Pensions in France

It could be that this results in a mismatch between French rules and the financial investments or products you own, putting you at a financial disadvantage – but, it could also be the complete opposite, enabling you to take advantage of certain opportunities.

There are certain financial decisions best taken before a move and others after you have arrived.  In addition, the French and UK rules could coincide in your favour, as well as the rules reflected in the UK/France Double Tax Treaty, which may benefit you, perhaps significantly reducing your tax bill.

Pensions is an area where this is very much the case - and more!

Does it then follow that you should bring your UK pensions with you if you are permanently living in France? It would be easier if there was one right answer, but that is not the case. Everyone has their own set of requirements, their own situation, plans and goals for their retirement, so your pension planning should be customised for you.

Leaving your pension in the UK

One option is to do nothing and access your UK pensions from France. If you have a ‘Defined Contribution’ pension, you can access funds in various ways. You could take cash in one lump sum or several withdrawals, receive a regular income until it runs out (drawdown) or purchase a lifetime income (annuity).

‘Defined Benefit’ pensions, on the other hand, are company pensions that provide a regular income for the whole of retirement. While you cannot usually access benefits as cash, you can never run out of funds, and lifetime payments usually pass to your spouse (where applicable) on death. You can also transfer them to a Self-Invested Personal Pension (SIPP) which you can then access.

Alternatively, you may have been a government or local authority employee for some, or all of your working life in the UK.  The associated pension schemes have their own rules in respect of taking benefits, transferability and taxation, which differ considerably from those applying to company and private pensions.

French tax on UK pensions

For French residents, regular UK pension income is taxed in France at the income tax scale rates, ranging from 0% up to 45%. Only UK government service pensions remain taxable in the UK.

France does not have a 25% tax-free lump sum regime like the UK, where you can ‘commute’ a quarter of the benefits, take it as cash, and pay no tax. If you take this option after you have moved to France, it will be taxable there.

The French tax authorities do offer a 10% allowance on gross overseas pension income. They will also work out your tax rate according to the ‘parts’ system, dividing your total household income by the number of members.

If it was your wish to take your whole pension fund as one lump sum (which is possible under the UK’s ‘Pension Freedoms’ of 2015, applicable to UK pension schemes, regardless of where the recipient is resident), it is possible to pay just 7.5% tax with an uncapped 10% allowance (certain conditions apply).

There may also be some exposure to social charges in France on pension income, though this will depend on your age, the type of UK pension you receive, the form you receive it in (annuity, regular withdrawal, single lump sum) and whether you are in receipt of a ‘Form S1’.

Transferring pensions overseas

Residents in France can move UK pensions to a Qualifying Recognised Overseas Pension Scheme (QROPS) tax-free.

Transferring to a QROPS can consolidate several UK pensions under one roof. Funds would be sheltered from UK taxation on income and gains and are immune to future changes to UK pension rules that may adversely affect you.

Establishing your approach

As QROPS receive the same tax treatment as other UK pensions in France, they may not be the most tax-efficient solution for French residents. Although QROPS do offer wide appeal, if a lump sum withdrawal is your preference, you may find it more beneficial to reinvest the UK pension funds into an alternative tax-efficient structure for France, such as an assurance-vie, which can offer similar flexibility and certain estate planning advantages.

In any case, the benefits of both an assurance-vie or QROPS can vary greatly between providers, as well as how they might or might not benefit a UK national living in France in different circumstances, so take specialist, personalised advice to navigate the options.

There is a lot to take in and be aware of and these are really only examples. Good planning can ensure you minimise the tax that impacts you and it helps to do so with specialists in this area. 

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; individuals should seek personalised advice.