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When it comes to retiring to France from the UK, one of the most imperative requirements for a successful visa application is ensuring that your financial circumstances are in good order.
We spoke to Jennie Poate at Beacon Global Wealth, a wealth management firm specialising in providing expert financial advice for those looking to relocate to France.
Jennie recently met with David and Raquel Highcroft (names changed for confidentiality), an English couple planning their move from the north of England to sunny Charente, south-west France.
With their long-term goals outlined, David and Raquel approached Jennie Poate for advice on executing their plans.
Jennie emphasises that every review of someone’s financial position is unique; advice cannot be a one-size-fits-all approach. UK investments and French taxation policies are often difficult to compare, and Jennie typically recommends full encashment before becoming a tax resident in France.
We asked Jennie how she helped David and Raquel prepare for their move and secure their retirement dreams.
Jennie: As you’re retiring to France, you need to apply for a long-stay visa for those retiring and classified as ‘inactif’ (not working). The French government website, www.france-visas.gouv.fr, provides all the details.
When applying for your visa, you must provide documents such as ID, proof of health insurance, accommodation, etc., and show proof of sufficient income. A guide is to aim for at least the equivalent of the SMIC (minimum wage in France), which is €1231 net per person per month. Though applications are considered case by case, this is a helpful guide.
Jennie: The visa office will consider the fact that your French house will be mortgage-free. However, you will still need to generate income from another source to meet the €2462 per month requirement (for a couple). Your joint income from ISAs (£500 per month; €590) and David’s pension (£933 per month; €1100) leaves you €762 short, which must be bridged by showing regular income from an investment.
Simply showing cash in the bank may not satisfy the visa office, so it’s best not to rely on that.
Once you’ve purchased your property (£177,000), you will have £283,000 remaining. To generate €762 per month from this sum, you’ll need a 3% return on your funds. This could be challenging with a medium-risk investment, for example.
For comparison, a Livret A account in France currently pays 0.50% p.a. tax-free on a maximum investment of €22,000. We would review your risk comfort level before making any investment recommendations.
Jennie: You could consider taking a mortgage on the property, as interest rates are low in France. However, inflation is currently over 2% p.a. (source), and interest rates could rise. You’ll need to cover mortgage interest, capital repayments, and fund income. Consider whether you’re comfortable with a mortgage commitment during retirement.
Jennie: Placing your funds into an investment vehicle that pays out income with lower taxes is essential. Given your funds, an Assurance Vie is likely a good idea. Though it doesn’t guarantee returns, in the short term that’s not a big issue; even if your capital erodes, you have future income from three pensions. This investment income fills the gap in the early years, easing pressure in the latter years.
You could also consider buying another property and using rental income to reach your income requirements. A UK property rental would be taxed in the UK using your marginal rate of tax, but you still retain your nil rate band of £12,500 each, potentially providing tax-free income, although it must still be declared in France.
The downside of rental income is the need to manage the property from afar, pay for upkeep, and potentially face periods without tenants or income.
Lastly, you could explore French rental/gîte income, but this changes your visa type and classification. Rental income is taxed as income tax and incurs social charges.
Careful planning is required to compare rental income to investment income and maximise every opportunity in your financial strategy.
Book a free, no-obligation financial consultation with Beacon Global Wealth.
*Based on current exchange rate of 1.18 Euros to £1, 2021.
*All names have been changed for confidentiality.
This communication is for informational purposes only and is based on our understanding of current legislation and practices, which are subject to change. It is not intended to constitute, nor should it be construed as, investment advice, investment recommendations, or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. While every effort has been made to ensure the information contained is correct, we are not responsible for any errors or omissions.
If you would like further details or to have a confidential discussion about your own personal situation, then please do not hesitate to contact us.
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