You may set goals for the year, such as exercising more, taking up a new hobby or planning a dream holiday.
When it comes to financial planning, however, focusing on one year is not nearly enough, you need to plan ahead for the future.
While you should always consider current developments that could impact your finances, good wealth management is all about establishing your goals, both short and long-term, then setting up a strategic plan to achieve them.
Planning for a financially secure retirement
For many of us, the ultimate goal is to be able to enjoy our dream retirement.
Since you are reading Connexion, that is likely to involve living in France or at least spending a lot of time here, and you will want to make the most of what it has to offer.
And the good news is that life expectancy in France is a year longer than the UK!
Not only are people living longer, they are also enjoying a lifestyle that is more active (and arguably more expensive) than previous generations. While this is welcome, we need to ensure our money comfortably lasts as long as we do.
Many retirees favour low-risk, ‘safer’ investments like bank deposits. But, you have potentially 30 years to fund in retirement, which means this is actually a risky option.
Slowly but surely the cost of living increases every year. Even lower inflation rates can erode the spending power of your savings over the longer term, so you need them to at least earn enough to keep up with inflation (and ideally beat it), but with today’s low interest rates this is a struggle.
Britons in France who keep savings in sterling also need to factor in exchange rate risk, as currency movements can make a noticeable difference to the amount of income you receive.
Start by establishing what your goals are (what income and capital growth you need, etc), and obtain an objective analysis of your risk profile.
Working with an experienced and regulated adviser, you can then build a portfolio, with a careful spread of investments across asset classes, regions, market sectors, companies, currencies etc, designed to achieve your goals within your risk tolerance.
The key is to find the right balance of risk and return for your peace of mind.
Planning to protect your wealth from tax
I mentioned inflation above, but when considering your income needs you also need to factor in taxation.
You should ideally review your tax planning once a year to take account of any tax reforms – and here in France they happen often and can be quite substantial!
That said, there is only one significant tax change in France in 2019, and that is the introduction of PAYE. But if you have not reviewed your tax planning after the key 2018 reforms, you should do so now.
Planning for the inevitable
Life expectancy may be increasing, but don’t use this as an excuse to put off estate planning – or you risk leaving it too late.
Again, start by defining your goals. Who you want to inherit your estate and in what amounts? Do you want to plan how and when they receive their inheritance?
You then need to research the succession laws and inheritance taxes in France and anywhere else you have assets and heirs.
You need to understand the EU succession regulation ‘Brussels IV’ and the pros and cons of using this for your cross-border estate planning.
Then take advice on how to achieve your wishes for your heirs and to make the process as straightforward as possible for them.
At the same time, you should consider the tax implications of your options, to find the optimum solution for you.
Planning for Brexit
We cannot talk about planning for 2019 without mentioning Brexit.
Negotiations on the Withdrawal Agreement were ongoing as I wrote this, so I cannot comment on what the final agreement may be, but this is a good time to consider whether you need to adjust your financial planning.
If you are living in France, your financial planning should be set up for France.
Do you own too many UK investments? Are all your savings in sterling, putting you at mercy of exchange rate swings? Are you hoping to transfer your pension out of the UK in the future?
Be aware that many speculate the UK could widen the 25% ‘overseas transfer charge’ after Brexit, so that transfers within the EU are also taxed.
When it comes to the taxation, your treatment as an expatriate is determined by the UK/ France tax treaty that exists independently of the EU. There are, however, some circumstances where taxation may be affected.
For example, if you hold UK bonds, you may lose beneficial tax treatment in France once the UK leaves the EU and EEA.
In this case you may want to consider moving to arrangements which provide full tax benefits in France.
Interestingly, we are now coming across more people in the UK who are looking beyond Brexit to what will happen next.
They are concerned that a change of government could impose a new taxation policy which would impact the wealth they have worked hard to build up in preparation for their retirement. Even if there is no change at No. 10, are tax rises on the middle classes still a possibility?
If you dream of living in France and are worried about what may happen in the UK, perhaps now is the time to start exploring your options for a tax-efficient move to France.
Even if you cannot leave the UK yet, it would be good to have a plan in place, especially if it is one that could help you move sooner rather than later.
Speaking to an advisory firm experienced at helping UK residents move to France should provide a wealth of useful information and advice.
Very best wishes to all Connexion readers for 2019 and beyond.
This column is by Bill Blevins of Blevins Franks financial advice group (www.blevinsfranks.com). He has decades of experience advising expatriates in France and co-authored the Blevins Franks Guide to Living 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.
