Retiring but want to work!

[Madhatter]

My OH and I want to retire to France in 2 years - he will be 62, me 58. We have a business idea which could earn us up to 120K euros per year gross profit (well, COULD.....)  . After costs, VAT etc, this would be down to around 80K. It is purely service based  - no sale of goods involved. Am I right in thinking that we would pay 36K pa  in Social Security charges? Gulp! After that, we would pay tax as well (and if so how much?) Double gulp. Trouble is we really do want to live there and really do want to work (it will be very hard work but only for 5 months a year). Also to be factored in - OH is diabetic and will need good health care in the future for which we fully accept to pay and will no doubt benefit from better healthcare than in the UK. Our UK pension will be state only and minimal as we did not pay full contributions during past 10 years due to cock up in NI many years ago. Will we also have to pay more for health care, especially in view of his condition?

Many thanks all.

[cooperlola]

If you set up your business and pay your cotis (Social Security/Healthcare etc) in France then your o/h's state of health will be largely irrelevant.  The top up insurance you would be advised to take up in order to cover the shortfall not paid for by the French state cannot, by law, penalise either of you for having pre-existing conditions.  How much your cotis would be depends upon lots of factors which I can't comment upon - depends upon what the business is and how it is set up etc - you really need an accountant for that (there are some on here, plus people who run businesses who know more about this than I) as there are different ways of doing this which affect what you pay to the French state in cotis, taxes etc. 

When you retire from your UK employment, you may well get a good couple of years medical cover (anywhere between 18 and 30 months depending on NI status and the date of leaving employment in the UK) paid for by the UK via a document known as an S1 form.  This will depend upon the NI contribution record and employment record in the three years prior to retirement.  The Deparment of Work and Pensions in Newcastle can help you with your individual status on this.  However, the moment you work or set up a business in France, you must pay cotis and an S form cover will be invalid.  When your o/h UK state retirement age, he will once again be entitled to S1 cover, provided he is NOT working here in France - that will cover you also.  In fact, it may be that it could kick in earlier in your name, depending upon which of you reaches UK state retirement age first..

C*ck up or not, you can bring your NI payments up to the required maximum for a UK state pension by making voluntary contributions up to the correct number of years.

[NickP]

[quote user="Madhatter"]

My OH and I want to retire to France in 2 years - he will be 62, me 58. We have a business idea which could earn us up to 120K euros per year gross profit (well, COULD.....)  . After costs, VAT etc, this would be down to around 80K. It is purely service based  - no sale of goods involved. Am I right in thinking that we would pay 36K pa  in Social Security charges? Gulp! After that, we would pay tax as well (and if so how much?) Double gulp. Trouble is we really do want to live there and really do want to work (it will be very hard work but only for 5 months a year). Also to be factored in - OH is diabetic and will need good health care in the future for which we fully accept to pay and will no doubt benefit from better healthcare than in the UK. Our UK pension will be state only and minimal as we did not pay full contributions during past 10 years due to cock up in NI many years ago. Will we also have to pay more for health care, especially in view of his condition?

Many thanks all.

[/quote]

Surely if you didn't pay enough contributions due to  the incompetence of the NI people then it is up to them to compensate you, or just  maybe they were working on the information supplied? I was freelance for 40 years  and sometimes worked for five different employers in a week; paying five different amounts of class 1 NI. I made sure that I kept a check on what I paid, and what was paid on my behalf. Every year I made an appointment with the appropriate NI office and went through my contributions, because; believe it or not some companies didn't pay what they had stopped from my wages, needless to say they got a shock when the NI people knocked on their door. I retired a couple of years ago and I receive the full state pension including increased graduated pension which I contributed to during the 70's/80's. So I would suggest you go back to the NI and demand an explanation about to their incompetence. Or as Coops said, you can pay back missed payments, I believe for up to six years, but please check on that.

[Will]

The c*ck up might not have been down to the DWP or its various predecessors - there are many ways things can go awry. But as suggested, it may well be possible to make up at least part of any shortfall.

You really do need to budget for cotisations of at least 40% on your profit; at that level they will be levied on profit rather than turnover. A good accountant would probably be a wise investment, in order to keep your declared profits as low as legally possible. Cotisations cover all sorts of things other than your own health care; not least paying the inflated pensions of French civil servants, and paying off the French national debt. You will also be liable for French tax on your profits.

[AnOther]

[quote user="cooperlola"]C*ck up or not, you can bring your NI payments

up to the required maximum for a UK state pension by making voluntary

contributions up to the correct number of years.[/quote]

You may only be able to buy back a maximum of 6 pension years and it may also be better to do it whilst still in the UK. It's quite complicated to work out [blink]

http://www.pensionsadvisoryservice.org.uk/state-pensions/voluntary-national-insurance-contributions

[Val_2]

From the OP they mention the profit and being TVA reg, this will mean a fully blown french registration scheme and the cotisations will be high dependent upon the profit etc - the more you make, the more you pay and you won't be exonnerated from certain taxes like Habitation etc. Suggest you do your homework carefully as regards to starting a business here in France, there are not many tiny business owners that are wealthy these days,the system sees to that.

[Madhatter]

Thank you all for your help - you are all clearly well informed and your advice looks very solid - a pleasure to read.

Without wanting to stray from the main subject too much, the NI thing was not obviously a mistake.

We had (and still have) a company that due to a year's bad trading some 18 years ago (yes, that long) and some poor advice from our then accountant (now retired so little we can do) led to us not paying our NI shortfall when it was due.(We always had a small shortfall of 2 to 3K which we paid in May each year when we submitted our return). In the year in question (c 93 or 94) there was a shortfall of around 12K. We were reminded several times to pay it but there was some sort of dispute in which our accountant was involved. In the end, we paid the 12K, some 3 months late. We were then informed that this sum would not count towards our future pension because it had been paid late. OH was so incensed he stopped paying altogether - and we haven't paid any contributions since. Our pension will thus be very minimal  and we are relying on selling a large commercial property and house to fund our life in France - but would still like to work as we get bored easily! (we are workaholics to some extent but enjoy it. Sad, really...).

I will certainly call the NI bods to find out whether we can make up a shortfall and for how far back. We are also considering setting up a SARL for the business in France which my OH says will have less onerous contributions to be made than as personal traders but will still cover us. We are lucky - both have good French - and have some contacts there who can probably help with finding us an accountant.  I think we should have been more thorough in the past and perhaps tried to recover the 12K....but it is no doubt too late now. It still grates though, even after all these years!

 

[cooperlola]

[quote user="AnOther"][quote user="cooperlola"]C*ck up or not, you can bring your NI payments up to the required maximum for a UK state pension by making voluntary contributions up to the correct number of years.[/quote]
You may only be able to buy back a maximum of 6 pension years and it may also be better to do it whilst still in the UK. It's quite complicated to work out [blink]

http://www.pensionsadvisoryservice.org.uk/state-pensions/voluntary-national-insurance-contributions

[/quote]AnO, you are right, I know.  However, if the female half of the partnership (I'm not being sexist, it's just a matter of pensionable ages) were to pay an extra 6 years, then start paying voluntary contributions from now until she reaches retirement age (I think that will be 64 for her at a rough guess from her first post) then that could make up a good few years for her at least.  Just a thought.  The full term for payments is a lot shorter than it used to be.  I, for example, was fully paid up when still over 10 years short of my official retirement age, because I began to pay from the age of 18.

Worth looking into, whatever, I would have thought.

[Chancer]

I had a similar situation, I was young(er), had not been in business long, was concentrating all my efforts on growing my business and believed 100% what my accountant told me, sounds very French in hindsight.

For several years on his advice I paid myself a very low salary on paper at least as it was never actually drawn and took the profits as they were as a final dividend each year (when the cashflow allowed it) paying ACT if I recall correctly, I was paying NIC contributions but didnt know the difference in the classes, many years later when I got a pension forecast I found that I had not been contributing towards my pension during that period.

I suppose in these days of someone else always being to blame one would try to sue the accountant but he had recently declared his_self bankrupt which sayw a lot about his financial acumen!

I could at the time have made voluntary payments to recover the lost years but in truth I have never actually believed that when my time comes there would ever actually be a pension for me so i didnt pay and then it was too late.

Some years later I discovered that they had changed the rules so that you only now need to have paid in for 30 years instead of 40 to get a full pension, so in theory I will be entitled to 26/30'thsof a state pension which is better than 26/40'ths, and I still have a good many years ahead of me to declare some UK income for 4 years so I am not overly concerned.

Mind you I still remain convinced that i wont get any pension, whether it be because I live outside of the UK or maybe they will change it to 30 years NIC payments minimum I dont know but when it was reduced to 30 years I could see no reason for doing so unless it was to disguise what was being done or would be done with the other hand.

[NickP]

[quote user="Madhatter"]

Thank you all for your help - you are all clearly well informed and your advice looks very solid - a pleasure to read.

Without wanting to stray from the main subject too much, the NI thing was not obviously a mistake.

OH was so incensed he stopped paying altogether - and we haven't paid any contributions since.

[/quote]

So that makes it alright then, just as well most of the population kept on paying; otherwise when you went into hospital or to the doctors Madhatter they would have been closed. I can now see where I went wrong in life, I paid my tax and insurance and rates, if I had known you could have stopped when you liked, I would have said sod it and stopped paying. I am a silly billy [:D]

[Russethouse]

 I get regular bills for money I don't actually owe, was there a way to 'opt out' ?

[AnOther]

None that I know of, or at least not without become non tax resident, you work in UK you pay NI.

Even if you are out of work you should get NI credits.

[cooperlola]

[quote user="Russethouse"] I get regular bills for money I don't actually owe, was there a way to 'opt out' ?[/quote]Well one thing is for sure - it's not a tactic which will work here in France.  No payments - no Attestation des Droits.

[NickP]

[quote user="Russethouse"] I get regular bills for money I don't actually owe, was there a way to 'opt out' ?[/quote]

 I'm intrigued RH, why do you get bills for money you don't owe?

[Russethouse]

 Because I used to trade as an antique dealer independently, but in 2002 or so I gave that up and paid as a partner in 'our' (Mr RH and me) business. I have written, by recorded delivery and ordinarily, but they failed to acknowledge the change of circumstances....until this year...

 When I wrote to them' recorded mail ' and later followed this with a phone call they tried to tell me the recorded letter had been received 3 months after they I had sent it, and blamed the PO............

[NickP]

[quote user="Russethouse"]

 Because I used to trade as an antique dealer independently, but in 2002 or so I gave that up and paid as a partner in 'our' (Mr RH and me) business. I have written, by recorded delivery and ordinarily, but they failed to acknowledge the change of circumstances....until this year...

 When I wrote to them' recorded mail ' and later followed this with a phone call they tried to tell me the recorded letter had been received 3 months after they I had sent it, and blamed the PO............

[/quote]

 So you're talking about the Department of Works & Pensions, sorry RH I thought you were just getting random requests for money. As I related earlier I never had a problem with either the DWP or indeed the Tax man,  I found them very helpful, but you have to converse with them; as soon as possible and I always found the telephone much better than writing, letters get put to one side and possibly get lost, where as a conversation is much more personal, and a follow up letter then tends to get dealt with quicker. Because the system  that I was assessed under was very complicated, every company stopped me NI class 1 but not all companies stopped me income tax, I had to keep a very tight check on what I paid out, and may I add a very tight check on who paid what on my behalf. Therefor I got to know my way around the system and who to talk to,  it was reasonably simple, but let it go and things could become very difficult. As for Madhatter saying " I just won't pay any more contributions", sorry I don't believe that because if you carry on working you can't get away with not paying. Also if I did manage that I don't think I would discuss it on a public forum. [Www]

[Russethouse]

Frankly I found the DWP very unhelpful -  for example I asked several questions in one letter but the person I spoke to told me that different departments dealt with some of the questions but the letter would not be forwarded and there was no mechanism to let me know this was the case - is it any great surprise the OP found themseves where they are  (and got away without paying, if you look at it that way?)

[Madhatter]

Hmm. I sense some criticism here. We employed 50 staff in those days and all their contributions were  always paid, plus all their tax and we never took cash in hand - the computer system saw to that. We also paid all our VAT and Income Tax (several hundred thousand over the years) and never went into liquidation.

I have had two children and a gall bladder removal and my husband has never been to hospital - his diabetes is low level at the moment and managed with diet and a trip to the diabetes nurse once every six months. Apart from that we have probably gone to the doctors each once a year. We also base our 'pension' on our two properties, and nothing from the state.

My conscience thus is pretty clear. I am not taking from the British system at the moment and nor do I intend to. We have always wanted to retire to France. 

In this respect, we have both put far more into the system than we have ever taken out, or will ever take out.

All I questionned originally was the seemingly high proportion of the contributions in France. 36K out of 80K seems a lot to me but if that is what we have to pay, then we will do so.

Incidentally,  the NI problem was caused through our accountant declaring the two directors as renumerated rather than as having dividends one year, in error. The total we had to pay was £21,000 - not £12,000. My OH told me this last night - I had actually got the sum wrong. 

[NickP]

Sorry if you feel that you are being critisised, but you wrote  that your husband just stopped paying his dues, and now in your latest posting you blame the accountant, if it was your business and you were the directors it was your responsibility. All accountants get their clients to sign off the accounts. Therefor I feel that any critisism is generated by your "explanations"

[Russethouse]

 I don't think its criticism as such, just surprise that you have been able to get away with not paying contributions, some of us were not aware it was an option.

Further isn't NI  loseley supposed to contribute toward health care and pensions, not only your but the everyone else's as well ? Isn't that the basis of our system ?

 I suspect your husband gets all his prescriptions free of charge as he has diabetes (my OH does) - as I understand it that isn't the system in France, the prescriptions for the diabetes medication may be free but drugs relating to other problems will not be.

[idun]

It doesn't work like that in the UK or France. Since we left France, for three years we had to pay towards unemployment benefits in France, even though we  could never ever claim them. (NB the cotisation system is different in France). In truth I called and asked if we could get out of it and they said 'non', it is solidarity.

 You may not feel guilty, but you cannot any more opt out there anymore than you can in France, I personally would say that that was illegal, but there you go.. In comparison  to France the NI contributions are low in the UK anyway.

 

Truth is if you are earning, you pay. And your accountant surely should have had some insurance to cover their negligence or was it simple incompetence? I would hope so.

[Russethouse]

 I don't think there is anything to be gained by going over the Op's NI status - I'm sure we all have an opinion.

Better to get back to the original question :

My OH and I want to retire to France in 2 years - he will be 62, me 58. We have a business idea which could earn us up to 120K euros per year gross profit (well, COULD.....)  . After costs, VAT etc, this would be down to around 80K. It is purely service based  - no sale of goods involved. Am I right in thinking that we would pay 36K pa  in Social Security charges? Gulp! After that, we would pay tax as well (and if so how much?) Double gulp. Trouble is we really do want to live there and really do want to work (it will be very hard work but only for 5 months a year). Also to be factored in - OH is diabetic and will need good health care in the future for which we fully accept to pay and will no doubt benefit from better healthcare than in the UK. Our UK pension will be state only and minimal as we did not pay full contributions during past 10 years due to *** up in NI many years ago. Will we also have to pay more for health care, especially in view of his condition?

[Madhatter]

Gosh, some of you are pretty aggressive. I'll think twice before I come on here again!

I checked with our current accountant of 18 years, and absolutely nothing we did was illegal.

My husband's pension is going to be around £27 per week based on the contributions he made before the problem arose. Mine will be zero.

We did not expect it to even be this much. As I said, our pension money will come from the sale of 2 properties. They are not huge but the money will be sufficient and we have a small flat in France already. However, we would still like to work and very much contribute to France's state system, as we did to the British one (more than 2 million pounds paid in personal income tax, corporation tax, VAT and NI). If we were intent on getting something for nothing I don't somehow think we would have done all that, nor would we be accepting  to pay 36K out of our 80K profit in France. As I said, it strikes me as high, but as I also said, if that is how much we will have to pay, then we will pay it.

[cooperlola]

As a general rule of thumb, Madhatter, income tax is lower but cotis (social security paments) are higher.

If you had come to France when you were both younger, you'd have reaped the benefits of the high cotis as by now you'd have been looking at a (relatively) good pension, not to mention the excellent health service care you get here.  However, even though you won't get any appreciable pension from the French system, you are expected to contribute to the system , as has been said, for the sake of solidarity, and for future generations.

I still believe that you may well be able to make up some of your NI shortfall as you both have a few years to go to pensionable age.  The important thing is to get enough years in so that when you do need to retire, then you can get your healthcare covered one way or the other.  Don't delay but get hold of the DWP and find out what your position is.  You may be entitled to more than you think.

More details as to how the system works via my www link below.  This is a voluntary site and although a little out of date now, still contains lots of useful info' and links.

[Madhatter]

Coops,

Thank you for your advice. I will have a look at your site and contact the DWP as you suggest.