Viewing posts from: November 2000

International SIPPs

By Andrea Glover
This article is published on: 22nd November 2022

22.11.22

What are they and how do they benefit a non-UK resident living in France?

Myself and my colleagues have seen a significant increase in enquires this year from clients who have private pension schemes in the UK. Many are having difficulties accessing pension benefits for the first time due to changes post BREXIT or their UK adviser has informed them that they can no longer work with them, because of the post BREXIT rules on ‘passporting rights’.

One of the solutions that has helped many of these clients is a scheme called an International Self Invested Personal Pension (SIPP). So, I am going to explain the background to this product and why it might be the appropriate home for your pension funds.

The SIPP was first introduced in the UK budget in 1989 and following further regulation became a registered pension plan in April 2006. SIPPs were introduced to encourage individuals to save for their retirement.

SIPPs are often set up by the provider using a master trust and the provider will normally be the scheme administrator and trustee. The individual then become a member of the scheme and investments are normally in the name of the provider or the trustee but are earmarked for the individual member.

The main advantage of a SIPP compared to a traditional personal pension is the level of investment flexibility the member has, as the range of available investments is much wider than a standard personal pension.

An International SIPP is a UK SIPP that has been specifically designed for non-UK residents. The structure is similar to that of a SIPP and both are regulated by the UK Financial Conduct Authority.

An International SIPP provides the ability to invest in several currencies and some providers allow withdrawals in euros, paid directly to a French bank account.

As with a SIPP, the international version allows you to transfer your pension or consolidate several pension plans into one simplified scheme. More importantly, the International SIPP allows a locally based, regulated financial adviser to implement an investment strategy and assist you with overall retirement planning.

It is also important to note that a locally based adviser will have knowledge of the French tax treatment of any income from the pension and the various options available.

You can transfer from most private or company pensions to an International SIPP and you can also consider transferring from a defined benefit or final salary scheme, if you’re not already taking benefits. However, you can’t transfer from an annuity or many of the public sector and government schemes.

If you have a very large pension pot, a Qualifying Recognised Overseas Pension Scheme (QROPS) may be a more suitable home for your pension funds, as it can help protect against future tax liabilities for those nearing the UK Lifetime Allowance (currently £1,073,100).

As with all such matters, it is important to seek advice from a regulated adviser to ensure that the appropriate recommendation is given for your individual circumstances.

Premium Bonds in France

By Andrea Glover
This article is published on: 13th May 2022

13.05.22

I meet many clients who are originally from the UK and hold Premium Bonds. In this article I want to talk through the tax and practical consequences of holding them as a French tax resident, as well as looking at a more suitable alternative.

Premium Bonds are a popular way to save money in the UK. Rather than offering a guaranteed interest rate, you could win tax free prizes between £25 and £1M every month. According to the NS&I website, there have been over 400 winners receiving the million-pound prize since 1994 and the average prize fund rate is 1% per annum. So, for the vast majority, the average prize rate is not keeping up with normal inflation rates.

Since BREXIT, it is important that NS&I customers living in the EU hold a UK bank account. Not having a UK bank account could invalidate the terms of your NS&I customer agreement and you may have no alternative but to close your account. Even if your terms are not invalidated, without a UK account NS&I would need to send you a warrant (like a cheque) which could be challenging to deposit into a non-UK account.

In France, Premium Bond winnings are not tax free – they have to be declared in your yearly tax return and are subject to tax in the same way as UK bank interest. On death, France will apply the relevant inheritance taxes to your worldwide estate, which would include Premium Bonds held in the UK. There is a double tax treaty between France and the UK for inheritance tax, which means that credit is given in France for any tax paid in the UK. So, you do not pay tax twice, but you do pay whichever is the higher amount.

Given the above, you may conclude that Premium Bonds are no longer an appropriate investment as a French tax resident. So, what are the alternatives?

In my experience, an Assurance Vie (AV) is one of the most suitable options to consider as a home for the cash in value of your Premium Bond savings. An AV is an insurance-based investment product and has the following advantages:

The investments that you place within your AV are never touched by French income tax or capital gains tax whilst they stay inside the AV, unlike Premium Bond winnings
If you keep the AV going for at least eight years, you then qualify for a special income tax-free band, on any withdrawals
On death, you can leave each individual beneficiary up to €152,500 completely free of French inheritance tax, if you invest before the age of 70. This is of great advantage to blended families, as beneficiaries do not have to be directly related
If you invest after the age of 70, you can leave a combined total of €30,500 inheritance tax free to all beneficiaries
International AVs are available which allow you to invest in sterling. Therefore, your Premium Bond proceeds do not have to be exchanged into euros, unlike a French based AV

In conclusion, if you hold Premium Bonds, speak to a regulated Financial Adviser to seek advice as to whether they remain suitable for you as a French tax resident.

*First published in www.thelocalbuzzmag.com

UK pensions and tax treatment in France

By Andrea Glover
This article is published on: 13th September 2021

13.09.21

I have had several queries over the last few months about the tax treatment of UK pensions in France, whether they are being received as a regular income or where clients have or are about to take a one-off lump sum to pay for a large purchase. Many of the queries were relating to the completion of French tax returns, but we are also seeing a large number of queries where advice is being sought on French tax treatment of pensions prior to a move to France.

So, in this article, I am going to go back to the basics and go through the different types of UK pension scheme and their tax treatment in France for French tax residents.

UK State Pension
As a French resident, the UK State Pension is taxable in France (not the UK) and where an S1 is held, no French social charges are payable. It is important to note that the UK State Pension can be paid directly into a French bank account, in euros, although the amount will obviously fluctuate due to exchange rates.

Government pensions
UK government pensions are dealt with under the UK/France double tax treaty and apply to those who have previously worked in the Armed Forces, Civil Service, Fire Service, Local Authority, NHS (with exceptions), Police and Teaching amongst others. A full list is available at www.gov.uk/hmrc-internal-manuals/international-manual/intm343040 to help you identify if your pension is classified as ‘government’.

Under the double tax treaty, UK government pensions are taxed at source in the UK. The pension income still has to be declared in your French tax return, but a 100% tax credit is given so that the same tax is not paid twice. It is important to note, that such pension payments are taken into account to calculate your overall income and could have the effect of increasing the rate at which other sources of income are taxed.

Qualifying government pensions are exempt from social charges.

Private pensions (occupational, stakeholder, SIPP)
Pension payments received from UK private pensions are taxable in France (not the UK) if you are French resident and again, where an S1 is held, the payments are exempt from social charges.

Annuities
Annuities are more complex and advice needs to be sought to establish the type of annuity held, as annuities can be interpreted as investment income in France rather than pension income.

Allowances
Amongst other allowances relating to pension income, there is a general 10% tax abatement on pension income (with the exception of qualifying UK government pensions) with a minimum of €394 and a ceiling of €3,858 (applicable to 2020 tax returns and subject to change). The allowance is per taxpayer, although the ceiling stated is per fiscal household.

The allowance only relates to tax and not social charges, where applicable.

Lump Sums
Lump sum pension payments are an area for discussion in another article. Other than qualifying UK government pension lump sums, such payments (including UK tax free lump sums) are taxable in France.

I would always strongly recommend that you speak to a France based qualified adviser, familiar with UK pensions, before any firm decision is made to take a lump sum payment.