BUSINESS & FINANCE
Brexit took place on 31 January, however, there is a grace period for the remainder of 2020 before the rules come into effect. That means there is still time to plan for what to do with your UK pension if you are residing in France. Blevins Franks offers Riviera Insider readers a few options to consider.
Time to review UK pension options before Brexit
As the clock ticks down on the Brexit transition period ending on 31 December 2020, there is increasing urgency to review your pension options and take advantage of current opportunities before things potentially change.
Transferring your pension abroad
Residents in France can currently move UK pensions to a Qualifying Recognised Overseas Pension Scheme (QROPS) tax-free. This can unlock advantages such as flexibility to take funds in the currency you need, more estate planning freedom and protection from UK pension rules.
However, the UK imposes 25% tax penalties on transfers to a QROPS outside the EU/European Economic Area. With expectations that the UK may include EU/EEA-based QROPS after Brexit, time may be limited to transfer without tax penalties.
Pension transfers can take months to process, so if you decide to transfer, act soon to secure current benefits and avoid unnecessary taxation. Take specialist advice to navigate the complex options and determine the most suitable solution for you.
Leaving your pensions in the UK
You could do nothing and access your UK pension from France. For ‘defined contribution’ pensions, current options include taking cash, receiving a regular income (drawdown) or purchasing a lifetime income (annuity).
You cannot usually take ‘defined benefit’ pensions as cash; instead, you receive a regular income throughout retirement. While you could transfer it for more flexible access, this is likely to be less beneficial than receiving a guaranteed income for life.
Remember also that UK pensions remain subject to UK rules, including lifetime allowance penalties of 25%/55% when combined pension benefits exceed £1.055 million.
The tax implications
If you are French resident, UK pensions (excluding government service pensions) are generally only taxable in France. When accessing UK pensions or a QROPS, the French income tax rates apply (up to 45%). However, currently, it is possible to take your entire UK pension as a lump sum and pay just 7.5% income tax if you meet certain conditions.
Pension income and lump sums are also subject to French social charges of 9.1% unless you hold Form S1 or are not registered for French healthcare.
Depending on your situation, it may be more beneficial to reinvest UK pension funds into an alternative tax-efficient structure that is compliant in France, so explore your options.
Make sure you take regulated, personalised advice to protect against pension scams and establish the best approach for you and your family’s particular situation in France.
Summarised tax information is based upon our understanding of current laws and practices which may change. Individuals should seek personalised advice.
- Rob Kay, Senior Partner, Blevins Franks
**UPDATE: With the ongoing developments relating to COVID-19, Blevins Franks has postponed their Spring seminars and are hoping to rearrange them later this year.
They recognise however that issues for British nationals with French connections remain and that some points may require attention now, with the Brexit transition period due to end on 31 December 2020. With this in mind, they are offering individual remote consultations with their advisers. Please contact Blevins Franks if you are interested:
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Blevins Franks provides cross-border tax, wealth management, pensions and estate planning services to British expatriates across Europe. Together with their tax, investment and pension specialists, they look at the whole picture to establish the most effective solutions for you.