Since the Pension rules changed in the UK in 2015, British Expats in France may find that the new rules have significant effects.
We looked at what it means in this article which covers who the rules apply to and some of the options. Now we consider more details on pension information for British expats in France…
I still want to contribute to my pension
There are conditions and restrictions on non-UK residents contributing to UK pension schemes. If you are planning to work in France, it may be worth exploring the French personal pension options instead and this will be covered in the next article.
The government is planning to restrict tax relief on pension contributions for those earning over £150,000. The lifetime allowance will be cut from £1.25 million to £1 million from April 2016. Large penalties arise on the excess when in payment.
What about the 55% ‘death tax’?
The 55% tax charge has been abolished. If you die after age 75, and your beneficiaries take a regular income, it will be taxed at their marginal rate (depending upon where they are tax resident) or at 45% on lump sums, though this may change from 2016. This applies to annuities also but not final salary schemes.
I have a defined benefit pension?
If you have a defined benefit or final salary scheme and want to use the new rules, you have to transfer to a defined contribution scheme. Transfers over £30,000 require you to take advice from a pension transfer specialist regulated by the UK Financial Conduct Authority. This is not to be taken lightly and is very difficult to achieve. We are finding that the costs to move these types of pensions can be more than £5000 in fees as it is very complex, and an agreement to transfer the pension is difficult to achieve.
What about QROPS?
Many Qualifying Recognised Overseas Pension Scheme (QROPS) cannot yet provide full flexibility on withdrawals and only certain providers accept non-UK residents, so choices are limited. Also, the rule where 70% of the transfer value made to a QROPS must provide an income for life currently remains in place for non-EU QROPS.
What about tax?
UK taxpayers receive 25% tax free, with other income/withdrawals taxed at their marginal rate of income tax. For us in France there is an income tax levied on the lump sum at 7.5% (there is another method too but this would need to be discussed). If you were to take the whole amount as cash, then the remainder would be taxed at 20/40% in the UK and is potentially reclaimable from HMRC but it would take a number of months to see the light at the end of the tunnel.
By Jennie Poate: BeaconGlobalWealth.com for information and factsheets
The information on this page is intended only as an introduction only and is not designed to offer solutions or advice. Beacon Global Wealth Management can accept no responsibility whatsoever for losses incurred by acting on the information on this page.