By Des Cooney
Qualifying Recognised Overseas Pension Schemes (QROPS) are increasingly becoming the pension planning vehicle of choice for British expats living in France. Wherever your retirement destination, it is best if you are able to arrange your finances in the most flexible manner. This means having access to your capital, at a time you want, in the place you want, and in the currency of your choice.
For retirement planning to be a success for expatriates, it is important to have a clear understanding of pension legislation in your chosen country of retirement. Thereafter, it is necessary to select an appropriate product that allows you to benefit from both a tax and investment perspective. This section looks at the merits of using a QROPS in France as both an effective and efficient retirement solution. Topics for discussion include:
- The cost of living in France compared to the UK
- Living in France as a reitree: Best places
- Pension schemes in the UK and France compared
- QROPS benefits
- QROPS rules and regulations
- Who is, and who is not eligible for a QROPS?
QROPS France: make the most of your UK pension by transferring to a QROPS
Recent changes to UK pension legislation mean that expatriates in France may be able to avoid the various restrictions imposed by the UK Government on how pension benefits can be taken on retirement, by transferring their pensions to a recognised Overseas Pension Scheme. Pensions that can be transferred into a QROPS in France include personal and occupational pension schemes.
1. The cost of living in France compared to the UK
There are an estimated 300,000 British expatriates currently residing in France. Many others make their way to these shores each year. With a similar cost of living to that of the UK, France beckons to a wide cross-section of expats. Whether it is the warm climate, the food and wine, or the diverse range of French cultural activities, retirement in France evidently has its attractions!
2. The best places in France to live as a retiree
France has a similar population size as that of the UK with approximately 66 million people living there. However, France is over two times as large as the UK and therein has a greater number and variety of retirement destinations for expats. Read our article about “Best places in France to live as a retiree” >>
3. Pension schemes in the UK and France compared
As an expat in France, it is important to compare pension systems there with that of your home country. British expats in particular need to examine closely the pros and cons of the two systems before deciding to transfer their pensions from the UK to France.
4. QROPS benefits when living in France
These schemes offer a certain degree of flexibility in terms of how and when you can take benefits. A summary of these benefits include:
- You can take up to 30% of your pension fund free from UK tax on retirement. This is higher than the current UK limit.
- A lifetime income can be provided by way of income drawdown, a fixed annuity, or a combination of both
- An overseas pension transfer helps solve the problem of currency risk by allowing you to invest your pension, and take income and benefits in a currency of your choice.
- QROPS offer a greater choice of investment options, allowing you to access funds managed by any of the world’s leading investment groups.
- Assets held in these vehicles fall outside of your estate for Inheritance Tax purposes if you die while living overseas. This means your wealth is protected for future generations, which is in stark contrast to the potential 55% tax charge on death were you to leave your pensions in the UK.
5. QROPS rules and regulations: avoid penalties
It is also important to keep an eye on the legal climate in terms of QROPS rules and regulations. Changes in legislation can affect the status of your QROPS. As of June 2013, expats from the UK are required to declare the value of their pensions, including those assets held in a QROPS to the French fiscal authorities. This decreases risks and will avoid penalties.
6. Who is eligible for a pension transfer?
In order to transfer your pension out of the UK, there are a number of rules that need to be adhered to. In the first instance you must have already left the country for tax purposes, or be intending to leave in the near future. Once tax resident in France, you can transfer your pension fund out of the UK into a QROPS in the same way that you would transfer between pension providers within the UK. Those eligible for such a transfer include:
- A UK national moving to France
- Any national who has built up UK pension benefits and is now resident or intending to become resident in France
As with all financial planning, individuals should take professional advice before attempting to move there pensions from the UK. Not all schemes are eligible for transfer to a QROPS. Rash decision-making can lead to a messy situation somewhere down the line that may be both difficult and costly to unravel.