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Early Retirement Cash Lump Sum/Pension Advice needed


richo

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Hi All

Am new to this wonderful forum, and have made a few postings on other subjects on this very informative site.

We (my partner and I) are in the "doing our homework stage" of selling up and moving to France, possibly/probably next year.

I qualify for SER (special early retirement) from May this year (age 50), and with the change to the UK pension lump sum laws of last April, means a greater lump sum tax free can be taken. My partner's only source of income is DLA (higher rate) which ceases the moment we leave the UK. So if/when we move, our only source of income would be my company (not civil service) pension.

With these new pension laws, I can get a far greater lump sum if I commute some of my annual pension (multiplied by a 12.5 commutation factor)which will  reduce my annual pension. I will use a large slice of the lump sum + the equity from our house in the UK (recently divorced and have an £100.000 mortgage) to purchase outright a home in France.

My question is, would it be to my advantage (tax wise) to have a larger lump sum, thus money in the Bank (in the UK or france) which was tax free upon takin early retirement, with a lower annual pension (approx £16.000) or a smaller lump sum (after purchasing the property in France) with a larger annual pension of say £20.000.

Any advice from someone in a similar position would be much appreciated. I have seen an "Independant F A" in the UK, but couldn't answer my question, as does not deal with overseas Tax Laws.

Dave

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There are several financial advisers who specialise in clients wanting to move from Britain to France with sums to invest, just like you. They can give independent advice (for a fee) or advise on products for which they receive commission - you choose. They will be able to provide forecasts based on your actual sums and requirements, with consideration given to taxation, inheritance etc..

You will see their advertisements in magazines like Living France, France and French Property News.

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You either :

Need to sit down with a spreadsheet and work through after tax income in France based on both views. Be warned it also needs a guess on when you plan on dying.

Pay money to somebody, suggest an accountant who knows both UK and French tax law to do the sums for you.

In general giving up income for lump sum is worthwhile if you would be using that money to off a loan on which you are pay interest or invest in a business which generates income at a higher rate of return that bank rate plus 3 % BUT not worthwhile if you are going using the money to invest in something which pays interest or dividends. This is a very crude rule of thumb.

NB do not wait till you are resident in France because the tax free lump sum is taxable as income last time I looked at the rules.

  

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[quote user="Anton Redman"]

NB do not wait till you are resident in France because the tax free lump sum is taxable as income last time I looked at the rules.

  [/quote]

Which rules - where? I am interested to find out whether a pension lump sum likely to be taxed as income or a capital gain.

Sue

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Page 260 - 24.1.4 c - To avoid any difficulty the taxpayer would be well advised to take the commutted amont before he becomes resident in Fance " Taxation in France 2001" - Charles Parkinsin PKF ISBN 0951 119919 9 6. My builder has stolen/failed to return my latter edition but the rules are actually becomeg worse not better.

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My notaire might be totally wrong but she had all the books out and said that you could offset the amount paid into an endowment or pension to reduce the tax you would have to pay. We were actually talking about tax on life insurance policies at the time and this came into the conversation.

What happens if all your pensions are below the amount at which you have to take an annuity and you take the whole lot as a lump sum - we understood that the amount paid in could be offset and the rest was taxable.

Talking to Newcastle they said that the average woman who lived abroad was only entitled to 25% of her state pension on her contributions or lack of them. I am 8p short and start getting the pittance this month. Mind, if they up the interest rate again it might be a slightly bigger pittance.

Di - still working, keeps the brain cell firing - which is what is probably killing the rest off.

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NB do not wait till you are resident in France because the tax free lump sum is taxable as income last time I looked at the rules.

  

 

 

Yes I saw that on a previous thread as I read through the older postings. That is one thing I have already planned. I will take the lump sum, retirement package. Then sell the house in the UK, pay off the mortgage before moving to France to rent a place to start with whilst we search for the right property.

After watching the programme on ITV tonight on Pensions, I think it made up my mind for me, take as much as you can as a lump sum whislt the pension fund is still healthy. I am luckily enough to be on a final salary pension scheme, but our company has now stopped this for new employees.

Thanks for all the advice, really appreciated.

Dave

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bonjour iceni".talking to newcastle they said that the AVERAGE WOMAN who lived abroad was only entitled to 25%of her state pension . why ?can you clarify please?cordialement john .ok i have just woken up .its because of EARLY RETIREMENT sorry!
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