Are you one of the many people who dream of retiring to France? Not everyone achieves this dream, so if you have, you are one of the lucky ones. France has so much to offer: the culture, cuisine, beautiful countryside, historic towns and vibrant cities… Hopefully, you will have plenty of time – and money – to make the most of it all over your retirement years.
However, to make sure your money does last you for as long as necessary, it is essential to review your arrangements now. You will need a plan that can keep you at the level of comfort you are used to and with enough savings to cover unexpected expenses.
Keeping up your lifestyle
There is a saying that spending in retirement is 80% of what you used to spend while working. This is very general guidance and may well not apply to you. Costs in France can vary from the UK, so you need to study the cost of living there to get an idea of what you will spend each month.
Much also depends on how active you are in retirement – you could take up new hobbies, perhaps more costly ones, or use your time to travel and see more of the world. Even going back and forth to the UK for regular visits to family and friends will add up.
For peace of mind you also need to know that you have enough money set aside for emergencies such as home repairs, health treatment or care costs.
You should also bear in mind that your retirement years may be longer than you expect. It is increasingly common for people to enjoy 30 years of retirement, or even more, so you need to take this into account.
Possibly the biggest threat for retired people’s wealth is inflation, especially the longer they live – each year you can buy less with the same amount of money.
Even if inflation is low at the moment, it changes each year and it is impossible to predict what it will be in 10, 20 and 30 years’ time. Also, depending on your lifestyle, your personal rate of inflation could easily be higher than the official rate.
So you need your capital to grow enough to keep pace. You may be concerned about investment risk, but if you leave your money in the bank, it is vulnerable to being eroded by inflation.
To take the fear out of investing, sit down with a financial adviser and work out an investment plan designed around your personal risk tolerance, objectives, circumstances and time horizon. You can aim to beat inflation while limiting investment risk through strategic investment planning.
Deciding what to do with your pension fund now, particularly following the new ‘pension freedom’ in the UK, is of fundamental importance. There are more choices than ever before and it can be confusing – especially across two countries.
This is an area where you definitely need professional advice from a firm that specialises in both UK pensions and taxation in France.
As a resident of France, you have to pay French tax on your worldwide income, gains, wealth and estate. Taxation is probably as big a threat to your wealth as inflation, as France has high tax rates and extra taxes like social charges and wealth tax.
The tax regime is quite different from the UK’s, and so are the tax planning opportunities. The right tax efficient arrangement can keep most of your investments in one place and help you legitimately avoid paying too much tax.
You also need to keep up to date, since the French tax regime frequently changes and this may mean you need to revise your financial arrangements.
Have you planned what will happen to your wealth after you die? Will your beneficiaries be liable to succession tax in France?
French succession tax works differently to UK inheritance tax. Each heir pays tax – not the estate – and rates and allowances vary according to the beneficiary’s relationship to the deceased. While children get fairly generous allowances, others get much lower ones and also pay higher tax rates.
However, you may be able to take steps to avoid or reduce the tax liability for your heirs.
You also need to consider succession law. France has ‘forced heirship’ which means protects children and means you cannot leave your estate freely to who you like. Under the new EU succession regulation you can now opt for UK law to apply on your death, but is this the right choice for you? You need to consider all the potential consequences to make the most suitable choice for your heirs.
Whether it is investments, pension or tax planning, seek specialist advice to ensure you do what works best for your personal situation. Use an adviser who can guide you on all these aspects and provide holistic solutions. The sooner you review your finances and get them organised, the sooner you have peace of mind that all is in order and you can get on with enjoying your new life in France.