tempting members to cash-in with ‘transfer values’ of up to 40 times the annual benefits due at retirement. Although a one-off sum could potentially provide a retirement income that exceeds the original annual payment, it is crucial to fully understand the consequences before giving up ‘gold-plated’ benefits.

Whatever type of pension you have, consider certain issues before making any decisions.


Taxation
While a quarter of a defined contribution scheme can be taken tax-free in the UK, French residents are liable to French taxation at the income tax scale rates up to 45%. Only withdrawals prompted by an ‘accident of life’, like invalidity, unemployment or death of a spouse, are exempt.

It may be possible to limit French tax on a UK lump sum to just 7.5% - with an uncapped 10% allowance – in certain circumstances. Generally, you must take the whole fund at once, so you may be ineligible for this rate if you have already started taking benefits.

All pension income also attracts annual social charges of 9.1% (7.4% previously), unless you hold EU Form S1 or do not have access to the French healthcare system.


Making your money last

Having the freedom to withdraw or transfer your pension does not mean that you should. You may even be better off taking no action at this time. If you choose to take some or all of your benefits as cash, make sure you have a plan to fund your long-term future that suits your personal circumstances and goals.

The threat of losing it all


Pension scams have never been more widespread and sophisticated – Age UK estimates £43 million has been lost to scammers since April 2014. Generally, if an investment sounds too good to be true, it probably is. Once you transfer your pension, it is too late.

Also, beware that many companies offering pension services are unregulated. Whether they aim to defraud you or not, unprotected investments risk losing your money, with no recourse if things go wrong.

Even amongst regulated providers, check for quality. The UK Financial Conduct Authority (FCA) found that less than half of those cashing in final salary pensions received suitable advice. Make sure your adviser takes account of your needs, objectives, personal circumstances and risk appetite to find a tailor-made solution for you and your life in France.

Getting it wrong could have serious and unexpected consequences. Take the time you need to do your research and establish your best approach for a prosperous retirement.



 

Article courtesy of Blevins Franks


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