The British love-hate relationship with our French neighbours across the channel may continue, but the place many of us love to hate is still the destination of choice for emigrating Brits.
A record 388,000 Britons left the UK permanently to live abroad in the year ending March 2009, and a great many many of them decided to settle in France.
According to figures kept in Britain, at least 100,000 expats have lived in France for two years or more.
Lifestyle and a warmer climate might have contributed towards the choice, but few expats would have considered France a tax haven for their UK pension.
In many ways, the French tax and pension systems are more complicated and burdensome than those in the UK, but anyone living in France permanently who has UK pension rights can transfer those rights in to a QROPS offshore pension and gain all the benefits.
Transferring in to a French QROPS is virtually impossible as no providers are set up to receive UK pension. An expat’s UK pension can be opened in any of the 40 or so countries that are authorised to operate a QROPS pension scheme.
Benefits of a QROPS when retiring to France
This means the fund can sit and grow in a low tax environment regardless of where the scheme member lives – including France.
QROPS providers pay pension benefits in any major currency, including the Euro. This negates the erosion of pension spending power by exchange rate fluctuation and does away with expensive bank transfer charges for switching cash between the UK and France.
Pensions are paid gross and income tax is paid where the expat is resident, so subject to French tax rules.
However, because the QROPS doesn’t have to be French based and involves a trust, the fund sits outside of the complicated French inheritance tax regime.
This is a double bonus for an expat because not only do they avoid buying an annuity or alternatively secured pension (ASP) that they would have to invest in if the pension remained UK based, but they also get to pass on any remaining funds to their family and loved one’s when they die.
When to take out a QROPS
Timing is important when taking out a QROPS. Anyone approaching the 75th birthday who has not yet bought an annuity needs to speak to an independent financial firm fast to see if they can avoid buying an annuity or ASP and make a QROPS transfer instead.
For anyone who has bought an annuity or ASP, it’s probably too late to switch to a QROPS without facing financial penalties. Contact us to find out exact details.
Anyone else who has not started drawing down their pension should also be able to make a tax effective transfer and receive all the benefits of an offshore pension while living in France.