New French Fiscal law taxes as income UK tax free lump sum capital pension withdrawals.

[Sprogster]

Apologies, if this has already been mentioned, but a new fiscal law which came into effect in France in January 2011, has the potential to inflict a painful tax shock on Brit retirees who move to France with private and employer pension arrangements, that allow them to avail themselves of a UK tax free lump sum capital withdrawal from their pension pot.

My understanding is that in the UK when you reach the age of 55, you can make a UK tax free withdrawal of up to 25% of your pension pot, the rest having to be used to buy an annuity. With annuity rates at historical lows, the lump sum cash withdrawal option has apparently become more popular.

However, under the new French fiscal law, any Brit expat retiree resident in France, who avails themselves of the lump sum pension capital withdrawal, will have this amount taxed in France as income on an aggregate basis. Meaning, that even if the capital withdrawals are staggered over different tax years the French Fisc will aggregate the withdrawals so they are treated as one income payment, potentially taking you into the 41% French income tax band.

Moral of the story appears to be that if you are fortunate enough to have a pension pot that you can make a UK tax free lump sum capital withdrawal from, make sure you do it before the move to France. If an early retiree, it might be a consideration to delay a move to France until you are 55.

[parsnips]

Hi,

    See thread "pension fund trivial amount".

[Chezstevens]

also, for now, does not affect taxfree lump sums from Government pensions.

[idun]

Well Sarkozy has already shafted the french with taxes and social security payments on such things, and as we have income from France we were hit too. So that he is after everyone else is not a surprise.