Ask the Expert: How Brexit has changed the rules on pensions, investments and bank accounts for Brits in France

In an interview with The Local, financial adviser Maeve Hoffman, a partner at Spectrum IFA Group, issued several warnings for Brits living in France, most concerning financial products bought in the UK or UK-based investments.

UK bank accounts

Earlier this year, The Local reported that UK high street banks were beginning to close the accounts of many of their long-standing customers who had moved to France. 

A spokesperson for Barclays bank told The Local in July that “As a ring fenced bank, our Barclays UK products are designed for customers within the UK.

“We will no longer be offering services to personal current account or savings customers (excluding ISAs) within the European Economic Area. We are contacting impacted customers to give them advance notice of this decision and outline the next steps they need to take.”

Since then, several other high street banks have begun either closing accounts or limiting services to people who are no longer resident in the UK.  

Hoffman elaborated on this, explaining that these changes are because "there is no financial passporting."

She explained that, depending on the bank, some Brits living in France might be able to hold onto "simple savings accounts with small interest roll, if [they are] already open" and that those banked in the UK can typically "keep existing ISAs, but can't open new ones."

For Brits living in France who still need a UK account - for example to have a pension paid into - the best option is often internet banks.

READ MORE: Ask the expert: What are the best UK banks for Brits in France?

French accounts

Brits living in France have the option to open a standard current and savings account with a French bank to deal with everyday financial matters and savings - you can see a breakdown of the options HERE.

If you are looking to save in the short-term, financial adviser Maeve Hoffman, recommends opening a Livret A.

READ MORE: What is a Livret A and should foreigners living in France open one?

There are also several other savings accounts options available to UK nationals living in France, and you can find more information HERE.

Other problems

However, bank accounts are not the only problems experienced by Brits in France and the basic issue is that they have fewer investment options post-Brexit because certain types of investment are closed to them. It also means that tax-free or tax-efficient investments in the UK no longer offer the same benefits. 

UK investments with tax benefits

Stocks and shares ISAs are a common example of this - though they should not to be confused with a simple cash ISA.

Stocks and shares ISAs are known for being tax efficient in the UK, but they cease to provide the same tax benefits when the holder becomes a resident outside of the UK. Brits in France can continue to hold UK ISAs, but they cannot open new ones or add money into an existing one. 

ISAs can make life quite a bit more complicated for the holder because the "UK financial institution does not provide the level of transactional detail underneath the fund that is needed to declare in France," Hoffman explained. 

The financial adviser describes stocks and shares ISAs as functioning similar to the French Assurance Vie: "The person puts their money in, and then there is 'pay per gain' until they decide to withdraw, at which point it becomes a realised gain. In the UK, this has tax efficiency for the holder.

"Basically, the ISA investment scheme can be compared to a box," Hoffman explained.

"The 'physical box' is called an ISA or Assurance Vie, and what goes in the box depends on you and your risk appetite, and inside the box [the investment] is doing lots of things and it might be tax efficient.

"For Brits coming to France, it's like someone erased the box, so what is inside is no longer tax efficient. The policy owner then needs to get the financial institution to provide all of the details of the underlying transactions, and without the box it is all declarable."

Hoffman added that people tend not to understand this "because they think it is about withdrawing money but it's about the underlying transaction that are happening."

For those who are planning to remain in France and who might be looking for alternative options to their UK-ISAs, there are local tax-efficient alternatives.

Michael Lodhi, the CEO of Spectrum IFA Group, added that "care is needed with the disposal of UK assets to avoid unintended tax consequences, so always seek professional advice before restructuring existing UK assets. It is also important to check product portability and adaptability so that tax benefits can be maintained on any future return to the UK."

Pensions 

For Brits resident in France, pensions are often an area of particular concern. According to Maeve Hoffman, one issue people have been running into is that they can access their pensions "but options have been limited."

Many Brits bought and paid into flexi-access pensions, with the goal that they would be able to have more options when drawing down the funds.

"There were many changes in recent years to pensions in the UK to give people more options, like the flexi-access drawdown," she said.

"Basically, people bought into these pensions with this intention and now are being told 'you cannot access it anymore.'"

Offering a hypothetical scenario, Hoffman said "say you have enough money this year, you can leave the pension where it is, but next year you might want to take more money out for a big trip."

The flexi-access drawdown would allow you to "control it from a tax perspective and from the tax flow - that was a big selling point for pension reform in the UK."

However, post-Brexit some pension companies in the UK have stopped offering this to EU residents. 

"The problem is that it's random, it is up to individual pension companies to interpret the laws and see how it applies to them," added Maeve.

Brits in France: What you need to know about your pension

Life insurance 

Finally, Hoffman warned of another trouble area for Brits living in France, particularly retirees or people nearing retirement age, as people see their life insurance policies coming up for alteration "whether that is increasing the term or changing the amount."

Hoffman explained that for many people nearing the age where they would need to alter their plan, either by increasing their monthly payment or reducing their coverage, they have found themselves in a difficult position because "both of those things are considered new business, and you cannot do new business in the UK if you are not a UK resident."

The financial expert said that this can be a particular issue for those residing in France, as French life cover "finishes in general at age 70. Some policies do exist, but they are few and far between." 

French options

But Brits living in France should be aware that they do have several local investment options, unlike their American counterparts, who face problems with the IRS over certain French products.

Assurance Vie

The “Assurance Vie” is a life insurance wrapper that holds investments. The minimum deposit amount will depend on the plan, and these can vary widely, with some requiring higher initial fees than others.

The primary benefit to an Assurance Vie is that it is a great tool for being tax efficient – you can grow investments tax free and you can choose who inherits them, rather than going through the traditional French inheritance process.

READ MORE: Money talk: The advantages of getting an Assurance Vie in France

Assurance Vie is available to all French tax residents, but you should be aware that if you become a tax resident elsewhere (for example if you move back to the UK) you will likely have to begin paying tax on the earnings made via Assurance Vie.

There are French Assurance Vie plans, as well as International ones, which are based in Ireland and Luxembourg. "The French ones only offer a solution in euros and the international version offers different currency options and is fiscally compliant within the French tax system," financial adviser Johanna O’Brien, with Beacon Global Wealth, explained in a previous interview with The Local.

O'Brien advised that clients who might be moving countries some point choose the International Assurance Vie "as it is more portable and more flexible."

PEA (stock savings plan)

The PEA (Plan d’Epargne en Action) is a regulated savings plan, or share account. When you sign up for one, you are given a portfolio of European company shares, and if you leave the investment for at least five years then you are not obligated to pay income tax on it. However, you should keep in mind that you will still have to pay social security contributions on any earnings accrued in the PEA. 

Any adult whose tax residence is in France can open a PEA and save up to €150,000. They are limited to one per person, or one per married couple.

Private pension plans based in France

While private pension plans are available in France, many people continue to rely on state-provided pensions - which all employees in France are required to contribute to.

According to Maeve, private pension plans in France are a relatively new phenomenon. “They would resemble a ‘money purchase program’ in the UK,” she said.

When discussing private pension plans in France, you will likely hear about “Plan d’épargne retraite” (PER). These are new retirement savings plans intended to replace previous options. The PER comes in three forms: one as an individual PER, and two as company PERs.

Maeve Hoffman is a partner at Spectrum IFA Group, financial advisers who specialise in expatriates and foreigners living in France and the EEA.