How To Build A Robust Retirement Portfolio For UK Expats In France
Building a robust retirement portfolio as a UK expat living in France requires thoughtful planning. Primary factors to consider include currency fluctuations, tax implications, healthcare costs, and the dual regulatory systems of the UK and France.
Below are key steps and considerations for constructing a robust retirement portfolio.
Assess Your Financial Goals
Retirement Age & Lifestyle:
Consider the retirement age you aim for and what kind of lifestyle you plan to lead. Will you stay where you are in France or move to an area with a higher or lower cost of living?
Time Horizon:
The number of years until retirement will guide your risk tolerance and asset allocation. Whilst it is not set in stone, it plays a key role in how your money should be invested.
Inflation Protection:
Recent inflation rates have highlighted the effect inflation has on your purchasing power over time. Ensuring your investments provide inflation protection is an important factor.
Understand Cross-Border Tax Implications
Double Taxation Treaties:
France and the UK have a double taxation treaty to prevent you from paying tax on the same income twice. Understanding how it works can have significant implications when considering pensions, investments, and property income.
Pension Transfers:
There are various options available to you depending on your position and objectives. These include both an International SIPP and QROPS Qualifying Recognised Overseas Pension Scheme. It’s important to evaluate the benefits, tax charges, and fees before proceeding with a transfer.
Wealth Tax In France:
France has an Impôt sur la fortune immobilière (IFI), which is a wealth tax on real estate. Your overall assets could impact your financial planning.
Inheritance Tax In France:
Inheritance tax in France, known as "droits de succession", applies to the assets passed on to heirs after an individual's death. The tax rates and exemptions vary based on the relationship between the deceased and the beneficiaries, making it essential to understand the rules for effective estate planning.
Broaden Your Portfolio Asset Classes
It's important to diversify across all asset classes in line with your risk tolerance to both mitigate risk and gain exposure to areas of growth.
Equities:
Allocate to global equities for the growth potential that can be achieved over the medium to long term.
Bonds:
Government, corporate, and sovereign bonds can provide capital preservation whilst generating retirement income. Money market funds currently play a valuable role and with interest rates staying higher for longer, they can further contribute to income generation.
Real Estate:
If you own property in both countries, account for potential property value fluctuations and rental fixed income streams.
Cash Reserves:
Hold part of your portfolio in euros to cover immediate expenses and hedge against GBP/EUR exchange rate risks.
Currency Management
You can mitigate exchange rate volatility in several ways.
Multi-Currency Accounts:
Open multi-currency bank accounts in both pounds and euros to minimise currency conversion fees.
FX Broker:
Work with an FX broker for larger amounts to ensure security and obtain the best rate possible.
Pension Options
UK State Pension In France:
You may still qualify for the UK State Pension subject to enough years of contributions. Ensure that you continue contributing where necessary to receive full pension benefits.
Private and Company Pensions:
Evaluate whether to retain your pension in the UK or transfer it to an International SIPP or HMRC QROPS. This includes understanding if you can access your pension, the tax implications, and how to optimise a pension transfer.
French Pension System:
Research the French pension system, especially if you've worked in France. The system is different from the UK’s, with earlier retirement ages but often lower payouts.
Tax-Efficient Investment Vehicles
ISAs (Individual Savings Accounts):
ISAs are tax efficient in the UK, but gains may be taxed in France. Tax-efficient investment products in the UK are no longer tax-efficient in France. Ensure you understand French tax rules on non-French investment products.
Assurance Vie:
Assurance Vie is a popular life insurance and investment product in France that provides both wealth management and tax advantages. It is widely used by French residents and expats to grow savings and plan for retirement while benefiting from favorable tax treatment and estate planning flexibility.
Healthcare Costs
French Healthcare System:
France has an excellent healthcare system, but you may need private health insurance depending on your visa status and specific health needs.
Long-Term Care:
Consider the cost of long-term care and whether your portfolio can absorb these expenses or whether additional insurance is necessary.
Regular Monitoring and Rebalancing
Review and rebalance your portfolio annually or as life events happen (e.g. exchange rate shifts, changes in tax laws, moving into retirement and requiring income).
Keep in mind that both the UK and French regulatory environments can change, so staying informed is critical.
Seek Professional Advice
Financial Advisor:
Working with an advisor who understands both UK and French financial systems can help you optimise your portfolio. Ensure they have experience with cross-border tax implications and expat retirement planning.
Tax Advisor:
A tax professional familiar with UK-French agreements can help you manage taxes more effectively and take advantage of treaties that benefit expats.
French Retirement Planning
The Wealth Genesis helps expats throughout France build a diversified, tax-efficient retirement portfolio that fits your specific needs as a UK expat in France.
Via our Regular review meetings, we can make adjustments based on market conditions and your evolving personal circumstances to help you achieve long-term financial security.
You can find our complete guide for British expats in France here.
To arrange an initial consultation and understand how our French based advisers can help you, schedule a free Discovery meeting using the diary link below.
