What options do you have with savings when you move to France? Financial expert Jennie Poate at Ark Capital, a company of Independent Financial Advisers specialising in wealth preservation and management, tax, financial and succession planning, to take us through a real life case study…
My clients Sally and Dan moved to France in February 2021 taking early retirement to live the good life. They are married and have two children each from previous marriages.
I met with them as they wanted to discuss their options for investment. They have a UK fixed rate deposit account maturing shortly. It was paying 1% gross interest and they have been offered just 0.15% by their UK Bank. They have received their first ‘Avis D’Imposition’ for income tax and are in the 30% tax bracket as they have good income from their teacher’s pensions.
Their £200,000 fixed rate deposit income paid them £2000 pa. They have been charged a 30% income tax rate (converted at £1 to €1.20) of €720 in total combining both ‘CSG’ (or social charges) and income tax. Wow! So out of their £2000 deposit income they have paid €720 in taxes.
They also need to be aware that the funds are considered to be part of their estate. If one of them dies the succession law in France means that the funds are split between the children and remaining spouse. This isn’t what they want. They want assets to pass to the remaining spouse only. Then to all four children after they die. Read more here: https://www.notaires.fr/en/donation-succession/succession/order-succession-and-inheritance-tax
As an expert in both UK and French financial matters, I asked them questions about their financial needs and requirements and then took them through the options available.
Options
The couple could consider a ‘Contrat d’Assurance Vie’. This can be available in sterling or euros mitigating the need for foreign exchange if the rate is poor. This is a life assurance investment, so inside the ‘wrapper’ is the investment, the part that is invested for you. It is usually held with an insurance company either inside France or outside depending upon the company recommended. It is open ended, i.e. no fixed term and can pay a regular amount, and it can match the performance of the funds chosen, you can take out the profit in the policy, the value of the remaining capital doesn’t change. The level of risk is set after discussion with your advisor or you can take a lump sum.
So, as an example, say Sally and Dan invested the £200,000, and it made a profit of 5% in the first year, and they wanted to take a 3% income, would it be taxed in the same way? Well no! The insurance company would work out how much of the withdrawal is profit and how much is deemed to be return of your capital.
Only the perceived profit part is taxed. On the above figures the taxable gain would be €771.43. Of this €270 would be deducted as tax and €119.57 for social charges. Though don’t forget that these investments normally have running costs and/or an up-front fee. The deductions come off the policy value and tax and social charge liabilities apply if a withdrawal is made.
Inheritance Benefits
The other useful thing about these types of investments is that you can name specific beneficiaries to receive the residual funds when it comes to inheritance. This will achieve Sally and Dan’s aim of maintaining control over their funds.
