Wife and I have been fiscally resident in France for 18 years. Wife two years away from 67 and retirement. She has a £50k pot with Standard Life that she opened way back in the 90’s. She put in £12k, one deposit, and has left it in there all this time. We have recently discovered that she is not allowed to take an annuity but can cash it out fully. I think we might be able to purchase a UK SIPP but would rather just take the money out and use it here.
So, on to Tax…..a couple of questions:
1 - I think I am right that we would not get 25% tax free being fiscally resident in France? Do the UK side tax the 100% amount on withdrawal or is it on the 75%? What is this emergency tax rate?
2 - Is this pot seen as an income or as an investment? In my mind she put in £12K 30 years ago into an investment company and it has grown to £50k…she is not allowed to transfer it to an annuity, so no lifetime income…so could she not treat this as a £38k gain and taxed on that only? Seems harsh to pay tax on the 100% amount as she already payed tax on the £12k she put in.
I then have to declare this to France and pay the relevant taxes/social chargers here and then try and get the Tax back from the UK. I understand this can take up to 18 months.
So here’s the thing..my Wife put this £12k in from her savings over 30 years ago and never put any more in. So it is going to be difficult/impossible to proove to the impots the contributions were tax deducted at the time with payslips or P60’s.
Basically we are trying to do the right thing and don’t want to open up a can of worms by doing the wrong things.
To compound matters my Wife has a long term illness, diagnosed in 2024, so we are wanting access to this money.
Tom is a good bet to give full financial advice and suggest appropriate vehicles to invest your money in France.
Completely forget the UK 25% tax free rule on pensions - you are in France - it also depends exactly what you invested into and I think you are potentially trying to apply UK pension tax rules to a non pension investment.
As Standard Life likely dont know French tax, whatever you do - stating the obvious dont sign forms and move money before you get it checked.
You’ve had some good advice already, so I would only comment that actually your wife got tax relief on that 12K, she did not pay tax on it - pension contributions attract a standard 20% (maybe more if she was a higher rate tax payer) relief which boosts the pension by the amount of tax she would otherwise have paid on it.
This has been the case in the UK since 1921, to the best of my knowledge.
Having just 100% withdrawn two UK pension pots I hope I can help…
On releasing the funds the UK pension provider will levy emergency tax on 75% of the value i.e. they still consider 25% of the fund to be UK tax free.
You will need to fill in an HMRC Form France Individual (FFI) in order to reclaim the emergency tax. This form needs to be signed & stamped by your local bureau d’impots in France, as they need to confim that you re tax resident in France. There is a lot of information about FFI & the various issues that might be encountered getting it signed & also getting it processed by HMRC.
The whole value of the pot (converted into €) needs to be declared in France where it attracts a one-off relatively low tax rate plus some social charges. I won’t quote the exact % here but, again, this is to be found elsewhere in this forum & via official French tax websites.
Thank you for this - very helpful and makes perfect sense to me. Can I ask if I report the amount on my annual French tax form (for the year in which I receive the lump sum)? Or is there a specific time frame, like you have with an inheritance?
My sympathies for your wife, and you. For your question, Yes. Use the euro rate on the day for the calculations.
If you cash in now, you’ll have this year and about 9 months next year before you have (start) to pay the taxes in France.
Here’s the link I keep for UK emergency tax calculation. If you mention a medical situation, you never know, HMRC might be speedier.
PS, I think taking the lump sum while in France instead of an annuity, or drawdown, might be best, but it does depend on the numbers (i.e. your regular income and what tax rate you are on in France). So think about doing some checking, don’t just accept SL’s point of view - there are UK providers who will give you drawdown or an annuity. Always think ‘what’s best for my wife’ rather than ‘what works for SL’‘.
Why not consider asking SL to confirm that the contributions were made in a standard,orthodox commonly available tax deductible arrangement at the time? Then translate any response into French..I would then consider doing an attestation sur l’honneur to corroborate any statement from SL (and if SL decline to help, all the more reason to consider the attestation route?) Failing that, I’m sure you can find general guidance online that would corroborate the tax deductibility or contributions to plain vanilla pension schemes throughout the 1990s onwards, then translate them into French. This is all presumably precautionary, since if you’re lucky the Impôts may not actually probe too deeply, particularly if you can provide a sufficiently comprehensive disclosure notice on your return concerning any lump sum received. (I’m assuming you’re considering going down the 6.75% tax rate route on lump sums).
As Chris has already said and I was thinking, tax was not paid (deducted ) on the pension, it grew free of tax and is taxed later in payment.
I did wonder if it was a whole of life insurance and it’s now accumulated a cash in value. Don’t laugh thousands of these types of plans were sold (mis sold) as pensions years ago by lots of companies. They were termed universal plans. It is because of the quite low value of the plan considering the contributions over that length of time. Haven’t done the maths but it seems a low return.
It’s been an experience sorting out the estates of my parents and the strange combination of policies they have between them, most of which seem to have been set to pay out on my mother’s death when she would really have needed the money when he went. I can only assume that some sharp-tongued salesman has been less than scrupulous on selling them what they might actually need.
Thank you for the reply. Think I’ve got a handle on it now thanks to this brilliant group. I was just wondering if the initial 12k she put in would be free of tax when it was cashed out….but understand that it would not be as it is a pension pot and not say another investment subject to CGT. It’s ok….it’s not our main pension…would have been a bummer if it was though and we had say 500k in there and were expecting an annuity having saved up all these years. Seems to be one big game this and unless you can afford a financial advisor/access to forums like this AND the gumption of understanding how this all works you could easily fall victim and not maximise your hard earned cash. My Wifes Dad was caught up in the Equitable Life pension scandal and lost alot……and he was a solicitor. As I have gotten older I am certainly not as sharp and with my Wife’s situation she certainly couldn’t be doing with all this at the moment. I guess being callous these Pension funds, who are a business after all, would like you to leave it with them as long as possible….and maybe meet your maker before you are able to cash it in. I imagine the weak and less able are compromised in this situation….and I’m putting myself just outside this bracket though had one foot in it at the beginning of the week Thank you for the replies though. Appreciated.
While I am as fond as anyone of bashing financial institutions, I think in this case your wife has simply become yet another victim of Brexit. If you were living in the UK Standard Life would happily sell you an annuity - or you would be able to buy one from a different provider of your choice.
But post Brexit they can’t sell you an annuity because Standard Life and others have no licence to offer financial services within the EU any more.
You will of course recall that fucking up people’s finances in retirement was not one of the benefits that Boris and friends offered us in 2016…
Ahh…Brexit…the gift……half my family voted for it. I remember my step dad punching the air as he was watching the results with us in France during his usual one week fully serviced stay and both mine and my Wife and jaws hit the floor…….another Aunt of ours who was also staying at another time was actively campaigning for the leave mob…very busy with emails etc every day..and kept demanding her iPad to pair to our wifi….as it kept getting “knocked out” :).to be fair we were all a bit duped but I’m parking that big red bus behind us now. My Wife lost her job immediately with a big media company no longer benificial to work in the UK…so then worked a bit in France spending more time with me and our then young son. So, winner, winner for us….and we are still in belle France!
Whole of life policies were free of CGT as they were normally “qualifying” policies. Kept for longer than 10 years under the then rules became tax free from that aspect.
I loved all of your comment Mikseymono. However the above ie no protection either.
Whilst there are many knowlefgeable hardworking, unbiased advisors over time a large number have been “defrocked”, and quite a number that one could speculate might have been, have “handed back their permissions” ie apparently voluntarily given up their licence to sell financial products, oerhaps after “conversations with the regulator” in thr UK. Not an insignificant numbsr. And that’s just the ones we could know about.
And in respect of rooting out malpractice, poor industry practices snd missellling I’ve got a strong suspicion the UK has come a lot further than many other countries. I’ll leave it there but take care where you go next.
Hope I got your name right. I have just gone through dealing with Standard Life and one of their pension plans. It’s very difficult communicating with them over the phone as they seem to be based in à part of Scotland in which they have the strongest accent and deliver their conversations at à rate of knots which would put Amol Rajan to shame. I had to keep asking them either to slow down or repeat things which gets embarrassing after a while.
It’s taken me over 3 months to get my money from them! I spoke with numerous people and received differing information from them. They are now another company trading as Standard Life. I eventually received a sum of money from them which included the 25% tax free lump sum and the rest with a deduction of emergency tax paid. I started this policy à long time ago and it has done reasonably well considering I never paid more into it. I just have to get in touch with the Taxman now to see if I can claim any money back after the emergency tax rate was applied. Fingers crossed but not expecting anything so it will be a nice surprise if there is anything else due to me.
When I joined that industry in 1991, training and examinations were just in. I found myself working amongst people who had been in the company for 10-15y and unable to pass their exams so had to leave. It was then down to us newly trained to explain to people that the products they had were quite often not what they had thought. This began the mis selling compensation. In the archives of that company I found an old fact find for a pension policy that had a forged signature on it. Naturally I persued the company and got my money back with reasonable compensation. It was not a pension plan.
