Healthy Pension Decisions

Delaying registering for healthcare could save tax on your pension. Here, Rupert Holderness explains what you need to know before deciding

One of the key concerns for expatriates arriving in a new country is healthcare. While we hope we will not need to use it anytime soon, we need the peace of mind of knowing that we have access to healthcare and are covered financially for it. For many Britons moving to France, therefore, registering with the local system is high on their priority list.

Be aware, though, that you should consider the options for your pension fund before you register for healthcare.

If you are thinking of taking your UK pension as a lump sum, access to French healthcare could cost you 9.1% (in 2018) of your pension in social charges.

How UK Pensions Are Taxed in France

With the exception of government service pensions, if you are resident in France, your pension income is taxable solely in France at the income tax scale rates of up to 45%.

Pension lump sums are fully taxable in France (with exceptions for an ‘accident of life’). In general, lump sums received from a UK-registered pension are taxable as pension income. However, you may be able to avoid the scale rates and instead benefit from a fixed rate of just 7.5%. This special rate  is available if:

•  the pension contributions were deductible from your or your employer’s taxable income; and:
•  the whole pension fund is taken at once or, if after having taken a capital (lump) sum, there is no further possibility to take other capital sum from the same fund.

Social Charges on Pension Income and Lump Sums

As with all income in France, social charges are payable on top of income tax. The rate for pension income increases from 7.4% to 9.1% in 2018 under the 2018 Budget proposals.

However, you do not have to pay social charges on pension income or lump sums, if:

• you hold EU Form S1, and/or
• you do not have access to the French healthcare system

If you are thinking of taking a lump sum from your pension, it may be sensible to delay joining the French healthcare system if this results in significant savings on social charges – particularly if you are taking your whole pension at once.

In this case, you should take out private medical insurance until you have received the pension funds. While taking your whole pension as cash is now an option, it needs careful consideration and specialist advice to make sure it is the right move for you. It is a particularly attractive option in France though, because of the potential low-tax rate and the opportunity to invest the funds in an assurance-vie policy, which offers many tax- and estate-planning advantages.

Deciding what to do with your pension could be one of the most important financial decisions you make. As always take specialist, personalised advice before acting.

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