UK pension options for British residents in France

If you live in France but have spent a considerable portion of your working life in the UK, you may well have accrued UK pension benefits from more than one source and be eligible for the UK’s state pension. Understanding how best to maximise your pension income while living in France, what to expect in the way of taxation and how to reduce that tax burden are essential considerations when planning for your future. We asked Jake Barber of SJB Global, a specialist financial planning advisor for expats in France, to explain UK pension options for British expats in France.

What kind of pensions might I have?

If you have paid sufficient National Insurance (NI) contributions in the UK or held certain overseas jobs, you will be eligible to receive the UK state pension. You may also have a government pension – you can find out what counts as a government or non-government pension here – and you could have a private pension with an occupational, personal or company pension scheme. If you’re unsure what UK pensions you have, you can use this government service to find and track down lost pensions.

You can also top up your NI contributions from overseas. If you are employed overseas, this will only cost you GBP 3.45 per week. For every week you pay for, you get about GBP 6 extra income per week in retirement, so it’s a no brainer.

Can I access my UK pensions if I live in France?

Yes. Your pension can be paid out regularly when you become eligible for it, regardless of whether you live outside the UK. However, the situation around all UK pensions is complex. UK rules relating to tax-free withdrawal of lump sums do not apply in France, and this figure will instead be taxed as income. Rules relating to the taxation of regular pension income are also very different as UK pensions are generally taxed at source in the UK. You can file a special tax code with HMRC to avoid your pension be taxed at source, but its best to work with an adviser who can help as its quite complex. It is also worth bearing in mind that any income paid in sterling and regularly transferred to euros is subject to fluctuations in the exchange rate.

Can I transfer my pension, and is it worthwhile?

Jake, principal adviser at SJB Global, says, “You can transfer some pensions as a French resident, although public sector can’t be transferred. State pensions can be merged together, or taken separately depending on whether you’ve met the minimum contribution limits in both the UK and France. If you have a defined contribution or defined benefit pension, you can transfer to a self-invested personal pension (SIPP), but you want to make sure it’s a SIPP that’s available for non-UK residents.”

Some, but not all, off-shore pensions are also eligible for transfer to France, Jake explains, but whether it’s worthwhile to transfer your pension to France or into a different UK scheme will depend on the benefits that come with it, any penalties and transfer costs and the value of the pension itself. “Unless the combined value of your private pensions is over £100,000, it is unlikely to be worth considering,” Jake says, “but even then, your decision will depend on your specific situation and requirements, the benefits attached to your pension and penalties and costs relating to moving it. A lot of times, UK Pensions restrict access once you leave the UK meaning you would have to transfer. The only way you can find this out is by calling up the pension company and finding out. I’d say about 2 out of 3 schemes restrict access, so its very important to know this well in advance.”

Where and how much will I be taxed?

Pensions from the UK received by French residents are covered under the double taxation treaty. This means you shouldn’t be taxed twice on your pension income. It doesn’t mean that you can choose in which country you are taxed on the income, however, or that you don’t need to declare the income in both.

In the UK, you can take an initial lump sum of 25% of your pension tax-free, but that is not the case under French law. There are ways, however, to withdraw your whole pension for a fixed French tax rate of 7.5%. Taxation of pension income is also considered differently in France. For instance, annuities, government and private pensions, while all taxable income, may attract different tax rates and exemption levels in France.

Pension income is mainly viewed in the same way as other household income in France, and tax authorities usually consider you a household rather than an individual. This means that most pension income, excluding certain pensions and a proportion of certain annuities, is subject to tax and social charges. One exception to this is for individuals who have an S1 – effectively demonstrating that all contributions to social care are, or were, paid in the UK. In this case, your income will be exempt from social charges.

How do I navigate all of this legally and without losing out?

You can do some research via the UK government’s website and through their Money and Pensions Service. The French government tax office also offers advice in English. If you speak reasonable French, your local tax office can help ensure you are completing your tax return correctly during a face-to-face interview, over the phone or by video-conference. However, the cross-border nature of your financial situation means you’re very likely to be better off by taking advice from financial advisors with expertise in UK and French law and who are up to date with all the regulatory requirements. “You’d be amazed how much you can save on your tax obligations by taking good advice. We specialise in ensuring you get the best you possibly can from your hard-earned pension.”

How can I get reliable and helpful advice?

If you seek advice, you must ensure that any company or advisor you work with is appropriately regulated to operate in your country of residence. Jake has some advice on how to avoid mis-selling and financial scams. “The good news these days is there are lots of protection in place for anyone looking to transfer their UK pension.” he says. “Before a pension scheme transfers your pension, they will double check the paperwork, the regulations, the fees, the investments, everything to make sure that its above board. This will help you check that the trustee and platform providers recommended are reputable. I strongly advise you to research them online and call them directly if you have doubts.”

The team at SJB Global are experts at helping you make the most of your pension so that you can relax and live the good life in France.