I have been researching this for my wife, who has not yet touched her UK fund and this will apply to her. Social charges, S1 dependent (fingers crossed), but my research opened an uncertainty as to my situation;
My UK pension fund (in this case a SSAS) made a lump sum (25% tax free) payment to me at age 49, expressly permitted under the pension fund rules (based on an inability to continue full time working, Cauda Equina Syndrome, paragliding accident). A monthly income has been taken since that time, declared in the UK whilst resident and declared in France for the last 10 years, whilst resident in France.
It appears that more than one lump sum is not forbidden, but understandably, there is little likelihood of finding someone in a similar situation.
Does the fact that I took a lump sum based on a “life event” preclude taking a second lump sum under the 7.5%?
You might find this post of some help. Given what you’ve described, I’d consider doing a request for an advance tax ruling (un rescrit) from the Impôts, as discussed below
You might be able to - a difficulty might be the ongoing regular pension payment.
From the tax bulletin -
Cas des rachats anticipés : Les versements en capital effectués à la suite de rachats anticipés de tout ou partie de l’épargne retraite conformément à la réglementation en vigueur dans le pays considéré peuvent bénéficier du prélèvement s’ils ne sont pas exonérés (BOI-RSA-PENS-20-10) et si un seul versement est réalisé au titre de l’événement à l’origine du déblocage anticipé.
En outre, ces versements ne remettent pas en cause la possibilité de bénéficier du prélèvement pour les versements ultérieurs lors d’un nouveau cas de déblocage anticipé ou lors du départ à la retraite.
Il en est notamment ainsi du déblocage de tout ou partie des droits pour l’acquisition de la résidence principale prévu par certains régimes de retraite étrangers, qui peut bénéficier du prélèvement, toutes autres conditions étant remplies, et ne fait pas obstacle à la possibilité de bénéficier à nouveau du prélèvement pour l’avenir.
De même, un contribuable qui a liquidé par anticipation une partie de ses droits en franchise d’impôt en application des dispositions des troisième à septième alinéas de l’article L. 132-23 du code des assurances peut ultérieurement au titre du même contrat ou régime de retraite, bénéficier du prélèvement libératoire.
with my quick google translation -
Early redemptions: Lump sum payments made following early redemptions of all or part of retirement savings in accordance with the regulations in force in the country in question may be eligible for the levy if they are not exempt (BOI-RSA-PENS-20-10) and if a single payment is made for the event that triggered the early release.
Furthermore, these payments do not affect the ability to benefit from the levy for subsequent payments in the event of a new early release or upon retirement.
This is particularly true for the release of all or part of the rights for the acquisition of a primary residence provided for by certain foreign pension schemes, which may be eligible for the levy, provided all other conditions are met, and does not preclude the ability to benefit from the levy again in the future. Similarly, a taxpayer who has liquidated part of his rights in advance tax-free under the provisions of the third to seventh paragraphs of Article L. 132-23 of the Insurance Code may subsequently, under the same contract or pension scheme, benefit from the withholding tax.
Thank-you, really very interesting stuff …….can’t really go the “un rescrit” route, as it stands the fund is not my asset and until its clear how Rachel Reeves is going to deal with it come 2027, don’t want to fess up to France that I have a fund, all remains clear as mud from a planning perspective!
I believe the Government’s plans re pensions in 2027 are not to start taxing people’s pension pots directly, but just to bring them within the scope of Inheritance Tax as part of your estate when you die, if the total value of the pension fund and all your other assets exceeds the IHT threshold.
I think if you’d only taken the lump sum in the UK after your accident (sounds terrible), and then applied to take the second lump sum when resident in France, you’d have a good chance of success. I fear that taking the monthly income weakens - and complicates - your chances of success in obtaining the 7.5% rate…That was the reason I suggested seeking advance clearance (rescrit) since you don’t want to take the lump sum then find it’s taxed in full as ordinary pension.
I agree with Chris Mason’s explanation on the IHT. Small comfort, as you’d be dead, but IF France actually taxed your UK pension fund at death, it would probably give a credit for any UK IHT paid up to the French tax applicable, under the UK France IHT treaty. The latter is actually silent on the treatment of pension funds, probably because in the early sixties when it was drafted, people generally had final salary pensions which left behind no actual funds on death. There is a clause in it, from the French perspective which says that if there’s some asset we haven’t thought about, it’s taxable in the other country (ie UK) and we’ll give a credit for their tax.
Thank- you George1, at first glance Rachel Reeves (RR) is creating a real problem for us ex pats (with a UK DB pension), with little opportunity to draw the fund down (I agree with your point of view) and between a rock and a hard place. As I understand it, the situation is simple pre 2027, the personal representative (PR) of the deceased informs the pension fund trustee (PT) of the death, the asset stays behind the veil of a trust, doesn’t belong to the deceased and the PT has two years to decide on the beneficiary/ies.
Post 2027, the PR asks the PT for a fund value and then calculates IHT due (if any) and the PT must pay in 6 months.
Devils advocate, say the deceased has a property and a fund over the Nil rate band (NRB), there’s now 40% IHT due on some, the PR apportions the NRB (325k or 675k) and the PT pays the IHT from the pension fund. Somewhere a tax calc is created (nothing is yet clear on how RR IHT will work in practical terms), but if that calc forms any part of probate, and a beneficiary declares that house in France (as they should) and wants to prove UK tax has been paid on a house, a notaire might get to see a pension asset (IHT paid) but with no certainty as to the beneficiary (doesn’t follow any will) and potentially could be headed to some dreaded step children, of course, I could be seeing problems that are not there, as the fund isn’t a will-able asset, maybe it never appears at probate (best case scenario) and the only liability is the IHT in the UK.
