Viewing posts categorised under: France

Looking back at 2020, looking forward to 2021

By Occitanie
This article is published on: 12th December 2020

12.12.20

Welcome to the 8th edition of our newsletter ‘Spectrum in Occitanie, Finance in Focus’, brought to you by Philip Oxley, Sue Regan, Rob Hesketh and Derek Winsland, your Spectrum team of advisers in the Occitanie.

2020 has been a year like no other we can remember. We have had a global health pandemic with tragically unprecedented levels of deaths in peacetime and significant changes for many people in relation to both their work arrangements and social lives, notwithstanding challenges in relation to individuals’ physical and mental health.

In the financial world, economies have suffered deep recessions and economic rebounds within the space of months. All financial markets plunged sharply in March, but many have recovered those losses, and more, with the US Dow Jones index recently breaching 30,000 for the first time ever. In the UK, the recovery of the FTSE 100 has been more muted and even with advances in the last few weeks, the index is still currently down about 15% from its starting point at the beginning of this year, although there are still a few weeks to the end of the year for the market to surprise!

Vaccines
Perhaps the single most positive piece of news in 2020 has been the recent succesful trials of a number of Coronavirus vaccines. With approval granted by the MRHA, the UK’s medicines agency, for the Pfizer/BioNTech vaccine, there are 800,000 doses heading to the UK with care home residents and staff thought

to be at the top of the list of recipients, followed by the over 80s and healthcare workers.

There are many other vaccines in the pipeline with Moderna and AstraZenica/Oxford University vaccines thought to be close behind in the approval process. Vaccines from Johnson & Johnson and Novavax are both in the final Phase 3 of trials, China has at least three and Russia one, which are all undergoing trials currently.

Interestingly the storage conditions and price vary greatly, with the Pfizer/BioNTech vaccine requiring about -70°c conditions, dilution before administering and is thought to cost in the region of £25 per dose. The vaccine from AstraZeneca & Oxford University, however, can be stored at fridge temperatures for up to six months, with an estimated cost of about £3 per dose (because the company has committed to distributing the vaccine at cost, during the course of the pandemic). On the day the company announced the results of its trials, the markets somewhat cruelly knocked nearly 4% off the company’s share price! Some confusion over the vaccine dosage and efficacy results didn’t help, but supplying the vaccine at cost is not going to provide the profits boost that investors might have expected.

Politics
Politically, both Biden and Trump registered more votes each than any other US President in history. Whilst Biden undoubtedly won this contest (despite Trump’s protestations), Trump and his views clearly still resonate strongly with many Americans. Politics aside, the economy, employment and equity markets have actually had a particularly good run under Trump’s stewardship. However, the markets have also taken the Biden victory in their stride. Despite what was said during the heat of the election campaign, Biden is a moderate and the response of the markets shows that also to be the view of most investors. The markets’ reaction was also supported by the likelihood of a Republican Senate (still to be determined) which will act as a check on any of the more radical instincts of the new administration. Much of the world will welcome the likely return of US support for the World Health Organisation (WHO) and the Paris Climate Accord.

Closer to home, Boris Johnson’s stock has plummeted from a comfortable election winner only a year ago, to talk of grumbling amongst his own MPs. There has been speculation of possible moves against him by his own MPs, although if this dissention does snowball, it will probably not be until 2021.

President Macron has been busy on the world stage in recent months; although interpreting the polls would suggest the French people would rather he focused on domestic matters instead. His popularity has improved from lows seen previously, but the numbers who disapprove still outnumber those who approve of his presidency and polling on people’s voting intentions for the 2022 Presidential Election show him only a whisker ahead of Marine Le Pen. But with nearly 18 months to the end of the President’s term, much can still happen.

Brexit
As this article goes to press, negotiations are still ongoing between the UK and the EU. Many areas remain unresolved including fishing rights (which seems to be one of the key sticking points in the deal, particularly due to Macron who,according to press reports, is the chief instigator behind the EU’s tough negotiating stance) as well as many other aspects of the UK’s future relationship with the EU. One item that has been clarified recently, however, is in relation to French residents in possession of UK driving licences. It has been confirmed that these will need to be exchanged for French licences, but those affected have until 31 December 2021 to secure their new licence. UK nationals who have driving licences from another EU country do not need to make this switch.

QROPS
Remaining on the subject of Brexit, one of the “go to” financial products within the expatriate market for pensions has been the Qualifying Recognised Overseas Pension Scheme (or QROPS). Since its inception 14 years ago, HMRC figures indicate there have been over 130,000 transfers and the average transfer value in 2019/20 was £125,000. This useful financial planning product has an uncertain future after the end of this year. From 9th March 2017 transfers to and from a QROPS became liable to an Overseas Transfer Charge (OTC) of 25%, unless one or more of five conditions was met. One of those conditions was that the pension member was resident in a country within the European Economic Area (EEA) and the QROPS was established in a country within the EEA. This meant that whilst the QROPS remained an attractive proposition to many expatriates within the EU, the number of individuals who went ahead with a transfer to a QROPS and paid the OTC in the tax year 2019/20 was only 13, according to an article published by Canada Life. The UK left the EU on 31 January 2020 and also left the EEA (the EEA comprises all EU member countries plus Iceland, Liechtenstein and Norway). The transition period agreed in the Withdrawal Agreement requiring the UK to be treated as an EU and EEA member, and bound by the rules of both, expires on 31 December 2020. It seems that this may mark the effective end of the QROPS, although we wait to have this confirmed. Fortunately, an International SIPP is still available to those looking for favourable solutions for their UK pension schemes and this product can provide many of the advantages afforded by a QROPS.

2021
One of our favourite quotes about predicting the future in relation to the world of finance is from the late J.K. Galbraith, who was for many years the Professor of Economics at Harvard University. He famously said that “The only function of economic forecasting is to make astrology look respectable”. For that reason, we will focus on possible trends rather than predictions!

The positive vaccine news has already seen a surge in value to those stocks in sectors that have been battered for most of 2020 – leisure, transport, hotels, restaurants, cinemas etc. It is also likely that prices in banking stocks will stabilise or possibly recover further. Furthermore, it is probable that a lot of the old traditional stocks such as oil, industrials, consumables etc. will improve as we move into 2021. What is not so clear is whether those technology stocks, seen also as “stay at home” stocks (Facebook, Alphabet, Apple, Amazon, Microsoft, Netflix etc.) which have had a stellar 2020, benefitting from the impact of Coronavirus, will continue to power ahead or take a breather in 2021. With regard to some of those sectors that were hit badly this year (hospitality, cinemas, airlines etc.) it is also unclear whether the change in consumer behaviour seen this year is here to stay, in which case any recovery in these sectors may be limited in scope.

Gold, seen as a safe haven during this year’s turbulence, fell back sharply with news of vaccine progress, but has recently stabilised, whereas Cryptocurrencies have strongly advanced in value over this period. It is difficult to assess the future direction of either of these assets, but as the vaccines get rolled out and economies improve, the predictions earlier this year that gold could reach $3,000 per ounce seem unlikely, in the short term at least. What can be predicted with more confidence is that there will still be volatility in the markets, because whilst they have been buoyed by the vaccine news, in the “real economy”, the fallout has yet to be properly felt.

Unfortunately, rising unemployment is inevitable, as are tax increases at some point, to start to chip away at the mountain of debt that has accrued through increased government spending and falling tax receipts. There has been much talk about the shape of the recovery, e.g. “V”-shaped, “U”-shaped, “W”-shaped (reflecting a double-dip recession) or even a reverse square root (unfortunately not an available button on this author’s keyboard!). The answer seems increasingly that all of these may happen depending on the country, the market sector or the company.

What we would comfortably recommend however, is to stay invested in the markets. To conclude with another well known quote from Warren Buffett, now 90 years of age and considered one of the world’s most successful investors, “The stock market is a device for transferring money from the impatient to the patient”.

We wish all our readers a very happy and healthy Christmas and we hope 2021 will be a better year for all. We will be back in touch again next year.

If you have any comments or questions, as well as suggestions for future topics for our newsletter, we’d love to hear from you at occitanie@spectrum-ifa.com. Please feel free to pass this on to any friends or contacts who you think might find the content of interest.

UK bank accounts after Brexit

By Occitanie
This article is published on: 20th November 2020

20.11.20

Welcome to the seventh edition of our newsletter ‘Spectrum in Occitanie, Finance in Focus’, brought to you by Sue Regan, Rob Hesketh, Derek Winsland and Philip Oxley your Spectrum team of advisers in the Occitanie.

As we are approaching the end of 2020, to say that it has been an unusual year would be a gross understatement. Countries across the globe continue to adjust to life with Covid-19 and with the ongoing and ever-changing restrictions that the predicted second wave has brought with it. As this goes to ‘press’ we now find ourselves once again in a national lockdown in France.

Although it had taken a back seat since the virus outbreak, Brexit is once again at the forefront of the minds of UK expats living in the EU. Will there be a trade deal? Are we heading for a cliff-edge ‘No Deal’? It is almost unbelievable that we are still at this point in the deliberations with only eight weeks of the transition period to go.

UK Banks accounts after BREXIT
As the deadline approaches one issue that we are frequently being asked about lately by concerned clients, is that some UK banks have been writing to their customers resident in the EU putting them on notice that their UK bank accounts and credit cards will be closed either at the end of the year or, in some cases even earlier, as a result of Brexit.

Although some banks have already contacted some customers, it is apparent that only some types of account are affected and only in some EU countries. The two main banking institutions that have taken such action so far are Barclays and the Lloyds Banking Group, which includes Lloyds Bank, Halifax and Bank of Scotland. Many other banks have stated that they ‘currently have no plans to close customer accounts, but they are monitoring the situation’. Given that this could potentially affect all of us with ties to the UK banking system, we thought this would be a good topic to focus on this month.
So why are some banks closing UK expats’ accounts?

UK banks and other financial firms are currently allowed to trade as part of the European Economic Area (EEA), as all member countries use the same regulatory framework. This arrangement is known as ‘passporting’, and it is why Brits who have moved abroad have been able to use credit cards and banking services from UK-based banks, even though they’re no longer living in the country. However, once the Brexit transition period ends on 31 December, this passporting arrangement will no longer be in place – that is, unless a specific agreement to carry it on is reached as part of a Brexit deal. With no such deal confirmed, UK banks would have to attempt to negotiate and fulfil the stipulations from every EEA country’s regulator. All of them work differently and a continuation of providing services to UK expats will be more feasible for some banks than others.

The impact on each customer will vary depending on how their bank or financial institution currently operates, the product or service being provided, and the legal and regulatory framework in the country in which they are resident. In effect, this means that the situation is different for each financial service offered by each financial provider in each country; for some banks, offering certain products in certain countries simply won’t work. So, certain services and accounts may be withdrawn in some EU countries but not in others.

We understand that many banks are still trying to figure out a way of working in different EU countries after the Brexit transition period, while also waiting to see if a deal can be agreed between the UK and the EU. The Bank of England and the Financial Conduct Authority (FCA) have written to banks informing them that, if they do decide to close customer accounts, they must have plans in place to service their Europe-based customers properly through the process, taking into account how their actions might impact on customer’s individual circumstances and the alternative products available to them.

What should you do?
DON’T PANIC – there have been some dramatic headlines in the press about the issue, but it is important to stay calm. If you think you will be affected, you should not act in haste and repent at leisure. Give yourself time to work out what your options are.

CHECK THE FACTS CAREFULLY – whether or not you have had a warning letter from your bank, talk to them now and find out what they plan to do on Brexit day. If you still have a UK address, your account may not be closed.

CHECK YOUR SPECIFIC ACCOUNTS – you may find the types of savings products you hold are still permitted in France. Your bank should be able to advise you on this.

ARRANGE FOR PAYMENTS TO BE PAID DIRECTLY TO YOUR FRENCH BANK ACCOUNT – if you are in receipt of the UK State Pension, HMRC will pay this directly to your French account every month and, because of the volume of payments made, the exchange rate is extremely competitive. OK, so the GBP:EUR rate isn’t that great at the moment but at least you will be guaranteed continuity of income if you rely on this to fund your lifestyle in France. Some UK private pension providers will also pay pensions to foreign bank accounts, so it is worth speaking to your provider about this.

OPEN A NEW UK ACCOUNT – find a UK bank that is operating in France (such as HSBC and Santander) and check if you can meet their eligibility criteria for opening a new bank account and that the account will meet your needs. For example, does it require you to have a minimum income or deposit with them?

CONSIDER OPENING A STERLING OFFSHORE BANK ACCOUNT – we have a good connection with a very reputable bank, based in the Isle of Man, that offers accounts in a number of currencies including Sterling and Euros and which will accept regular payments in and direct debits out. If you would like details of the account, please contact your Spectrum adviser.

If you have savings on deposit in the UK that you use for your short-term liquidity or an ‘emergency fund’ and you have been told, or are concerned, that these accounts will be closed, there are a number of tax-free savings accounts available in France, which you should consider maximising, if you have not already done so, including the following:

THE ‘LIVRET A’ – which is currently paying a rate of interest of 0.5% per annum and is available to non-residents. The maximum permitted investment into this type of account is €22,950 per individual.

THE ‘LIVRET DÉVELOPPEMENT DURABLE (LDD)’ – this account is available to residents of France and the maximum investment permitted is €12,000 per individual. It is currently paying an interest rate of 0.5% per annum.

THE ‘LIVRET D’EPARGNE POPULAIRE (LEP)’ – this account is available to residents of France who are on low incomes. The maximum investment amount permitted is €7,700 per individual. The interest rate is currently 1% per annum. For example, in order to open a LEP account in 2020, your ‘revenu fiscal de référence’ in 2018 (as shown on your ‘avis d’imposition’ of 2019) must not have exceed €19,977 for a single person or €30,645 for a two-part household.

But it’s not just bank accounts that might be affected when passporting goes………….

Some UK financial services providers are informing their non-UK resident customers that they will not be able to provide them with advice on their existing UK based investments after 31 December and that ‘you should find a new adviser or cash in your investments’.

As a reminder to our readers, Spectrum in France is a registered French company, regulated in France, and we are not passported in from the UK, so as far as we are concerned, it’s business as usual.

For those of you who still have investments in the UK, whether they be stocks and shares ISAs, investment bonds, pension funds or other investment portfolios, now would be a good time to review these and discuss with your provider as to whether they will be able to continue advising you in a post-Brexit world. Even if your UK provider will be able to continue advising you, they may not be familiar with the French taxation framework and the investments you hold may not be tax efficient in France. We can advise you on investment products that are suitable and tax-efficient for living in France and provide you with ongoing advice to ensure that your financial plan remains on track as your situation and attitude to risk changes over time.

Please don’t forget that, although we may be restricted on where we can travel at the moment, we are here and have the technology to undertake your regular reviews and financial health checks remotely. If you would like a review of your situation, please do not hesitate to get in touch with your Spectrum adviser or via the contact link below.

We’d love to hear from you with any comments and/or questions, as well as suggestions as to future topics for discussion. Please feel free to pass this on to any friends or contacts who you think might find it interesting.

Occitanie@spectrum-ifa.com

Are you a UK IFA with Clients Living in Europe ?

By Spectrum IFA
This article is published on: 17th November 2020

17.11.20

ARE YOU UNABLE TO SERVICE THESE CLIENTS POST BREXIT?

At The Spectrum IFA Group we can look after your clients long term as licensed and regulated financial advisers operating in France, Spain, Italy, Portugal, Malta, Luxembourg and Switzerland.

The things you should know before you contact us for our help:

We specialise in financial planning for English speaking expatriates across western Europe
We are locally authorised in all jurisdictions in which we operate and across the entire EU (and Switzerland). Our regulatory status is unaffected by Brexit
We hold financial services licenses for both insurance mediation (Insurance Distribution Directive compliant) and investment advice (MiFiD compliant)
Established in 2003, we have 50 advisers and 12 regional offices
We work only with large, well known asset managers including Blackrock, Jupiter, Fidelity and Prudential. For clients with higher value portfolios we also use discretionary investment managers such as Rathbones, Smith and Williamson and Quilter Cheviot
As part of our terms of business, clients of The Spectrum IFA Group receive ongoing, long term service and support. All advisers live within easy travel distance of their clients
We are not an offshore broker. We do not use products from UK dependant territories (such as the Isle of Man or Channel Islands) as they can produce adverse tax consequences for clients living in Europe. We advise that you don’t use any of these structures for your clients if they are EU resident
We use only locally compliant products which are designed specifically for the jurisdictions in which our clients are based
We work on a transparent charging structure with all clients. Charges are deducted directly from the products and solutions we recommend. We do not invoice separately

As the end of the transition period is rapidly approaching we ask that you contact us as soon possible to allow time for us to complete any necessary restructuring of client assets.

If your clients are resident in the EU or Switzerland, or intending becoming resident, please feel free to contact us for a no obligation discussion to determine if we can look after your clients post Brexit.

You can contact us at info@spectrum-ifa.com

Or speak to the specific country managers in France, Spain or Italy

Click the relevant flag below

We don’t have a crystal ball but we know how to prepare for the unknown

By Alan Watson
This article is published on: 10th November 2020

10.11.20

For most of 2020, nobody in France has been able to escape the misery of the daily Virus update; even as I write this article, it gets worse by the day. From a financial planner’s viewpoint, and thinking of my family, long term Rhone-Alps based, it can spin one’s head wondering, “how much, and for how long, will our children be paying extra taxes and social charges to balance this black hole.”

President Macron has certainly not been slow in pressing his Eurozone political colleagues to secure a massive support package for France (so all those excessive Urssaf charges have clearly not been enough!) Did anybody analyse, offer some statistics as to how this will be paid back? If so, sorry I missed it, but we all know the harsh reality is payback time will be long and heavy.

Many of my clients in the Alps are either retired, considering it, or working hard in their business to secure a tidy financial future, not only for themselves, but for their families also. It’s a part of life’s pattern that many of us become beneficiaries of a family estate, and being a French fiscal resident, this brings up potential questions and complications, “what are the limits I can receive before the tax man becomes an unwelcome beneficiary?”, “my children deserve a portion of this, but the bank offers a derisory return, not even Eurozone inflation proof,”, “our young daughter dreams of studying in the US, how much will that cost?”

So how do we approach such matters ? You may be surprised and relieved to hear that the French fiscal system can be both generous and highly tax efficient when it comes to financial planning for ourselves and our families. For example, a gift of €100,000 can be made every 15 years from parents to children, free of tax and social charges, which could be used for that far off house purchase, a highly regarded study program, or even setting up a business. A lower, but still highly valuable, allowance of just over €30,000 applies for gifts between grandparents and grandchildren.

Currency is also an important consideration. French banks are always happy to offer short and long term saving vehicles. The wording of the contracts, terms, and fund choices, even for somebody who has spent over 30 years in European financial services, can be rather bewildering, plus they always insist on converting your Sterling to Euros, and currently this is not a sensible proposition. In the last year alone we have seen swings between the two currencies of 10%; the Pound is still a global currency and will return to its former glory, so a far better facility is to be able to choose your exchange date, then take advantage whenthe currency is stronger to move to your new Euro based need. This flexibility coupled to tax efficiency, could make a gift for your loved ones a very sensible and well planned move.

As a financial adviser, I meet many people in sometimes complex and misunderstood situations, “I have actually lived in France for the last two years, is it now time to declare fiscal residency?”, “My children have UK ISAs set up by their grandparents, so living here as a family, is this tax efficient?”

A no obligation meeting may help to unravel the complex French reporting system, and allow you to enjoy all the things that brought us here in the first place.

How much tax do you pay in France?

By Katriona Murray-Platon
This article is published on: 3rd November 2020

It’s strange to think that this time last year I was in Quebec with my husband and children. Whilst autumn colours in Canada were absolutely splendid, I have really been enjoying seeing the colours of the trees and vineyards in my local area.

France is now in lockdown for at least the month of November. However unlike the previous lockdown schools will remain open and people can still go to work. Although I have become a lot more comfortable working from home online I enjoy my drives to see my clients. If you would like to speak to me about any matter, even if your annual review is not due at this time, please feel free to let me know and I would be happy to arrange a face to face meeting or an online video call. I can come and see my clients because that is my work but it may also be a way of preventing clients feeling isolated when they cannot see other people.

Being flexible is very important at this time. We don’t know what will happen in the future or how Christmas may be celebrated but what we do know is that

1) We have survived lockdown before so we know what works and what needs changing
2) We know that lockdown was effective in bringing the number of cases down
3) We have made enormous progress on understanding the virus and how to treat it, we are also getting ever closer to a vaccine. We just have to keep calm and carry on!

As you know in November, the Taxe d’Habitation is due (by 16th November or 21st November if paid online). This is a tax for all residents of buildings on 1st January. In 2020, 80% of French households will be considered exempt from paying this tax. In July 2019 Macron said in 2021 the higher income households would see a 30% reduction in their taxe d’habitation increasing to 65% in 2022 and 100% in 2023. So basically this tax will cease to exist after 2023.

As regards income tax, the tax levels have increased by 0.2% for the tax on income earned in 2020 to take into account the inflation forecast for 2019-2020. The new tax barriers are:

Between 0 and €10,084	0%
From €10,084 to €25,710	11%
From €25,710 to €73,516	30%
From €73,516 to €158,122	41%
From €158,122	45%

Just how is my tax calculated in France?

If you have looked at your tax statement and wondered how the tax is calculated, you may find the following rough guide to be useful.

If a couple has a total of €30,000 of income, their taxes would be as follows. €30,000 divided by 2 = €15,000

No tax for the first €10,084 but 11% on the difference between €10,084 and €15,000 (€4916 x 11% = €541). This amount is then multiplied by the number of people (or tax parts) so the total tax for this couple would be €1082.

For a couple with €60,000, the income is again divided between them (€60,000/2 = €30,000).

There is again no tax for the first €10,084, the next amount would be €25,710-€10,084=€15 626 at 11% which is €1719.

The difference between €30,000 and €25,710, i.e. €4290 would be taxed at 30% resulting in €1287.

The final tax would be (€1719 + €1287) x 2 = €6,012 total tax.

Once the tax is calculated then the tax reductions for home help expenses or charitable donations are deducted. For more information please request our free tax guide on our website.

If you have French investments or interest earning accounts and your taxable income (as shown on your 2020 tax return for your income earned in 2019) is less than €25,000 (or €50,000 for a couple) for interest, or for dividends €50,000 (or €75,000 for a couple) you must inform your bank or financial institution before 30th November 2020 so that they don’t withhold the 12.8% income tax on your income in 2021.

Wishing you all a wonderful November. Stay home, stay safe, stay in touch!

Do I need a residence permit or driving licence in France?

By Spectrum IFA
This article is published on: 30th October 2020

Like it or not, Britain formally left the UK on the 31st January 2020. Since then we have been in a transition period which will last until 31st December 2020, during which time the politicians are supposed to negotiate agreements for various aspects concerning how the UK will interact with the EU in the future. Despite the looming deadline, the shape of the future relationship of the EU with the United Kingdom remains uncertain. Whether they manage to agree or not, there are some points that are very likely. You will need to get a French residence permit and possibly convert your UK driving licence.

Do I need to get a ‘titre de séjour’ to live in France in 2021?
Yes, all British citizens living in France need to apply for a residence permit from 2021, but you have until 1st July 2021 to apply for it and 1st October 2021 is when it will become necessary to hold it. Even if you hold an older residence permit stating “citoyen Union européenne”, you will still need to change it for a new version by the 1st October 2021, after which date it will no longer be valid. The new residence permits will be known as ‘titre de séjour mention « Accord de retrait du Royaume-Uni de l’UE »’. If you have been living in France for more than five years, this will be a permanent ten year residence permit. If you have been living in France for less than five years, you will receive a residence permit for one to five years.

Luckily, the process for obtaining these permits is simple, and free, but you must make the application via the dedicated residence permit application website before July 1st 2021. All you need is photographs or scans of your passport, proof of when you moved to France and proof of current address. Here is the list of documents.

British citizens moving to France after 31st December 2020 will be required to obtain a long stay visa, then to file an application for a residence permit at their prefecture in a procedure which is likely to be much more onerous, so if you are thinking of moving to France, it could well be worth doing so before the end of 2020.

Do I need to change my UK driving licence to continue driving in France?
UK driving licences are valid throughout the EU until the end of the transition period on the 31st December 2020, but the rules governing driving licences after this date have yet to be set out. If there is an agreement, there will be special provisions for the conditions of exchange of your UK driving licence for a French licence if you are resident in France.

If there is no agreement, driving licences will be valid for a year from the date of moving to France, but they will not be exchangeable. At the end of this period of validity, British driving licences will no longer entitle their holders to drive in France.

The application for exchanging your licence must be made online on the ANTS website and there are long waiting times. You will need to get a photo taken in an accredited photo booth that sends the photograph directly and gives you a code to enter in the application. Note that if you want to keep any extra categories other than the standard A and B, such as towing permits, you will need to specify this and arrange a medical examination with a listed doctor (about 50 euros).

What else do I need to think about?
There are also a number of financial aspects to Brexit that you could do well to consider before the end of the year. Regarding general banking, some people are already getting notices informing them that their UK accounts will be closed. If you are stuck without an account in the UK, there are international accounts available which may be suitable.

Another important consideration is pensions. As well as the questions about state pensions, there could well be changes in taxation on moving your personal pension out of the UK. Until the end of 2020 you can move your pension out of the UK but within the EU cost effectively, but after this year the 25% tax charge which is applied on moving your pension anywhere else could be applied to moving it into the EU.

Healthcare is another issue. If you are employed in France, you will continue to have the same access to healthcare as French citizens, but retired expats relying on an S1 certificate are still waiting for news of an agreement. Additionally, if you are moving to France after January 2021 you may need private healthcare cover during the application phase of residency.

Not everything is clear yet, but if you are living in France and want to make sure that everything is in order before the end of the year, contact us and we will put you in touch with a local adviser who will arrange a free consultation to discuss anything you are worried about.

If you are thinking about setting up residency in France before the end of the year, it is essential to seek help so you can arrange your affairs tax efficiently in the little time that is left, Contact us and we will put you in touch with an adviser in the area in which you want to establish residence who will arrange a free consultation. All our advisers have made the same move and will be happy to answer any questions.

Should I transfer my UK Pensions if I’m living in France?

By Philip Oxley
This article is published on: 12th October 2020

12.10.20

I live in France but have pensions in the UK. Should I transfer them to a QROPS, an International SIPP or just leave them where they are?

For British Nationals living in France, perhaps the primary decision to be made in relation to long term financial planning is whether or not to take any action with regards to any pension scheme/s they have in the UK.
To deal at the outset with one question I have seen asked, and increasingly so since the Brexit decision, it is important to state that it is not necessary to move your pension if you move to France. Even after Brexit, you will still have access to your pension funds. Concern that you will lose access to your pension fund is not a good reason to move it!

However, there can be good reasons to consider moving your pension once you have relocated to France. This decision should be made only on the basis of a proper analysis having been conducted on your existing schemes.

As a French resident, the primary options in relation to your pension scheme/s are as follows:
i) Leave them where they are
ii) Move them into a QROPS
iii) Move them into an International SIPP
iv) A combination of the above

Click on the sections below to find out more:

Leave the existing UK Pensions Schemes in their current arrangement

Following a professional review, sometimes our recommendation is to leave your pensions schemes in their existing arrangement in the UK. Reasons for doing this include the following:

you plan to move back to the UK at some point in the near future
your pension scheme/s are relatively small in value (e.g. less than £100,000)
you have a cautious stance in relation to investments, your pension scheme is a Defined Benefit scheme (sometimes known as a Final Salary scheme) and this is your only or primary source of income once you retire

One key drawback to this approach is that you will forever receive your pension in GBP, therefore always be subject to exchange rate risk and currency exchange costs. You only have to speak to someone who already receives their pension in GBP (or even read some of the posts on Facebook on this issue) to see that British Nationals have really felt exchange rate pain in recent years, only receiving €1.10 currently for each £ when once it was closer to €1.40. In addition, there is the time spent researching and using currency exchanges to try to obtain the best rate.

For example, drawing a pension of £10,000 per year and converting to Euro would have yielded approximately the following amounts over the past 15 years:

€15,000 in January 2007
€10,500 in December 2008
€14,250 in July 2015 and
€11,000 currently

These fluctuations are not helpful in your later years when you need to plan your financial affairs and seek a degree of certainty in relation to your income.

A Qualifying Recognised Overseas Pension Scheme (QROPS)

A QROPS has been the go-to product for many expats over the years. To be classified as a QROPS the scheme must meet certain requirements, as defined by Her Majesty’s Revenue & Customs (HMRC). Amongst the key benefits are the following:

The option to consolidate multiple pensions into one administratively simple but diversified portfolio. Consolidating pension pots into a single structure is a more convenient way of tracking your pension growth and provides a far simpler structure when you start to draw your pension
The currency of the pension can be chosen, not just at outset, but a change in currency can be made whilst holding the pension. Therefore, if you move your pension into a QROPS in GBP initially, if a point arises in the future when the pound significantly increases in value, part of the fund or the entire fund can be moved into Euro
A QROPS is a pension which is held outside of the UK; therefore, it provides some protection against future legislative changes that might take place impacting pensions based in the UK. Chancellors of the Exchequer have for many years now seen pensions as an easy target for raising tax revenue
Moving pensions funds into a QROPS is an action that is known as a Benefit Crystallisation Event (BCE) and your pension will be tested against the UK Lifetime Allowance (LTA) at the time of transfer. Should your pension subsequently grow in value in a QROPS beyond the LTA (currently £1,073,000) there will be no further test or tax to pay. Currently, pensions in excess of the LTA can be taxed at up to 55% in the UK, depending on the type of withdrawal (lump sum or drawdown). Although in some cases, you may be able to enhance the LTA limit with different forms of pension protection
Tax planning opportunities for your nominated beneficiaries on the event of your death. Currently, if you are over 75 when you die (most of us hope this will be the case) then a tax liability exists for your beneficiaries in relation to UK based pensions. This liability could be greatly reduced and often no tax is payable if certain conditions are met

One disadvantage of some QROPS is the level of fees. Because of the structure of a QROPS requiring an offshore investment platform, EU based trustee (typically Malta-based) and sometimes a Discretionary Fund Manager (DFM), costs can in some cases become prohibitive. However, regardless of pension value, there is scope to control both initial and ongoing charges. With proper planning, cost should not be an obstacle to establishing a QROPS.

An International Self-Invested Personal Pension (SIPP)

A SIPP has some of the advantages of a QROPS in relation to currency flexibility and consolidation, but because it remains a pension structure domiciled in the UK, the tax advantages in relation to the LTA and Death Benefits for heirs do not apply. Also, it remains exposed to any legislative changes made by the UK Government in future budgets.

However, if you plan to move back to the UK or prefer to keep your pension based in the UK, then this is an option that may be suitable.

A combination of the above

What I mean by this, is that if you have a good, well-funded Defined Benefit (final salary) scheme and also one or more Defined Contribution (money purchase) pensions schemes, you have the option to move one or more into another structure (e.g. QROPS or International SIPP) and leave some of the schemes in place. For example, you may want to keep the security of a guaranteed pension that a Defined Benefit scheme provides but move your other DC pension schemes into a QROPS or SIPP and secure the benefits that ensue from these structures.

Other considerations

In deciding whether to go ahead and transfer your existing pensions into a different structure, typically the bar should be set at a higher level for a Defined Benefit (final salary) scheme. This type of pension provides a guaranteed income for life, offers some protection from inflation and the risk of funding your retirement does not rest with you (i.e. you are protected from the ups and downs of the stock market).

However, these schemes do lack flexibility and by exchanging the guaranteed annual income from retirement age, you receive instead a cash lump sum (and transfer values have seldom been higher than now) which you can invest and spend how you like with access from age 55 and the ability to pass the full amount onto your beneficiaries (tax-free if you die under the age of 75 and also the potential to be tax-free over the age of 75 if your pension is a QROPS).

Most Defined Benefit schemes only pay half of your pre-commutated pension to your spouse should you die, and usually a minimal amount or nothing to your children if you no longer have a spouse at the time of your death or your spouse who was a beneficiary of your pension subsequently dies. A QROPS for example allows much greater flexibility in relation to the selection of a beneficiary, allowing the funds to pass to any named beneficiary. Also Defined Benefit schemes are not entirely risk free – many are underfunded and some may be unable to meet their obligations (although the Pension Protection Fund exists to provide 90% of the guaranteed income if the scheme becomes insolvent before you reach retirement age, although there are maximum limits of compensation, i.e. £37,315 at age 65. The full amount would be paid if the scheme became insolvent if you were over the scheme retirement age).

There are two primary types of
employment pension schemes in the UK

a) Defined Benefit (or Final Salary)

• Provides guaranteed pension as a proportion of final salary based on i) salary ii) years of service iii) accrual rate (e.g. 1/60th of final salary for each full year of service)
• Payable from Age 65 (if taken earlier penalties apply for each year taken before 65)
• The pension is reduced when taking a lump sum

b) Defined Contribution (or Money Purchase)

• Pension benefits depend on the size of the fund
• Significant flexibility in relation to when to take the pension (currently from Age 55), how much to take and structure used to take the pension (annuity, capped and flexi-access drawdown, UFPLS, Scheme etc.)
• The pension fund size will depend on how and where it has been invested and the performance of those funds

Summary

This is a complex area and it is difficult to cover all relevant details within the parameters of this article. There are other considerations I have not addressed here, and this piece should be considered a high-level overview of some of the factors to consider. Perhaps the best advice I can give is the following:

Do not just do nothing and leave the pensions where they are because it’s the easiest thing to do
Do not assume the best option is to move your pension/s offshore into a QROPS just because you live in France and the UK has left the EU
Act now to have your pension schemes carefully reviewed. Engage with a properly regulated financial adviser and have an analysis conducted as to your options. Only then can you make a well-informed decision about what is best for you and your long-term financial security

A final point to consider is that there is currently a 25% tax applied to pension transfers into a QROPS for British Nationals living outside the EEA. After 31 December 2020, it is possible that this tax will also apply to those living in the EEA (as the UK will no longer be an EU country and the transition period will have expired). This has not yet been confirmed by the UK government but the opportunity to consider a QROPS as a financial planning option may not exist beyond the end of this year. If this is an option you want to explore, I recommend you do this without delay.

Are you au fait with Exchange Rates?

By Occitanie
This article is published on: 9th October 2020

09.10.20

Welcome to the sixth edition of our newsletter ‘Spectrum in Occitanie, Finance in Focus’.

The Covid-19 pandemic is still dominating our thoughts and lives and will probably continue to do so for some time yet. Life must go on though, and we need to make sure that we are looking after our finances, as well as ourselves and our loved ones. Today we are going to take a slightly deeper than usual look at something that we might take for granted – exchange rates.

As a reminder, we are Rob Hesketh, Philip Oxley, Sue Regan and Derek Winsland. Together we form Spectrum’s team in the Occitanie, formerly of course the Languedoc Roussillon and Midi Pyrenees.

What is an exchange rate?
Ok, let’s start with the easy questions. It will get tougher as we go on. Obviously, the exchange rate is the rate at which one currency can be exchanged for another. Currently the rate at which holders of sterling can buy euros is 1.1100. Or is it 1.1000? or maybe 1.0925? It might even be less than 1 if you buy it at the wrong place. Then again, 0.9010 might be a very good rate. How can that possibly be right? How can 0.9010 be better than 1.1000? The answer lies in the fact that there are always two versions of every exchange rate.

We Brits tend to take the view that sterling is more important to us than any other currency, so we always want to know how much of any given currency we can get for £1. The rest of the world however are prone to taking a different view, so if you ask a French bank for the rate to convert sterling to euros you will get a rate that reflects how many pounds you can get for one euro. Confused? I do not blame you. To keep things simple, I recommend that when you see a rate expressed in that way, all you need to do is divide it into one. Thus 1/.9010 = 1.1099

Why so many different rates?
Well, obviously the rate can keep on changing every minute. The law of supply and demand applies here, but there are also many different rates at the same time. That is because volume plays a huge part. An exchange rate is a compromise between two parties, one of whom wants to sell, and the other to buy. Basically, if you are an international bank dealing in hundreds of millions of pounds per deal, you are going to get a very good rate; in fact, the best there is. Players (to many it is in fact a game) can either make a price or request a price. If the latter, they will never say to the market ‘I want to buy euros’. They will always ask for a two-way price, the idea being that the bank being asked for the rate does not know which side of the deal the other bank wants. The spread between the two prices may be a little as 3 basis points. That’s the fourth decimal point to you and me, so the rate quoted might be 1.1000 to 1.1003. The quoting bank sells euros at 1.1000 and buys them at 1.1003. Those three basis points represent the market spread, or profit margin on the deal. Still with me? If you are it will come as no surprise that the profit margin gets wider and wider as the amount you are dealing in gets smaller and smaller. At exactly the same time as a big bank is dealing at 1.1000, you might find that the rate you get for your €500 will be more like 1.0700, and if you go to a kiosk at an airport and ask for €500 cash for your weekend away in Paris, you might well get less than 1:1, so you would end up spending more than £500.

Why should I be wary of exchange rates?

Quite simply because if you do not give them due care and attention, they can cost you a lot of money.

The indisputable fact is that whilst most of us arrive in France (or any other new home abroad for that matter) declaring that wild horses wouldn’t drag us back to the UK, or if they did we’d be in a box, the fact is that many of us end up back where we came from. We might hate the idea, but the facts are there. That means that there are four general phases that we will go through where exchange rates are going to have great bearing on our lives. Firstly the initial move phase, where we need to have enough euros to move here and buy property; secondly the sustenance phase, where we need to invest lump sums or exchange regular income such as pensions based in sterling; thirdly dealing with possible influxes of capital through inheritance or UK property sales, and fourthly the reversal of all of the above if we decide to go back.

What is exchange rate risk?

Best think of this as ‘‘damned if you do and damned if you don’t’’. If I do a currency deal, would I be better off waiting for a better rate?

If I don’t do it now, will it be worse when I have to do it?

Often, the answer is yes to both questions.

The aim should always be to eliminate exchange rate risk, but it is a lot harder to do that than it seems. Yes, if you sell your property in the UK and move to France, you are going to need to convert a sizeable part of the proceeds into euro to buy a property here, but what if there is a good chunk of money left over? What if you were fortunate enough to get £800k for your des-res in Surrey, and managed to find the ideal pied-a-terre in the Aude for €300k? That leaves you with a decision to make about the £530k or so that you have left. Is the answer that you are going to live in euroland so your money should be in euro? – Yes. Is the answer that eventually you may want to go back to the UK so your reserves should stay in sterling? – Yes. Is the answer that the current exchange rate is terrible, and you should at least wait and see what happens? – Yes. So, which ‘Yes’ is the right one? You can have the same conversation about your pension funds if you are looking to consolidate them outside of UK jurisdiction (and political meddling). You can also have that same conversation when or if you decide to sell a second property that is currently let out, or Mum’s house which she left to you.

What is the answer?
Quite simply, the answer is planning; serious discussion with your partner/family about what the future will bring, and where it will be, and then serious discussion with your financial adviser (that’s us by the way) about how to manage the resulting risk. The inescapable fact is that no-one can accurately forecast exchange rate movements. In much the same way that financial/economic projections by experts are notoriously unreliable, so too are those made by F/X forecasters, but do you really want to convert all your assets into euro at 1.10 only to find that in fifteen years’ time you want to relocate to the UK and the rate is 1.50? In case you don’t have a calculator handy, that would result in an f/x loss of over £140k in the above scenario. What you really need is someone to help you decide where your future requirements will lie, not what the exchange rate will be when it happens.

Even funding a house purchase needs planning. In France it can take months before you can finally pay for and move into your new home. The exchange rate can move a long way in that time, and strangely, it usually moves against you! There is a way to eliminate that risk though, and it is called a Forward Contract. If you have a set date for your final payment, your financial adviser may well suggest that you speak to a good Foreign Exchange company who will be able to fix a rate for you, valid for that date, so that you know exactly how much your villa in the sun is going to cost you in sterling terms. These are legal contracts though, and you will have to accept that rate even if the market goes up. What you are doing is buying peace of mind against it going down, which could make your purchase uncomfortably more expensive.

Another product that may be useful to you is the Limit Order. If for example you decided to buy land abroad, and have a property built on it, you might well find yourself needing to make stage payments to your builder. If the rate goes up during this process you will be happy, but if it goes down markedly…?? You can place an order for a set period with your F/X company to buy a set amount at a chosen higher or lower rate. So, you might decide that you want to buy your euro at 1.25 if it gets there, but also if it starts going down, you don’t want to get a rate any lower than 1.05. This is basically a ‘take profit’ and ‘stop loss’ strategy combined, but you can just do one side of it if you choose to.

Part of our service to you is to monitor these companies and make a suitable introduction to you.

Our responsibilities don’t end there though…

We will discuss with you the choices you have regarding the investment of any left-over lump sums. Those discussions should leave you in no doubt that cash left uninvested is a loss-leader. Leaving your surplus cash invested in the UK in non-French tax compliant instruments such as ISAs is not the answer.

In France, the clear leader in terms of tax efficiency for capital gains, income and succession taxes is Assurance Vie, but you can make all those mistakes listed above by investing in the wrong policy. Flexibility is the key, along with portability.

What if we could offer you an Assurance Vie
that could start life in sterling?

Then change into Euro if the exchange rate moved up, and back again if it went down.

What if you could invest in both sterling and euro in the same policy?

And what if that policy could simply change into an ordinary investment bond if you went back to the UK, fully compliant with UK tax law?

Strangely enough…

Taxe Foncière – Do you qualify for exemption?

By Katriona Murray-Platon
This article is published on: 8th October 2020

08.10.20

Although it hasn’t felt like it, because we have had such gloriously warm and sunny September, autumn is officially here! October is a special month in my household because it’s my son’s birthday and also Halloween which my very French husband has officially and fully adopted as his favourite annual event (the children rather like it too)! However I feel that two topics that must be covered this month are taxe foncière which needs to be paid by 15th October and of course banks.

Taxe foncière is a tax paid by property owners on the 1st January of each tax year. Note that it is paid by the owner not the occupant and applies to both buildings (houses or apartments) and land (agricultural or constructible).

If you sell your property or land, the tax liability for that year is apportioned to each party, by the notary, according to the timing of the sale.

You may qualify for an exemption if:

the property is a new construction used as a main residence (the exemption is for 2 years)
you are in receipt of disability allowance
you are in receipt of old age allowance
you are over 75 (depending on level of income)

The tax office may also allow an exemption for unoccupied property which is habitable and normally rented, provided that:

it is unintentionally unoccupied
it is unoccupied for at least 3 months
part or all of the building is unoccupied

However, as the tax reduction is not automatically granted, you have to apply for it and demonstrate that you qualify (with reference to the specific points above).

For more details on the taxe foncière please read the rest of my article on our website HERE.

As I’m sure you will have heard some people have received letters from their banks informing them that some services will not be continued for those resident in the EU. Not all banks are going to discontinue their services but customers of Barclaycard in particular have been told that this service will no longer be available to them.

If you find yourself in this situation or you are concerned about having a UK sterling account when you move to France and after 31st December 2020, please do get in touch. Spectrum has worked with Standard Bank for many years and they provide an excellent service to expats living in the EU.

Some key points to note are that:

They do not charge to receive funds into the bank
UK Sterling to Sterling transfers are done by BACS so there is no charge
Clients can set direct debit transactions up from their debit card at no charge
Standing orders can also be set up on the account and again there is no charge for Sterling to Sterling in the UK

As with any financial decision it is always best to get advice and recommendations from a certified, regulated financial adviser. So if you want to know more about Standard Bank please do get in touch or if you know anyone who is worried about their UK banks after Brexit, feel free to pass on my details.

Fun fact of the month:
In France a popular savings account, in addition to the very popular Livret A account is the LDD or Livret de Development Durable. This savings account actually began in 1983 and was called a CODEVI which stands for an account for industrial development, it allowed clients to put away short term savings which the bank used to lend to the French industries to ensure funding and modernisation. At the time the interest rate was 7.5%!!! In 2007 this account changed its name to become the LDD and it now only makes 0.5% interest. Since 1st October 2020 those with these accounts can request that part of their savings be used to benefit social economy and solidarity organisations.

Finally, if you haven’t seen the article that I wrote last month on the Spectrum website about Assurance Vies in France, you can find it on my page HERE.

Wishing you all a wonderful October!

Which Assurance Vie is best?

By Katriona Murray-Platon
This article is published on: 7th September 2020

In answer to the question of where do you put your money for maximum tax efficiency, an assurance vie is certainly the best place to put it. The French have continued to favour this investment over the years. According to the French Insurance Federation (FFA), in 2019 the premiums paid into assurance vies increased by 3.5% in 2018, to a total of €144.6 billion. I subscribe to a French financial magazine and every year they do an article on the best assurance vies in the market. This gives me an interesting insight into which products are recommended for the typical French investor.

What is interesting to note is that it is very rare for bank assurance vies to appear in this list. Banks have several assurance vie products under different names with different offers and it can be hard for the consumer to understand and compare performance and costs. Every member of my household, including my children, has an assurance vie, because even after social charges on the part in Euro funds, they are more likely to outperform any cash savings accounts. For example, the Livret A (the preferred savings account of the French) and the LDDS now only pay 0.5% interest per year and any other savings account offered by banks only generally offer between 0.2-0.3% interest which is not exempt from tax and social charges.

The French tend to favour investments in Eurofunds, believing them to be a safe option. Whilst this may be true if the investment horizon is less than three years, in the longer term inflation has a negative effect. The days of glory of the Eurofunds was around 2013-2014 when rates reached 2.5%. In 2019 the average rate on Eurofunds was 1.5% compared with 1.8% (net of fees) in 2018. However when compared with inflation, which was 1.8% in 2018 and 1.1% in 2019, there wasn’t much ‘real’ growth. Social charges are taken at source on such investments which further impacts performance. If your investment horizon is over three years and closer to between five and eight years then you should be investing at least partly in equities to produce a positive return above inflation. If it’s security you are looking for, the more diversified your assets, both in terms of asset classes and geographical location, the better your portfolio will be to weather market fluctuations.

The advantage with bank assurance vies is that you can start with smaller amounts to invest and build up with regular monthly amounts. However as a financial adviser with a high level of French, even I find it difficult to understand what exactly is in these assurance vies and where the underlying investments are held. Usually you are given the option of eurofunds and euro equities. It is rarely possible to hold assets in a different currency. We work with assurance vie providers who can allow you to hold assets in sterling and dollars as well as euros, which would allow you to leave this money to beneficiaries living in the UK or the US and avoid transferring the money into euros at today’s exchange rate. If you wanted to invest in euros but are holding sterling, over time it can be switched into euro funds at the appropriate time and with advice from your financial adviser.

It is not easy to change assurance vies. The French government changed the rules at the beginning of last year allowing people to change contracts but only with the same insurer. However this depends on whether the insurer will allow you to change contracts and whether they have anything better to offer.

If you are in your 40s, 50s or 60s and your investment horizon is longer than eight years, and if you find that your assurance vie is not performing as it should, or you no longer get the proper advice/service from your financial adviser/assurance vie provider, you could consider encashing the policy and finding a better investment. Professional guidance from an authorised financial adviser is essential to determine whether this this option is appropriate for your circumstances.

If however you are over 70 and set up the assurance vie before 70, or you set up the assurance vie over eight years ago and are benefitting from the income tax abatements of €4600 per person (€9200) per couple, it may not be in your interest to change assurance vie providers. There are still many benefits of setting up a small assurance vie after 70 to benefit from other abatements, but that will depend on your situation and you should discuss options with your financial adviser.

I would always advise speaking to a financial adviser before going into any investment whether French or foreign. You need to be aware of the past performance of the investment (although this is no promise of future returns), the reputation of the investment company and the costs and how this may affect investment performance. For more information about assurance vies in general please see our guide but if you are considering this type of investment please do contact your local financial adviser.