Would you like to make more of your UK pension fund when you become an
expat in France?
If so, you might find that a SIPP (a self-invested personal pension) is something that will help you generate the best retirement income possible. This option won’t be right for everyone. It’s important to have a qualified financial advisor review your position, but you may find that a SIPP gives you the potential to make the most of your pension fund whilst you enjoy the
good life in France. We asked Jennie Poate at ABC-EU, expat finance advisors, to explain SIPPs.
Self- Invested Personal Pensions (SIPPs)
A SIPP sounds like it might be really complex, time consuming, stressful. But that’s not the case. All it means is that this is a tax efficient pension wrapper. Its aim is to give you flexibility.
That said, a SIPP can be simple or more sophisticated – which is where your financial advisor comes into the equation. Some people like to be hands on with their SIPP, but most don’t and want to leave investment decisions to the experts.
SIPP explained in plain English
A SIPP is a wrapper that goes around your pension investments. It allows you to benefit from tax breaks for example taking a tax-free lump sum of up to 25 per cent of your pension pot after the age of 55-years old. (UK rules; other countries may well tax this part differently)
Investors are also able to reclaim income tax on contributions (the annual UK allowance 2024 is £60,000). For higher rate taxpayers – the reclaim is very beneficial.
And, as well as paying personal contributions into your SIPP yourself, contributions may be paid by another person on your behalf e.g. a family member or if you are employed, your employer.
A SIPP enables investors to take control of financial decision making rather than leaving it in the hands of insurance companies and fund managers. But while SIPPs offer greater flexibility than traditional pension schemes, they often have higher charges and the time involved in research means they may be more suitable for experienced investors.
Can expats in France hold a SIPP?
If you’re a UK expat living in France, yes, you can consider a SIPP. As with other personal pensions, you do not have to live in the UK to be able to invest in a SIPP.
However, there are a few important considerations to consider if you do not live in the UK and are considering a SIPP.
As SIPPs are held in the UK, and are normally held in Sterling. This means that if you plan to draw an income from your SIPP while you live abroad you will be liable to currency fluctuations, so you may wish to factor this is into your retirement planning. For people who plan to retire abroad and not return to the UK, an international version of a SIPP can be attractive from a currency point of view and also being able to have an advisor who can manage your pension and knows the local tax rules in the country in which you live.
Conversely, if you are paying into your SIPP while you live abroad and the value of the pound falls, the amount you are actually investing will increase. SIPPs abide by UK pension rules and are affected by any changes the UK Government makes to pension rules. One example of this would be the recent changes to the Lifetime Pension Allowance where the Government has changed the rules as follows:
From the 2024/2025 tax year the lifetime allowance will end. BUT, the tax free cash you can get from your pension will be limited to £268,275, and when you die to £1073,100 in most cases. An overseas transfer allowance or OTA will also apply if you transfer your pension abroad. Therefore the attraction if moving pension funds to a QROPS has rather diminished.
It’s important to understand the local French tax rules, as well as those in the UK before making a decision about how to draw an income from a SIPP.
Finally, and perhaps crucially, many expats will speak to a financial adviser when making a decision about their retirement plans. If you are seeking advice from an adviser in the UK, remember that they may not be fully aware of all the opportunities for expats. It is important you speak to an independent financial adviser who understands both the UK and French tax rules. Certainly this is an area where getting advice and making decisions before you move can make a huge difference to potential tax in the future.
Whatever you do, it is important to do your homework as there are many different types of SIPPs each offering different investment options.
If you’d like to find out more or have questions about how to maximise your investments, contact Jennie for an obligation free consultation at: jennie@abc-eu.com
This communication is for informational purposes only based on our understanding of current legislation and practices which is subject to change and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.
ABC-EU are members of Nexus Global (IFA Network). Nexus Global EU is a division of Blacktower Financial Management (Cyprus) Limited (BFMCL) and Blacktower Insurance Agents & Advisors Ltd (BIAAL). ABC-EU is an Appointed Representative of BFMCL which is licensed and regulated by the Cyprus Securities & Exchange Commission (CySEC) – Licence No. 386/20. ABC-EU is an Appointed Representative of BIAAL which is licensed and regulated by the Insurance Companies Control Service (ICCS) – Licence No. 5101
