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Best Savings For Monthly/Annual Income


Keni
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Help needed please, if possible.

We are starting to get things together now and I have been monitoring the Forum for some time, I know in an earlier thread various things were thrown up for savings, including Assurance Vies etc.

What we need is something we can put or savings into that brings in an annual or monthly income - the OHs pension will not sustain us without interest. We know the problems about putting more that 35K into a British Account, does the same follow for a French account? We have an account with CA but they do not seem to want to push their savings accounts - is it because their rates are low?

We are a bit unsure about putting our money into stocks and bonds, but need to be able to get as much interest as possible from the amount we are saving  for our livlihood. Obviously it is difficult to generalise and I know this is rather vague but  if someone had, (for the sake of arguments) 100K, where could you best put it? We just seem to be getting blinded by savings figures against bonds etc.

When talking to financial people we just glaze over as they starting going on about figures and percentages, we are not stupid, just not of the financial section of life.

 

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Probably the first question to ask is where are you resident?  Generally speaking you wll get higher rates in the UK than in France so if you are still UK resident it is probably wise to stick with UK savings.  AFAIK the £35K applies only to the UK and I must admit I have no idea what the position is if a French bank collapses.  To avoid any problems in the UK just spread the hypothetical sum around 3 different banks or building societies making sure that they are not in some way related.

Liz

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I guess you need to decide whether to leave your money in the UK and just transfer or access as much as you need when you need it, or to transfer to France and open appropriate accounts here.  Or do a combination of the 2.

If you are in the UK then you can search on-line for the best savings accounts there. There are banks that will allow you to keep your accounts when you transfer to France and if you have set up internet access then they are easy to manage. For easy and good value access to your money, a Nationwide Flexaccount with card withdrawal is a good option. Also, once you have a Nationwide Flexaccount you can take advantage of good savings rates there, e.g. they are currently offering a 1 or 2 year bond at 7%. Once you are in France and no longer have a UK address it is almost impossible to open new accounts. The only bank I have found that allows you to do this is Halifax.

Once you have moved to France you will either need to ask your banks to pay interest gross or claim it back if that facility is not provided. You will then declare the interest gross here on your tax form.

Once you are in France, you can do the same here i.e. carry out an  on-line search for the best rates (do a search on google.fr for "comparer epargne")

In your position I would be tempted to leave the majority of the funds in the UK, but open a number of on-line savings accounts so that I could move the money around to get the best rates offered at any one time, and use Nationwide to access the cash. Then when/if the exchange rate improves, move some of the money to France and open the best account you can find here.

There are tax free savings accounts in France but I haven't yet convinced myself that the interest rate is worth using them.

EDIT

I read on another thread that in France you are covered for up to €70000 per person per bank

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Isn't £35K the maximum that will be paid out to you if a bank goes bust, so if you had £100K in the bank and it collapsed, you would only get a maximum of £35K.  Hence the need to spread it about a bit ..

I'm very interested in this thread as we, too, are about to make the big move.  Our advisers (a large British-based financial/law firm) are really pushing assurance vies but does anyone have more informatin - preferably in plain English - about these.  I am getting slightly goggle-eyed at trying to decipher 'financial-speak' so just want someone to explain it in short easy words (or preferably pictures !!)

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[quote user="tinabee"]

 Once you are in France and no longer have a UK address it is almost impossible to open new accounts. The only bank I have found that allows you to do this is Halifax.  [/quote]

I was able to open one with Bradford & Bingley (IOM)......although after recent events that may not have been a good thing [blink]

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[quote user="krusty"][quote user="tinabee"]

 Once you are in France and no longer have a UK address it is almost impossible to open new accounts. The only bank I have found that allows you to do this is Halifax.  [/quote]

I was able to open one with Bradford & Bingley (IOM)......although after recent events that may not have been a good thing [blink]

[/quote]

I should have said it is almost impossible to open new account IN THE UK. But you can open an offshore account with the international branch of a UK bank, although they are not covered by the Financial Services Protection Scheme.

 

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[quote user="tinabee"]

But you can open an offshore account with the international branch of a UK bank, although they are not covered by the Financial Services Protection Scheme.

[/quote]

As I understand it the IOM has its own protection scheme which mimics the UK and covers the first £35K for each individual with each specific Bank/Building Society.

Sue

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[quote user="krusty"][quote user="tinabee"]

 Once you are in France and no longer have a UK address it is almost impossible to open new accounts. The only bank I have found that allows you to do this is Halifax.  [/quote]

I was able to open one with Bradford & Bingley (IOM)......although after recent events that may not have been a good thing [blink]

[/quote]

Try Northern Rock Guernsey, it is owned by the British Government

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Thanks necatrine, Krusty and all, this is a real minefield. I should say we are in Uk at present looking to move soon. Once OH has his pension, and when (if) we sell house then money will be there for saving.

I saw in the mag about the assurance vies, only it did not say what they were, how you got paid out, for how long or any of the other basics, so do not really understand what they are - life insurances I presume for an agreed amount of time, but do they only pay out at the end , or yearly or what?

I am looking to this business as well about using the Nationwide to transfer monies across, a lot of those in France seem to do that. Nectarine, what you say is really helpful and I can see others are balking (great word isn't it) at what to do with the hard earned cash. the government bonds thingy seems the surest bet for some, and I did not realise HM gov. owned the bank!

Any more info will be appreciated, and as was said before in English or pictures even more so!

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I suggest that one of the first questions to answer is : which currency do you want your savings to be in?  It's true that you can currently get higher interest rates on sterling than on euros, but that may be because the market generally expects the pound to fall further against the euro.  Are you willing and able to take that risk?

I'm not saying you shouldn't, only that you should think about it.  For instance, if most of your commitments and expenses are going to be in euros it might make sense to keep most of your savings in euros also.

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You make a very good point allan and frankly I fail to understand the reluctance of some people living in the Eurozone to commit to the currency.

Certainly over this past year or so whatever you may have earned in UK has been comprehensively wiped out, and more, by the fall of Sterling against the Euro. In broad terms you'd have had to have made something like 20% net to simply stand still and I challenge anyone to show me a single UK High Street investment vehicle which has come within a mile of that !

When we moved in August last year there were various reason why I didn't, or rather couldn't, transfer my cash assets immediately but if I had then apart from any interest it could have earned here I'd have seen my Euros appreciate against the £ by the said 20%, and completely tax free of course. Had I had the slightest inkling that the £ was headed as far down the U-bend as it's gone then even though there would have been penalties I would have liquidated and converted there and then.

With the exchange rate bumbling along at around 1.26ish for the past 3 months or so things have at least stabilised a bit but personally I see no prospect of it improving significantly in the medium term and if anything expect it to deteriorate further so, for that reason, when a couple of UK investments mature in September and assuming no cataclysmic upheavals in the interim, I'm planning to then convert the bulk of my cash into Euros.

I see it as a no lose situation. I stem any ongoing erosion, earn a modest amount in interest, and if I do unexpectedly find myself in need of £ should at least get back what I started with and likely a bit more.

 

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[quote user="Keni "] Obviously it is difficult to generalise and I know this is rather vague but  if someone had, (for the sake of arguments) 100K, where could you best put it? [/quote]

To answer this part of the original question.

Personally, if I had 100K€ to invest, I would  (despite the doom and gloom about the state of the market here in France), buy a small village house to rent out to long term tenants.  At say 500€ per month over 12 months, that represents 6000€ per annum ie 6% interest before tax.

This is purely my opinion, and anyone doing so would have to look at their own sitauation, taxes, whether they  might need quick access to the money in the future etc.[:D]

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I think in your position Keni where you say you will need income over and above your pension to simply survive, protection against erosion has to be your first and highest priorit followed by liquidity.

I'm hoping that we don't witness a further drop of the magnitude which has already taken place which has undoubtedly put an enormous strain on the resources of many people living on fixed £ derived incomes.

Maricopa's suggestion has merit but in your situation I think for peace of mind I'd prefer to see my savings in Euros and in a French savings vehicle paying a rate of interest which at least keeps up with inflation.

Buy to let is fine but you should be aware that French law is very protective of tenants and if you find yourself in a situation where your tenants don't pay the rent your asset becomes a liability and the additional income stream dries up. Your rights are further weakened if you are renting out what is a second property.

Have a search on the forum for some tales of woe.

 

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[quote user="Keni "]

I saw in the mag about the assurance vies, only it did not say what they were, how you got paid out, for how long or any of the other basics, so do not really understand what they are - life insurances I presume for an agreed amount of time, but do they only pay out at the end , or yearly or what?

[/quote]

 

An assurance vie is an investment product, NOT a life insurance product, where your money is invested for you. You pay a percentage to open the account (ours was around 4%) and there is a management fee (ours is about 1%). You can say how much risk you want and I think this affects where your money is invested, or you can have a version where the capital is protected. The interest you earn is automatically reinvested into the fund and there are very favourable rates of tax applied on any money you withdraw. They are mainly designed as a long term investment product as the rates of tax you pay decreases the longer you have held the policy. You can withdraw funds whenever you want. After 8 years you can withdraw up to about €9000 tax free (for a couple).

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"As I understand it the IOM has its own protection scheme which mimics the UK and covers the first £35K for each individual with each specific Bank/Building Society"

In fact, The Isle of Man has its own Depositors Compensation Scheme which guarantees 75% of the first GBP20,000 or currency equivalent held by each depositor.

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[quote user="Keni "]

 I should say we are in Uk at present looking to move soon. Once OH has his pension, and when (if) we sell house then money will be there for saving.

I saw in the mag about the assurance vies, only it did not say what they were, how you got paid out, for how long or any of the other basics, so do not really understand what they are - life insurances I presume for an agreed amount of time, but do they only pay out at the end , or yearly or what?

[/quote]

Keni

Assurance vie's in the sense that you have been told about are the equivalent of a tax wrapper.  They are also life insurance products, but this is not the one you are looking for.  They can be either cash or equity based, dependent on your view of risk (as a previous poster has said).  They are not a short term option, as the tax benefits (I will leave someone better experienced in maths to tell you how they work if needed) only begin to kick in after 4 years.  IF you need to withdraw before then, you need to look at other savings options.

However, and this is the biggest advantage of AV's as far as I can see, is not in itself the tax saving (though it can be helpful) but the removal of succession taxes and the possibility of leaving the money outside the succession stipulated by French law.  The benefits are better if you set one up BEFORE you become French resident.  The benefits are still available if you don't set one up until you are resident, but the amount you can safeguard is much reduced.  (ie Before, all can be sheltered, after, only 172,000€ (someone will tell me if I have the amounts wrong, this is from memory), and I think it is per beneficiary (again someone pl correct if I am wrong).

Thus, do not look at an AV as a savings product which you can access as and when.  They are useful if you have a need to protect the succession (as I have) and if you have enough coming in to tie up your savings for some appreciable amount of time.

Writing as someone who has researched the succession problem thoroughly (anyone I leave my money to with the exception of my husband will otherwise have to pay 60% tax, and so I am protecting what I do not want my husband to have).  I made it clear I wanted the cash only option, as all my forays into the stock market in the UK have not been particularly fruitful.

I did take advice from one of the well known advisers to obtain the best product for me, but I was fairly sure that was the way I wanted to go, long before I got to the asking stage.  Like you I was confused initially, but I hope that helps to explain it better - this from a non-financial whizz-kid rather than one who speaks only jargon.  With luck, all that was jargon-free.

Sorry about the delay in replying - I've been offline for a couple of days!

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Judith: Its 152500€ per beneficiary.

As an example of an AV:

Investing 100,000€ with 0% charge and 0.6% annual charge in a capital safe investment, assuming 4.55% growth after charges and withdrawal of all interest each year .

After 1 year you withdraw 4550€ in the AV wrapper the taxable amount is 198€ at your marginal rate plus 20€ social charge, compared to a non av investment where the taxable amount would be 4550€ at your marginal rate plus 500€ social charges.

So within a year the tax benefits are obvious - remember that you are withdrawing 4550€ each year every year.

The taxable amount will grow over the years and in year 8 the taxable amount is 1218€ at your marginal rate plus 134€ social charges.

From year 9 onwards the 4600€ per person allowance kicks in and the taxable  amount is 0€ plus 138€ social charges.

Years 10 to 20 result in 0€ tax and social chages which increase each year from 150€ in year 10 to 260€ in year 20.

Assuming that the rate of return stays at 4.55% which is of course variable, you still have 100,000€ in the account. If you have a substantial taxable income you may wish to be taxed at the forfait rates.

An element of stock market investment could be included to counter the effects of inflation if you wish. The value of your investment etc, etc - always seek advice etc etc.

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[quote user="Juswundrin"]"As I understand it the IOM has its own protection scheme which mimics the UK and covers the first £35K for each individual with each specific Bank/Building Society"

In fact, The Isle of Man has its own Depositors Compensation Scheme which guarantees 75% of the first GBP20,000 or currency equivalent held by each depositor.[/quote]

I stand corrected; as explained here.

Sue

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[quote user="tinabee"]

Also, once you have a Nationwide Flexaccount you can take advantage of good savings rates there, e.g. they are currently offering a 1 or 2 year bond at 7%. Once you are in France and no longer have a UK address it is almost impossible to open new accounts. [/quote]

Has anyone opened a Nationwide bond with a French address? Their rules appear to require UK residency: details here

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