Whether you are nearing retirement or it is several years away, it is never too early to start thinking about how you will finance your golden years. If you are already enjoying retirement, you still need to regularly review your arrangements to ensure they are on track to meet your goals and provide long-term financial security.
If you are hoping to live in France once you retire – and who can blame you? – you will have more research and advance planning to do. Or maybe you are already living here and are unsure what your options are.
Whatever your situation, what do you need to think about now to secure the retirement of your choice?
Approaching retirement
Even if retirement is a way off, there are things you need to do to make sure you are on the right track financially.
There may be steps you can take today to help make your dream retirement a reality.
Questions you should ask include:
- Will I be able to afford to retire when I want to?
- What is the best strategy for withdrawing from my business or employment?
- What options will I have for my pension funds?
- Will I be able to retain my existing wealth and assets?
- Where do I want to spend my retirement years? In France, UK, or perhaps elsewhere?
Let’s say that you plan to retire in the coming years and move permanently to France.
You may have concerns about whether you can afford your preferred lifestyle without having to sell existing assets.
You may not want to have to downsize, for instance. Perhaps you have a business to sell and are unsure how best to convert your years of hard work into a retirement nest egg.
Then there are residence, tax and succession implications of living in France which you need to research – you may be surprised at how different the French regimes are to the UK’s.
Professional financial advice can prove invaluable. An adviser can take a holistic view of what you have (your savings, investments, assets, pensions) together with what you want (your timeline, income requirements, legacy wishes) and an objective assessment of who you are (your circumstances, goals, risk appetite) to design a personalised retirement plan for you.
Already retired
If you are already retired, that does not mean you should forget about retirement planning – after all, you could be retired for 30 years or more!
Remember that inflation can be detrimental to a long retirement. Even low inflation will have a big impact in the long term, when you will find your money does not go as far as it used to.
Bank interest rates rarely keep up with inflation, so you need to invest your savings wisely to generate enough capital growth while keeping risk to a comfortable level for you.
Regular reviews allow you to adapt your strategy to suit your changing circumstances and goals, such as incorporating new family members, addressing health issues or relocating.
It also enables you to keep up with the ever-changing tax and pensions landscape.
Your pension options
Pensions are usually the foundations of retirement, so deciding what to do here may be one of life’s most important financial decisions.
Pensions are complex enough, anyway, but with greater freedom and choice than ever – and an increase in sophisticated pension scams – you must take great care.
You might benefit from consolidating several UK pensions into one to provide a coherent, more cost-effective investment platform for your retirement income. You also need to consider the French tax implications of the various options and compare their tax efficiency.
Also, remember that receiving pension income in sterling exposes you to conversion costs and exchange rate risk.
British expatriates have the option of transferring UK pensions to a Qualifying Overseas Pension Scheme (QROPS).
Doing so can unlock advantages you do not always get with UK pensions, such as flexibility to take income in euros and more freedom to pass benefits to chosen heirs.
Transferred funds would also be protected from further UK lifetime allowance charges and future UK pension rules that may adversely affect you.
If you transfer UK pensions to an EU-based QROPS as an EU resident, you can currently do so tax-free, but transfers outside the EU/EEA invite a 25% UK tax penalty.
There was speculation that the UK government would widen this taxation net to capture EU-based QROPS after Brexit, but the good news is that this has not happened so far and EU transfers remain tax-free. It may still change in the future, so bear this possibility in mind.
Transferring is by no means a one-size-fits-all solution and the benefits of a QROPS can vary greatly between providers and jurisdictions. Take regulated advice before making any significant pension decision to protect your benefits and establish the most suitable option for you.
Retiring in France
If moving permanently to France is on the cards, it is especially important to review your retirement strategy early.
Not only will you need to consider your residence status and cross-border tax implications, you will need to adapt your estate planning to suit the very different local succession rules.
Preparing in advance can reap many benefits, such as lowering taxation and avoiding France’s forced heirship rules.
For example, there are various ways of owning property in France, which can have an impact on succession rights and tax, so explore your options and understand how they relate to your family circumstances – particularly if you and/or your spouse have children from previous relationships or you are not married or in a civil partnership.
In any case, careful planning is the key to minimising taxation and maximising the available opportunities so that you can enjoy your dream retirement with long-term financial security.
Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our, Blevins Franks, 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.
Author: Blevins Franks. Blevins Franks provides tax and wealth management advice.
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