UK pension problem for non-UK residents

Banking & Financial Pensions
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To avoid too much thread drift & clutter I decided to start a new topic about a problem that has started to emerge in the recent QROPS thread (see below).

I’d really like to limit the discussion to those with proper financial knowledge, those who have the same problem as I’m about to outline, or those who have steered their way through it since brexit i.e. recently.

I’m in the process of claiming a couple of UK based private pensions that are the product of working for companies that had a private company pension scheme. Neither fund is large, with the two totalling about £34K. Both pensions were taken out assuming a retirement age of 65, although I realise that I’m not tied to that (I shall be 65 in February 2025).

I’m probably going for a straightforward annuity & hoping that I live long enough for that to be the right decision. I’m not planning to take any lump sum as I’m keen to avoid paying tax on that here in France, plus it gives me a higher regular payout (again, I need to live a while yet…).

There does seem to be an issue, with non-UK residents not being allowed to buy an annuity, despite the pension funds being held by a UK provider, & with payment going into a UK bank account.

Due to all the potential hassles (such as claiming back income tax levied by the UK annuity provider) I’m toying with the idea of buying a French annuity.

Dear SFers, I look forward to yours thoughts…

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As I mentioned on the other thread, we are in the process of doing precisely this sort of thing. I had to abandon all hope of an annuity and took the money out in its entirety.
Because my partner has a small amount in several pension pots he is trying to amalgamate them into the only one (L&G) which will give him an annuity since you can’t buy one from another provider under UK rules for non-residents.

I hope one of the experts in this line can comment on buying French annuities as I’m not at all sure you can use UK funds to do this without withdrawing the lot, paying tax on it and reinvesting - it certainly never came up as an option with the people I discussed this with, so I will be interested in any feedback you get.

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Just for clarity are these both DC funds? not DB?

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Also for clarity are you saying that if DC funds and want to access them (assumng over UK minimum age 55 to do this)…As a French resident, are you saying you are seeing choices such as:

  1. use funds to purchase an annuity : Blocked as not found UK annuity provider willing to provide to French resident

  2. withdraw funds as a lump sum - partial or full : End result bring you will pay French tax of net 6.75% if withdrawn when you have an S1, considerably more if you do not have an S1.

  • (though depending on if lump sum taken is more than 25% of the fund, en route to the above, HMRC UK might cause provider to deduct basic tax around 20% which you as a French resident will have to reclaim from HMRC along with getting a fund-specific FFI “France Form Individual” signed/stamped by local French Impôts office & sending to HMRC)

  1. Flexible drawdown: FFL form needed as above to avoid having to reclaim tax from HMRC on drawdowns. Drawdown amounts taxed as income in France.

  2. Transfer to another provider in UK in hope of better options : Likely same block as annuity if a new provider. Possibility some might accept a transfer to a fund you already had with them before you became non UK resident?

  3. Transfer abroad possibly to 3rd jurisdiction such as Gibraltar. See QROPS thread.

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Yes, they are. Neither scheme has had any payments put in for years.

All of your list! Number 5 is only seems to be possible with bigger funds (& I don’t tend to trust the various providers offering investments abroad either…).

I’m not an adventurous investor. I just want a simple monthly income for life. Inflation protection isn’t essential, nor is transferring onto a beneficiary after my death.

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Badger, I’m sure you’re an old hand at reclaiming the UK tax, but for those who aren’t, please don’t let the process put you off. Granted the Form France Individual (FFI) is tedious to complete, but the questions are purely factual. Granted you have to get the Impôts to stamp the FFI, but most offices seem to happily do so (so they should, France is getting all the tax in the future!) and granted you probably have to chase HMRC. But my recent experience is that with a fair wind, people should get a full refund of UK tax within 3 months and that precious No Tax/NT PAYE code.

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Angela, sorry if you’ve already reported back on this but did your local French tax office stamp & return your form without any problem?

I’m about to remind my best friend in Germany that he should chase up HMRC 2 months after sending them his stamped form, as per George’s advice.

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The reason I haven’t reported back is because they didn’t help and the form seems to have gone into a black hole. I need to retry by a different route.

Saga so far is - because of problems getting any kind of communication with the Avranches tax office, I went to the one at St Lo, which processed my tax for years before they decided to move me to Avranches for some reason. The nice lady I saw at St Lo said that they couldn’t deal with it because my records are now processed at Avranches, but she would forward it onto them and they would return it by post.

That of course was several weeks ago and nothing has emerged. A different approach is obviously necessary :roll_eyes:

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If only…

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Thats a pity, St Lo impots were helpful when I went with my FFI (as you know), but my tax stuff in now dealt with by Avranches too. They already sent my TF to my old address, I went to see them a few weeks ago to get it sorted out, what a shambles and weird way of dealing with people. They still haven’t taken my TF payment!

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I’m really not, haven’t had to be thus far.

I has a conversation with HMRC in 2006 (shortly after we sold our UK house, having been in France permanently since 2004) during which they basically waved me goodbye as I had no reasons left in the UK for them to have any interest in me. Could that mean I’ll already be down for an NT tax code? I guess I can check online.

So would an FFI not be required for a simple annuity pension? No lump sum, monthly fixed payment for life.

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I originally thought that, but with drawdown pension payments and OAP it took me over the threshold. Far simpler to declare and pay taxes where you live (IMHO)

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I have a similar amount in a private pension (with L&G) that I accumulated over 3-4 years when I was a much younger man. I’m still a good way off retirement, so I’d forgotten about it, and haven’t looked into any of these options or potential problems. I figured I could take it as either a lump sum or monthly or yearly payment of sorts, which hopefully would be tax free on the UK side, and then declared on the French side… Hoping these issues are resolved by the time I get to that age, but who knows, the way things seem to pan out, it’ll probably be even more complicated!

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If you’re receiving a pension from the UK, the payer will normally operate PAYE unless you’ve applied for an NT code via FFI. The only exception where there is no PAYE is the UK state pension which is paid gross. Presumably if you have got a UK pension being paid, you can check on payslips etc to see if you’re having PAYE withheld or not. An NT code will clearly show up, as would the data on the HMRC personal tax account site if you have an account.

Definitely required.

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If a provider doesn’t have a tax code for the pot/fund, - and that tax code is apparently attached to each fund/pot and not to its owner nor the person receiving funds from it, - then my understanding is HMRC requires the provider to deduct Basic Rate tax (currently 20% or so) from any payout from it, for sure if Flexible Drawdown.

The idea is that the person receiving the income claims it back from HMRC if there’s a reason they don’t owe at least this amount that has to be deducted for HMRC by the provider. Reasons being such as : they do not have enough total income to have to pay tbis level of tax. Or they may be not taxable in the UK on this money for some other reason :Such as living abroad in a country which has a Double Taxation Agreement (eg France) with the UK that says this money of this type received by this person is not taxable by HMRC.

HMRC has 3 variants of the form to reclaim this overpaid tax ISTR depending on the reason type.

Alternatively, if the person receiving from the fund/pot is normally taxable in the UK at a higher tax rate than the Uk Basic Rate of tax, then the person must pay the extra tax to HMRC. Presumably via their annual tax return.

I also understand that a first withdrawal from any fund, eg a.lump sum withdrawal of up to the “HMRC tax-fee Lump Sum withdrawal of up to 25% of the value of the fund”, if the fund has not had a tax code attached to it (presumbly your submission of the FFI form you got your local Impôts to sign mentioning this fund should result in a no-tax code onto the fund?)…a first withdrawal has swingeing Emergency Tax rate deducted from it.

I don’t know if this applies to the first payment out of an annuity. But for a Lump Sum Withdrawal it’s even worse than you would think as HMRC taxes a first Lump Sum Withdrawal, even within the 25%, as though the same amount will be taken every month and taxes it at Emergency Tax rates. Taking a first withdrawal should trigger HMRC to give the pot a tax code (I was told by 2 providers this is automatic and takes about 2 weeks). But meanwhile HMRC keeps the overpaid tax from the first withdrawal and the person not eligible for UK Emergency Tax must reclaim the overpaid tax from HMRC.

HMRC’s cashflow is enhanced literally by hundreds of billions of £ each year, for this. For some strange reason they haven’t stopped these overdeductions despite calls to do so.

Hence a lot of first withdrawals from UK pension funds are of a £1 or £100 amount, or whatever minimum the fund provider imposes.

But if you live in France, then technically you have already done a first withdrawal by doing this much more intelligent way of reducing the amount of Emergency Tax taken by default by HMRC from your firsr withdrawal from esch pot. And so you technically lose access to the net 6.75% (gross 7.5% less the customary 10%) concession rate by France on a single sum first and complete withdrawal of an entire pension pot/fund. Tbough I gather it might be possible to ask Impôts in advance to agree to the 6.75% if you explain a £1 initial withdrawal might be necessary first for this technical reason.

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No, not yet, hence all these questions.

I love a precise answer :sunglasses:

It sounds as if I need to get the ball rolling re: FFI. Presumably available on the HMRC website?

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Here you go,ask away if you have any questions. You might also find the guidance on completing FFI I previously posted on SF under 'Form France Individual hopefully of some use.

#HMRC DT_Ind_France_01_20.pdf (265.3 KB)
#HMRC DT_France_notes.pdf (251.5 KB)

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Hope you get it sorted soon Angela.

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Yes, that would definitely help the cashflow - however I would have thought the answer would be no, given France being keen on regulations. What gives you hope they might bend the rules? :slight_smile: