Retirement can be tricky to navigate in any country, and France is no exception. We spoke to Rosemary Sheppard, International Financial Adviser at Blacktower Financial Management Ltd.
After the introduction of pension freedoms in 2015, financial advisers found that in addition to trying to get clients to save and accumulate wealth they now had to try to make sure clients didn’t deplete their pension pots so that they ran out before the client died.
This can be quite a challenge as since this change clients have the freedom to use their retirement savings however they want. Admittedly, there are fewer Lamborghinis on the road than was expected, but it is crucial, where possible, that financial advisers step in to help clients make the right decisions and ensure the money is not frittered away.
The most common questions are:
Should I take my 25% tax-free cash?
This may sound good but whether you are eyeing up a cruise, a new car, or have a nagging mortgage to pay off, the ability to take a quarter of your pension as a “ tax-free lump sum” can seem like an opportunity to good to miss. However, before you are swayed by what the money could buy you, remember that if you are a French Tax resident there is no such thing as a tax-free lump sum, this applies to UK tax residents only. The French authorities will tax this sum once they know about it.
How much can I take from my pension?
If you have, a pension that allows flexible drawdown you will have to carefully manage how much money you can take out of your pot to ensure that it doesn’t run out.
Before looking at the numbers, you’ll also need to think about what you want to do with your retirement and what your financial priorities are – for example, whether you want to really make the most of your early years while you’re fit and well, or whether you want to stockpile your cash for care later in life or an inheritance for loved ones.
Research has shown that people think they can safely withdraw around 7% a year from their retirement fund without fear of running out of money, although the reality is likely to be significantly less than 7. A more sustainable rate of withdrawal is usually between 3.5% to 5%pa.
It is also important to consider that your spending needs will change during your retirement. The early years of your retirement are likely to be the most expensive, but costs can be high in the latter stages too, especially if long-term care is needed.
Can I take my whole pension as a lump sum?
Since the introduction of the pension freedoms in April 2015, you can now take your entire pension as cash, but just because you can, it doesn’t mean you should.
Remember any money taken from your pension is taxable here in France and this could mean that you find yourself with a very large and unwelcome tax bill.
If, however, it is only a small pot and you have other sources of retirement income, it may not always be a bad move. The key is doing it because you have a specific need or use for the cash, rather than just sticking it in the bank, where you will get pitiful returns and lose all the tax benefits of keeping it in a pension.
Must I take an income from my pension?
The simple answer to this question is ‘No’, if you don’t need the money, there can be advantages in leaving it within a pension, including tax-efficient growth, the ability to pass the money tax-free to your beneficiaries if you die before age 75 and pension money being outside of your estate for inheritance tax purposes.
If you would like pensions or investment advice, Blacktower Financial Management has been established for over 32 years and has worked with its clients through the good and the bad times, offering sound financial advice.
In these testing times, getting advice from a financial advice company that has weathered more than one or two financial downturns is essential for your financial wellbeing and peace of mind. Blacktower Financial Management has been established for over 32 years and has worked with its clients through good and the bad times, offering sound financial advice.
Blacktower will be by your side both now and in the future, we are here to help you. For an independent, professional and impartial consultation please contact me by email or call me on 06 38 86 99 70. You can also visit the Blacktower Financial Management website.
The above information was correct at the time of preparation and does not constitute investment advice and you should seek advice from a professional adviser before embarking on any financial planning activity.
Blacktower Financial Management Ltd is authorised and regulated in the UK by the Financial Conduct Authority. Blacktower Financial Management (Int) Ltd is licensed in Gibraltar by the Financial Services Commission (FSC) through whom we have a registered branch and passport for financial services in France. License number 00805B.