Contrary to a recent scaremongering article, those wishing to transfer their UK pension schemes to France or Italy will not find their UK funds confiscated. Here are the fears and the facts on HMRC's delisting of French and Italian ROPS.
This Le Monde Economie article which landed in my inbox just before the New Year is, in my opinion, scaremongering and factually inaccurate.
The publication’s London correspondent reported in the piece:
“By blocking the transfer of pension funds to France, the British tax system fuels the anxiousness of expatriates since the Brexit vote.
"On Wednesday, December 21, Christophe Premat, the deputy (socialist) of the French abroad for the constituency that includes the United Kingdom, arrested the secretary of state in charge of European affairs, Harlem Désir. In a broader question about the uncertain status of French people living in the United Kingdom after the Brexit, he was concerned about a recent decision by the British tax authorities: now they forbid the transfer to France and Italy of pension funds held in the UK - unless they accept a 55% tax.
"If it is confirmed, it would be a confiscation pure and simple money that many have invested for their old days," accuses Mr. Premat. The French deputy sees more than a chance of timing, while the British government has promised to officially open negotiations on the Brexit by the end of March. "This decision taken within three months of the application of Article 50 is obviously not innocent," he said. Among some French people living in the United Kingdom, anxiety is mounting. "I've been saving for a number of years in the pension fund of my company and I'm starting to worry about seeing everything go up in smoke," says Michaël Vincent.”
There is no confiscation of pension funds, and no loss of funds for those looking to transfer, so Michaël Vincent, don’t panic!
Mr Premat might want to look in his own ‘back yard’ before making such alarming statements. The French do not allow French pension funds to be transferred to the UK nor anywhere else. The UK Pension fund system is considerably more flexible than that in France. Just try repatriating/transferring your French pension fund to the UK.
What HMRC has actually done, is look at the French pension fund system to see if it is in line with the UK rules governing “recognised overseas pensions” (ROPS). It is not. Rather like Australia was found to be in 2015 and Canada in 2016, and it has removed not only France but also Italy from the ROPS list. HMRC has not removed anything from, nor taxed those nationals’ UK pension funds.
A French national (or anyone else for that matter) retiring in France can still draw their pension from the UK. He or she can claim treaty relief under the DTA between France and UK, get a gross payment from their UK pension fund, declare it to the FISC and pay French income tax. There is no UK 55% tax. It is only if you try and transfer your UK pension to a French domestic pension that there will be a tax charge. And frankly, as there is a scheme sanction charge on a UK pension making such a transfer, it is not going to happen.
Alternatively, if an individual does not want to leave their pension in the UK, there are other jurisdictions that UK pensions can be moved to, such as Malta. In any case, suitable advice should be sought.