I don’t why it has to be so darned complex. But, yes, that’s another matter entirely. And not even one for a rant thread!
I’m 100% French resident and have been paying tax here (and nowhere else) for 15 years. It is the cost of FAs that does concern me particularly since we are talking about a small sum (by their standards, not mine!) Sadly, the FA we did have many moons ago disappointed me and it’s left a bad taste.
I don’t mind that. I’m not concerned about an upfront charge as long as I can understand in advance the rules around how much I get refunded. Knowing that could change my course of action.
Edit: how about I just ask HMRC? Could it be that simple?
Then if you are a French tax resident then I would just fill out the non-resident UK tax forms as advised in a few threads on here for the SL pot, I think the French local tax office has to stamp them before you return them to the UK. I gather you have to do this for each ‘source of income’ for HMRC now ie each pot, then when that’s done instruct SL.
If you can’t do a token withdrawal with SL first of minimum (£1 to not very much), and then wait about 2 weeks for HMRC to issue the pot a code before you then withdraw the rest, then yes you will be deducted emergency tax on that one and only withdrawal. You should just immediately reclaim it
You are fully accountable to French tax and it seems, only French tax so you don’t have the opportunity to take the 3*£10k pots without tax that a UK tax resident would, so far as I can tell. If you have an S1 then it look like you can keep it to 7.5% French tax less 1p% so net 6.75%. If yoi don’t have an S1 then you will have social contributions to pay to France on top of the 6.75%.
So it seems you’re only able to determine logistics in the UK as the result will be no tax in the UK after some formfilling and reclaiming. With tax being determined in France. I would do the withdrawal as soon after 1st January as I could as that gives me the longest time to reclaim overpaid tax from the UK, before I will have to pay the tax in France.
You will also have to deal with the Fidelity fund in the same way, doing another UK NT form for that and having the local French Impôts office stamp it and send it stamped back to the UK, thinking only about French tax, ie which French tax year should the withdrawal(s) fall into, etc
PS don’t get me started about so-called 'financial advisers (FA’s) in the UK. So many still not worthy of the name so far as I can tell
Thank you Karen. I understand that, it’s as straightforward as I’d hoped/assumed/thought. I couldn’t see how I could be liable to UK tax, not having lived there nor paid tax there in over a decade, but I’m obviously no expert. The SL advisor said I wouldn’t be and obviously they knew the size of the pot and my circumstances. I just wanted to double check that before proceeding.
The financial services industry has repeatedly asked for HMRC not to do this massive emergency tax take upfront on first withdrawal, many times. As the cashflow over-taken is literally £billions amd the onus is then on people, not all of whom are knowledgeble, to claim it back.
Note that what’s taken is even more emergency tax than you’d first think - as the calculation is done on the “one month basis”, ie you are taxed at the highest possible tax rate and as though you earn that amount every month which is a double whammy of massive tax take upfront
But for some strange reason the Chancellor has always refused
In fairness, the FA we first had was good. We took advice from them when we moved here, they structured our savings etc. Probably money for old rope from their perspective but we knew nothing and were happy to pay them. They were approachable and friendly, and they treated us as human.
Sadly, they were taken over by another firm and I always got the impression they couldn’t be bothered with us as we were not wealthy nor prestige clients.
Yes, thank you, I’ve read about that. I am prepared.
Yes the financial advice industry is undergoing massive consolidation and unfortunately the “private equity” (also so-called) industry, often foreign-owned (particularly USA) is behind a lot of the takeovers.
Massive, massive funds under management, continuous financial flows, the opportunity to earn fees (as well as earn in other ways from the funds under management)…What could possibly go wrong?
I have followed this thread in general but as I sorted out my private pensions before becoming french tax resident the comments have no relevance to me however—
I am sure that someone will correct me if I am wrong but aren’t payments into a pension scheme made before tax is deducted from a wage/salary as an encouragement to create a pension pot?
If this is the case then being able to take 25% of the pot tax free is a very favourable bonus.
I took my 25% and the balance was invested in 2007 to pay a monthly sum which I have been receiving for15 years. The total sum of monthly payments exceeded the invested pot 3 years ago so win win all the way now.
Really don’t understand why people get upset that a pension pot is taxed when trying to move it around. In the case of HMRC who didnt tax it as encouragement to save then why shouldn’t they have their pound of flesh if it is being moved out of UK.
Surely better to receive a monthly payment from the UK that is then treated as foreign income and taxed according ie. Pay as you go.
I think the trap people fall into is the thought that the pension pot is all theirs while forgetting that it originated from earned income which the law of the land dictates has to be taxed at some point.
If I am wrong in my thinking then I apologise in advance.
In most cases yes. Both employee and any employer contributions are tax deductable.
Yes, that is HMRCs view of things, backed up by the legislation (I assume). You took advantage of a generous tax relief, so if you cash in, you have to pay some back. I think it is a common assumption that you can just cash the whole thing in and take the money. Some also assume that because they aren’t UK taxpayers, that HMRC is not able to take their chunk.
Edit: It’s not just taking it out of the UK, just attempting to take more out than the rules allow tax free, no matter where you are domiciled.
This post is by way of an update to particular thread aspects discussed and for information and hopefully people will comment on what they think! Also follow up of the small pots idea.
It hopefully takes forward comments from @malinois @Alan_Dargie (lan_Dargie ?) @hairbear and @KarenLot
And my thanks again to @JoCo who I first discussed lump sums with all those years ago now.
The post relates in particular to strategies for reduction of HMRC emergency tax taken from whole lump sum withdrawals and confirmation from the impot of the treatment where there are several pots with one provider.
In summary - if fiscally resident in France the suggested approach is make a small pot with the pension provider (if possible, perhaps by making a new investment) alongside one’s big pot, cash in the small pot either after getting the DTT form signed by the Fisc( or before if the tax office requires that), then wait for HMRC to process the form and issue the Non-tax (NT) code then take the large pot.
As ever discuss with one’s tax inspector!
So for background I have two separate pots with one provider - each pot has a separate plan number. One pot has 20K the other 180K.
I emailed our France tax inspector requesting a RDV to (google french here) “discuter de l’achèvement d’un formulaire de convention sur la double imposition pour un retrait du capital de retraite d’environ 200 000 à taxer en vertu de le prélèvement libératoire de 7,5 % (Boîte 1 AT de Declaration No. 2042 ?) et l’achèvement d’un formulaire de convention sur la double imposition pour ca” on the back of completing Mme’s DTT form for state pension.
At the meeting I showed him screenshots of the two plans with different plan numbers
from the provider website and asked him whether these are considered separate under paragraph 110 of the finance bulletin BOI-RSA-PENS-30-10-20 - the paragraph reads
“Afin d’éviter les rachats partiels échelonnés de l’épargne constituée dans le cadre d’un régime ou contrat de retraite, équivalent à une sortie en rente, tout en bénéficiant de l’imposition au taux réduit de 7,5 %, le bénéfice de ce dispositif est réservé aux versements non fractionnés. Le respect de cette condition s’apprécie de manière distincte pour chaque contrat ou régime ouvrant droit à un versement en capital.”
He confirmed a ‘regime’ = a plan (google also translated it as such). I also pointed out the numbers for tax relief but he didn’t seem very interested in that - I think he appreciated all UK HMRC approved pensions are similar to France and have tax relief.
He then stamped the DTT form.
He suggested do a mention expresse - enter in the dialogue box the first amount, and the plan chosen (je choisi…), then the second amount etc. He also explained ‘le droit a l’erreur’ and seemed to suggest that as I had researched the Finance bulletin and had a conversation with him if there was any mistake made in the lump sum prelevement request it would all be OK if everything was stated - not sure I believe that but there you go.
So as my pension provider confirmed I could cash in the two plans separately this seems to open up a method for reducing the emergency tax by taking the small pot, obtaining the provider HMRC reference / tax code, adding it to my stamped DTT form and then sending to HMRC requesting the emergency tax refund for the small pot and a zero tax (NT) code sent to the provider. Once processed take the larger pot.
Thinking of Karen lots comment on small pots, I wondered if there is the possibility to create a small pot alongside a large pot with a provider, possibly as a separate investment. I ran that scenario passed the pensions advisory service who said that an HMRC tax code would not be issued for a small pot - possibly to do with the provider just takes 20% tax off the pot after the tax free element. (The small pot tax details aren’t an issue here, it is the obtaining of the NT tax code - if you are still bearing with me…). (PS I appreciate the 20% tax on the small pots does somewhat contradict Karen’s small pots tax point - I’m not meaning to specifically contradict that, I’m just mentioning with reference to obtaining the tax code). If cashing in these pensions after becoming fiscally resident in France only France tax will apply to the pensions in any case - after getting the DTT forms sorted?
For actual declaring the inspector said the amounts also need to be recorded on the 2047.
Finally if one has a P45 issued in the year of pot encashment, for example having left a job, one can provide that to the provider to use though for larger amounts it’ll probably be more than the emergency tax.
To note (I’m sure everyone will be aware) -
Once cashing in pensions this has implications for future pension contributions - I.e. they are much reduced
If the provider gets wind of France residency they may stop any further contributions if its a personal pension (workplace pension contributions continue).
If one can get a S1 wait till receipt of that (e.g. age 66 state pension) to remove social taxes.
Hi @KarenLot - I’ve checked tax-free small pots with @Dave_Lawson and not sure if this was something we could do - but don’t think there’s any tax-free small pot process in place ?any more? on DC - but it is the limit for cashing in DBs without needing an IFA.
I think I’ve read you mentioning it in 3 threads now on SF.
@SBcamsci
This thread is 2 years old. It’s quite possible that info shared herein is already out of date.
You might be better off posting on a current thread… 
Quote from Malinois on the hopelessly complicated nature of money,
This flavour of comment comes up time and time again relating to money - really nice to have found a few people here who’re willing to help.
Quote from KarenLot on the questionable worth of financial advisors.
5th independent time exactly this comment has come up - a pattern!
The problem that I’d cite is that financial advisors take a high fee for advising what will happen in the future.
There’s no way of knowing!
And worse still - many charge a % rate on initial transfer or annual % on the sum REGARDLESS of whether the fund goes up or down - far more logical - we won’t charge % figure unless the fund increases by a minimum of 3 x this fee … … or this fee + inflation.
Isn’t it obvious @billybutcher @KarenLot - that money just doesn’t work?
Friend at work just back from Calcutta.
He would sit by the Ganges, with some gold and silver coins and a heap of rubbish by my side, and taking some coins in my right hand and a handful of rubbish in the left, I would tell my soul, “My soul! This is what the world calls money, impressed with the queen’s face. It has the power of bringing you rice and vegetables, of feeding the poor, of building houses, and doing all that the world calls great, but it can never help thee to realise the ever-existent knowledge and bliss, the Brahman. Regard it, therefore, as rubbish.” Then mixing the coins and the rubbish in my hands, while repeating all the time, “Money is rubbish, money is rubbish…” I lost all perception of difference between the two in my mind, and threw them both into the Ganges. No wonder people took me for mad.’
RamaK and ViveK - homeys from Calcutta had it going on!
Hey loving your comments @Stella - you’ve a lovely Internet voice. What I’ve learnt about you is that you love physical banks (somebody to talk to!) and are lovely to your local tax office people (somebody to talk to!)
… … as am I - Big Hello to ‘Tax Officers’ in Auch, Gers!
I think physical interactions are dying though in this fast-paced world.
We’re taking the @Stella approach rather than the very well thought through @JaneJones approach and will not have a credit card in France.
Money is terribly and needlessly complicated in this world.
-*-
@Stella - trying to make it through 000s of posts here before starting another thread.
Small pot pension rules are for DC pensions 10k or under and up to £30k.
If you are Uk resident 25% tax free and the rest subject to income tax at your marginal rate.
Trivial commutation refers to DB pensions valued under £30k (assuming these are your only final salary DB rights if you have other schemes and total over £30k you do not qualify) taxed in the same way as above.
Essentially it’s the same as an UFPLS… flexible access rules 2015.
The only difference is you don’t trigger the money purchase annual allowance which reduces your future potential pension contributions to add to UK pensions in the future.
Seems to be working for the wealthy.
Plenty of crap advisers to choose from… the value comes in knowing how to goal plan and apply the pillars of financial planning to someone’s situation.
That’s what you pay for… the regular meetings and continuous planning, stress testing and forecasting when things change.
If you were investing yourself and had built up some savings invested in a diversified portfolio and COVID hit and your portfolio dropped between 10-20% you might sell the lot in fear of how low it it might go… due to fiscal stimulus by the end of the year most markets were at all time record highs. I know that there are people that did this and crystallized a significant loss. The power of advice is having someone to explain rationally what’s happening and why remaining invested is important. Anyone can invest in a few ETF’s and target medium to long term growth.
It’s how to strategize and tax plan alongside good investing that works.
The biggest problem is that unfortunately not everyone has access to advice at a young enough age when it’s really needed. Also there are some lazy advisers out there… the key is to find someone you can work with over the long term.
I’m very careful about who I take on as a client because I have to speak to them 4 times a year at least… it’s a massive commitment on both sides.
Anyone I guess I’m a little bit passionate about it 