Transferring UK Pension to France

[Mrs B]

Hi there

We hear that French pension tax is slightly more attractive than UK's, we are currently trying to figure out our pension situations :-

1. husband currently has private UK taxed pension, how do we go about transferring his pension to France and how much in advance of our move do we need to start things moving

2. hope to draw mine in approx six year comprising three small money purchase funds. What are my options please? Do i consolidate all three now and transfer to a French equivalent or do I wait till maturity in six years before doing anything? and when the time comes, what are my options please? It will only be a small pension so looking to maximise my income/minimise tax payable ideally

Apologies if these are basic questions but do find pensions complicated at times

Thanks in advance, Mrs B  

[andyh4]

Possibly some misunderstandings

 

Where your pension will be taxed depends on the double taxation treaty.

Most pensions will be taxed in France if you come to live in France.  Basically most pensions will be taxed in France including the UK OAP.  Pensions paid by the UK State to public sector workers remain taxed in the UK.  There are no legal options, those are the rules.

 

Once you have established French tax residency (I think minimum 3 years but it could be 5) you can arrange to transfer any UK company and private pensions to off-shore approved providers - QROPS.  Whether this is a good thing to do or not will depend on your view on a number of things:

annuity rates in the UK when you retire - currently lousey, but will they improve?

currency risk - you can convert your QROPS to a Euro account and remove any currency risk, but equally lose out on any gains if the pound appreciates.

flexibility - QROPS generally offer more flexibility than an annuity.  That can be a good thing, but also bad if you hedge bets badly.  It is not a decision to be taken lightly and proper financial advice is really required.

[AnOther]

Yep, definitely some misunderstandings [;-)]

You become eligible to take out a QROPS once you become non UK resident, there is no other time constraint. Although costs and fees have come down recently a QROPS is still unlikely to be appropriate for funds under about £100k.

In general terms the average person would probably be better off being taxed wholly in France. Mainly this is because each person in a household has an allowance which the principal tax payer can claim, on top of which the marginal rates are lower. Even on a not insubstantial salary as a UK offshore oil worker I would be better off paying my tax in France but although I have an option to be paid gross out of the Channel Islands for various reasons, membership of a company pension scheme and death in service life insurance to mention but two, it wouldn't really work to my benefit overall.

You don't need to actually transfer a pension to France or offshore but if your husband is already drawing from his he may not now be able to transfer it anywhere anyway, nor will he be able to have it paid net in UK until he has submitted his first French tax return along with which he should complete and submit the FD5 'France Individual' form. The French stamp this and eventually a copy finds it's way to HMRC and acts as the confirmation that you are French resident and paying tax here and therefore your UK pensions may be paid net of UK tax.

In practice then this means that when you move you will first have wait until the end of the relevant tax year (Dec.), then fill in your first tax return, the forms for which don't come out until about the following May, then submit them, and the France Individual form, and then wait, then wait a bit more, and then wait a bit more on top, so I wouldn't bank on getting it sorted out for at least a good year or more from when you move.

Annuities are a sore point at the moment being at an historic low and unlikely to improve in the foreseeable future. That said for some they are still a good option particularly if your life expectancy is lower than the norm and you qualify for an 'impaired life' annuity. Under certain circumstances this can enhance the monthly yield by as much as 50%  - guaranteed for life remember - so if you have medical conditions or even family history which potentially reduces your life expectancy, you should not dismiss them out of hand.

Lot's to consider [blink]

[Mrs B]

Many thanks andyh4 and AnOther, for the clarification - we were certainly under some misconceptions! despite having read up on the subject (or so we thought). In some ways does make it slightly easier as it's one less item off the list to plan for before we actually take the plunge!

Many thanks again, Mrs B

[Bob T]

"Once you have established French tax residency (I think minimum 3 years but it could be 5)"

Has that changed then? I thought that a person was a tax resident the day after they come here with the intention to live here.

[andyh4]

Yes you are tax resident immediately but I thought there was a delay on applying for QROPS - seems from ANOs response that I was wrong.  Oh and quoting half a sentence is always likely to result in something out of context.

[AnOther]

There may be some confusion between being deemed French resident because you live here and formally defining with HMRC which normally would only occur after you have submitted your first French tax return and/or France Individual form but in any case you can in fact take out a QROPS whilst still UK resident !

http://www.qrops-pension-transfer.co.uk/qrops-who-qualifies

The first bullet point is a tad contradictory when it states "You will need to be a non-UK tax resident for five tax years" this is at odds both with the opening sentence and also the following list of qualifying criteria you must meet.

[parsnips]

[quote user="AnOther"]Yep, definitely some misunderstandings [;-)]

You become eligible to take out a QROPS once you become non UK resident, there is no other time constraint. Although costs and fees have come down recently a QROPS is still unlikely to be appropriate for funds under about £100k.

In general terms the average person would probably be better off being taxed wholly in France. Mainly this is because each person in a household has an allowance which the principal tax payer can claim, on top of which the marginal rates are lower. Even on a not insubstantial salary as a UK offshore oil worker I would be better off paying my tax in France but although I have an option to be paid gross out of the Channel Islands for various reasons, membership of a company pension scheme and death in service life insurance to mention but two, it wouldn't really work to my benefit overall.

You don't need to actually transfer a pension to France or offshore but if your husband is already drawing from his he may not now be able to transfer it anywhere anyway, nor will he be able to have it paid net in UK until he has submitted his first French tax return along with which he should complete and submit the FD5 'France Individual' form. The French stamp this and eventually a copy finds it's way to HMRC and acts as the confirmation that you are French resident and paying tax here and therefore your UK pensions may be paid net of UK tax.

In practice then this means that when you move you will first have wait until the end of the relevant tax year (Dec.), then fill in your first tax return, the forms for which don't come out until about the following May, then submit them, and the France Individual form, and then wait, then wait a bit more, and then wait a bit more on top, so I wouldn't bank on getting it sorted out for at least a good year or more from when you move.

Annuities are a sore point at the moment being at an historic low and unlikely to improve in the foreseeable future. That said for some they are still a good option particularly if your life expectancy is lower than the norm and you qualify for an 'impaired life' annuity. Under certain circumstances this can enhance the monthly yield by as much as 50%  - guaranteed for life remember - so if you have medical conditions or even family history which potentially reduces your life expectancy, you should not dismiss them out of hand.

Lot's to consider [blink]

[/quote]

Hi,

    Small quibble Another, I think you meant gross of UK tax where I have highlighted. 

    Best regards from pedants corner.

[Bill]

I am jumping to a conclusion ,  u said ""  hope to draw mine in approx six year comprising three small money purchase funds""

 

Maybe worthwhile looking at the option to top  up your state pension..

 

you are (certainly  were ) allowed  to pay a small amount and top up any missing years in your NI contributions.

 

rgds

Bill

[AnOther]

Actually both can be correct Parsnips, net generally does means after taxes are deducted but if none are due then the sum becomes both gross and net at the same time, I think the meaning was clear enough [;-)]

Did you miss my other 'net' reference then or let me off that one [Www]

I think you are jumping Bill, Mr's B said nothing about her state pension only her private ones.

The 'small amount' you mention to buy back years BTW is actually £626 per year and it went up from £421 in April 2009 however we do not know if Mrs B needs a top up or not.

http://www.guardian.co.uk/money/2009/feb/15/ni-contributions-rise-state-pensions

As the state pension is now neatly chopped up into 30ths if you are short it's quite easy to work out whether buying back is a worthwhile investment or not. My OH bought back a few years before the price rise so at least we both have full state pensions to look forward to so here's hoping we live long enough to at least get our money back,

Whether it would be advisable to consolidate three small pensions into one or not is a

job for an IFA. He would need to take into account the performances of

the funds and their risk profiles, and of course any fees and charges

you were paying on them not forgetting transfer or exit fees which can wary from nil to as much as 10% or even more. The charges aspect alone might well be sufficient reason

to consolidate or not..

Decisions decisions [8-)]

[Bill]

AnOther said..

 

I think you are jumping Bill, Mr's B said nothing about her state pension only her private ones.

 

 

 

whoops.. [:$]

[Sprogster]

Bill, I would hold off any fiscal planning until after the Presidential elections in May/June, as if Mnsr Hollande wins there invariably will be a lot of changes. Even under the current administration, the tax rules seem to be in constant flux with changes being announced off the hoof almost on a weekly basis!