Planning on living the dream and retiring to France? You may wish to consider your pension arrangements before you make the move.
With more of us living longer and the State Pension age currently increasing to age 66 by 2020, we are becoming increasingly reliant on pensions we have funded throughout our lifetime. These pensions can take different forms with some being personal pensions and others being funded by employers.
In the UK, your pension lump sum is currently free from income tax. However, in January this year France introduced a law which, on the face of it, makes your pension lump sum chargeable to tax in France if you are resident there. What this means is that if you move to France, and then take your pension lump sum following your move, this sum could be liable to French tax.
The jury is out though as to whether the lump sum will be taxable in France, with opinions mixed as to the extent to which the French law applies in the circumstances. Some commentators suggest that the provision of the UK – France Tax Treaty provide that the law will not apply to private pensions and, in the case of employer-funded pensions, income tax will only be due on the part of the lump sum funded by your employer. Other commentators suggest that it will apply to all lump sum pension payments where the individual takes the lump sum following their move to France.
For now, it is case of watch this space! However, it is important to be aware of the possibility that your tax free lump pension sum could now be taxable if you take the sum following your retirement to France