Annuities

[Jackie]

Simple question. Is a UK based annuity tax efficient in France compared with interest on say an Isle of Man savings account or a UK company pension. Impression from reading this site is not.................J

[Sunday Driver]

See BobD's pension/annuity/interest calculation in the thread entitled 'Social Charges'......

 

[Jackie]

Yes thanks I have done and hence my last comment but still like to have this confirmed or otherwise..........J

[Sunday Driver]

Bob stated that his calculations were obtained by running the figures through the official impots on-line tax simulator, so you could regard that as official conformation.....[;-)]

 

 

[Jackie]

Ok tried the calculator with the annuities entered separately and then again lumped in with our pensions. In the first case the total of income tax and the social contribution was higher though not by a great amount. The calculator would not accept my teachers pension in TI in either case. So the answer to my original question would seem to be that annuities are not tax efficient!..Poo!.................J

[Sunday Driver]

Going back to your original question and taking the three examples given.

Annuities qualify for a 30/50/60/70% relief before tax is calculated.  UK company pensions qualify for a 10%  relief.  Savings interest qualifies for no relief. 

Annuities attract 11% CSG/CRDS/PS on the after relief amount.  UK company pensions attract 0,5% CRDS on the total amount.  Savings accounts attract 11% CSG/CRDS/PS on the total amount.

 

[Jackie]

Yes thanks for the figures. In playing with the tax calculator I note the following. Yes your income tax is lower if part of your income is an annuity but your social contribution is higher so you may pay more out overall. However if the ratio of pension to annuity is large then you may not pay out more overall. Confusing is it not.............J 

PS I take it that Building Society interest, premium bond prizes and profit on sale of say something like CMI Bond units are all treated the same.i.e they are totaled and go in box TS or should that be TR?

[Benjamin]

[quote user="Jackie"]Simple question. Is a UK based annuity tax efficient in France compared with interest on say an Isle of Man savings account or a UK company pension. Impression from reading this site is not.................J[/quote]

I'm a little intrigued as to why you are asking this question. The three financial products you quote are all completely different and are not interchangeable.

[Jackie]

Well in part because others thinking of coming to France to live might find it useful to know if it was a good idea to purchase an annuity or to put their money into some kind of savings paying interest. I would also know if annuities could be declared as pensions or if not would one be worse off for declaring them in another way. What would be really helpful in Tax Faqs is a list of common income sources like company pensions, state pensions, govt pensions, building society interest, premium bond prizes, sale of units from bond, annuities etc etc and where each is declared on the forms 2042, 2047 and 2042C. The French beside each box/section can be translated into English but, I suspect for most folk, has little meaning..........J

[ams]

Have you looked at assurance de vie, competely income tax, CGT, social assurance and cmu free whilst within the framework of the contract. At the end of 8 years the tax rate is substantially reduced, (7.5%) the 11% still remains and no CMU de base. However for a married couple the first €9,200 is free from all taxes.

 

ams

[Benjamin]

Thanks for the clarification Jackie; a sort of what if? scenario then?

As I said in my earlier posting the products that you mention are not interchangeable. You purchase an annuity with a fund which you have built up in a private pension. It's not possible to just decide to put it into some other form of savings scheme except in special circumstances which means you would lose a lump of the fund in tax at the outset.

The other option with a private pension fund is to take what is termed income drawdown which means that you can take an income (around a maximum of 5% of the fund value) without purchasing an annuity but you would need a fund of at least £ 100,000 to do this.

There have been a lot of changes in private pension legislation in the last couple of years and I'm not fully up to date so it's important for anyone contemplating their options to take appropriate professional advice.

[Sunday Driver]

Jackie

I don't understand why you say it would be really helpful if the Tax FAQ gave a list of common income sources and where each is declared on the forms.  If you've actually taken the time to read the FAQ, then you'll see that it does exactly that...... 

That's all it was designed to do. 

Anyone wanting information or tax guidance which falls outside the scope of the FAQ is at liberty to ask specific questions in the main body of the finance section.

 

[freddy]

Benjamin

Whilst you are probably right in practice - one thing you say about annuities is incorrect.

Annuities are normally purchased with pension funds but there is nothing to stop you using other funds to buy an annuity. For example if your great aunt dies leaves you a lump sum there is nothing to stop you buying an annuity with this. This is not frequently done but may be tax efficient for french tax purposes for all I know.

This wouldn't do for me (even if I had the money!) due to loss of control of the capital and the worry that I might get knocked over by a bus next week etc. but it might work for some.

[Benjamin]

Agreed freddy, but without the up front tax relief that private pension contributions attract, the purchase of an annuity with capital from any other source doesn't make any financial sense whatsoever. Fortunately successive Governments are tinkering with private pension legislation thus at least delaying the need to use funds to purchase an annuity.

As you say with annuity rates roughgly equal to deposit account rates on the High Street and the retention of control of your capital (the most important bit as far as I personally am concerned) it would be difficult to make a compelling argument for purchasing an annuity with great aunt's legacy.

[Jackie]

Yes you are quite right Sunday Driver and my only excuse is that I was, and still am, in a state of confusion when I wrote that. However it would be helpful to have premium bond prizes and sale of units from something like a CMI Premier Bond included in the helpful Tax FAQS. Siddalls recommended the CMI bond to us when we consulted them before coming to France so chances are that others will have similar arrangements and the information would be of help to them too. 

Re your comments in my other recent post about Tax FAQS:

 

As explained in the FAQ, foreign earnings and pensions taxable in France (ie, your non-teaching pensions) are subject to CRDS except where you hold an E-form (or have private insurance).  Assuming you were registered for CMU prior to 30/06/2007, then you enter the sum of your non teaching pensions for the whole year in boxes AS/BS (that's for the tax bit), then split the total into that received prior to 30/06/2007 and that received after.  The pre June amount is additionally entered in box TL (that generates the CRDS charge due for that slice of income) and the rest goes nowhere because there's no charge applicable.

 

What about the annuities declared in box BW, should a proportion of those go in TL as well or does having an E121 not give a cessation of CRDS charges on these as well. You have said:

 

Annuities attract 11% CSG/CRDS/PS on the after relief amount.  UK company pensions attract 0,5% CRDS on the total amount.  Savings accounts attract 11% CSG/CRDS/PS on the total amount.

 

so the CRDS rate is different on annuities compared with pensions so I assume you cannot just add it into TL?...........J