Your pensions can be the key to financial security in retirement, but with Brexit looming and more options than ever, they can also be a source of concern and confusion. However, expatriates in France can find rewarding opportunities. This is the perfect time to review your pensions.
Your pension savings play a large part in determining your financial security and lifestyle over your retirement years. You need to keep up to date on developments that affect you or offer new opportunities. A crisis in UK pensions may prove rewarding for those with final salary (defined benefit) schemes.
Final salary pensions provide substantial benefits by guaranteeing a fixed, inflation-linked income for the whole of retirement. Now a tipping point has been reached, where large pay-outs offered by some providers to cash-in early can outweigh the benefits of drawing a pension for life.
In today’s climate of all-time low interest rates and market uncertainty, providers are finding it difficult to fund pension payments promised to members. The cost of providing final salary pensions has soared as returns from the assets underpinning them – mostly UK fixed interest bonds – have shrunk.
To offload future liabilities, many companies are offering much larger than usual transfer values. Calculated as a multiple of the annual income on retirement, it is not unknown for some pay-outs to be increased from 20x two years ago to, in some instances, around 40x since the Brexit vote. Properly managed, even more modest pay-outs could provide a retirement income that well exceeds the original scheme annual payment.
Transferring pensions comes with some risks and you may be better off staying where you are, but it is worth taking specialist advice to weigh up your options.
For expatriates in France, transferring your pension could have added tax benefits. Depending on your circumstances, you may be able to take your entire UK pension as a lump sum and pay a one-off tax in France of just 7.5%. You could then reinvest the funds into tax-efficient arrangements.
Potential exit tax?
There is speculation the UK government may stem the flow of pension transfers with law changes to make withdrawals more difficult. Some predict they may also introduce extra taxation on pension transfers for non-residents. Currently, you can enjoy UK tax relief on pension contributions, receive tax-free growth and, as a non-UK resident, potentially pay no UK tax to access your funds. An ‘exit tax’ would put an end to this.
While changes may not happen, if they do, it could mean paying more taxes on your pension savings. Now is a good time to consider what could work for you, under current rules, before the window closes.
To protect yourself, it is essential to take regulated professional advice and understand the long-term implications before making pension decisions. Contact Blevins Franks for a personalised review, advice on your options and tax planning opportunities in France.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.