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Thinking of retiring in France? It’s easy to see why, as this wonderful country boasts fabulous food, pleasant climate and an excellent healthcare system. Plus, it’s just a hop back to the UK to visit friends and family. France is also a good choice for retirement security, being ranked 25th in the world by the Global Retirement Index 2020¹.
Whether you’re planning a move to France, or already live there and are approaching retirement age, you’ll want to know all about the French state pension - including whether you’re eligible to claim it.
We’ll cover everything you need to know about the state pension in France, right here in this handy guide. This includes who is eligible, how to apply and alternatives such as transferring your UK pension over to France.
And if you’re considering international pension transfers, make sure you have a Wise multi-currency account. If you have a pension in another currency paid into this secure, multi-currency account, you could save a small fortune on fees and unfavourable exchange rates.
Plus, you can use your Wise multi-currency account to manage your money while in France. You can send money back to the UK for tiny fees and use your linked debit card for low-cost, contactless spending in EUR.
We’ll look at this in more detail later. Let’s start with the basic facts you need to know about the state pension in France.
The state pension in France is a three-pillar system, just like in many other countries. It’s made up of - state pensions, compulsory supplementary pensions and voluntary private pensions.
As we’ll be focusing here on the French state pension, here are the essential facts you need to know²:
- It’s a compulsory pay-as-you-go state pension system, called the Minimum State Pension or Retraite De Base.
- All employees and employers in France must pay into the system through social security contributions.
- At the same time, workers must also pay into a compulsory supplementary pension plan administered by the specific industry they work within (for example, AGIRC for executives or ARRCO for non-executives.
- The state pension enables retirees to take a minimum of 37.5% (for those born after 1953) and a maximum of 50% of their annual average earnings on retirement - up to a maximum of €39,732 a year.
- The minimum pension in France is around €634.66 per month for low-income earners and €833 per month for pensioners living alone.
- The amount of pension a retiree will receive is calculated based on either basic salary or average annual earnings, the pension rate (max. 50% of salary) and the total period of insurance. There’s a pension amount calculator on the French government’s website.
- French state pensions are taxed at a rate of 10% (to a maximum of €3,689 per household).
As you can see, the French state pension system can be a little complicated to navigate. It’s probably a good idea to seek expert pensions advice to help you get to grips with it.
Pensions in France are calculated based on a formula that takes three things into consideration.
The first one is the total length of insurance. It doesn’t only include your active working years, but also things such as parental leave, unemployment, periods when you haven’t worked due to sickness or industrial injury etc.
Then, the average of your earnings during your working years or RAM. However, the RAM calculation takes into account only your 25 best-earning years, not all of them.
Finally, the payment rate, which uses the rate of maximum pension payment (set at 50% of your basic salary), as a base. The maximum pension is decreased by a percentage determined by the gap between the number of quarters credited and the number of quarters required to receive the maximum rate.
It’s good to know that France takes care of retirees who have low or no income at all. ASPA (Allocation de Solidarité aux Personnes Âgées), is a social security benefit provided by the French government to the elderly in need. The amount of money you receive depends on your income, assets, and living situation. At the moment, it’s €916.78 per month for a single person. This can be adjusted based on circumstances, as long as the total amount of personal pensions isn’t above €1,299.36.
After deducting a 10% allowance per household (capped at €3,858 based on 2021 figures), pensions in France are liable to income tax. If the total pension amount surpasses the tax-free allowance of €10,084, the income tax rate increases to 11%. For individuals with high incomes, the tax rate can increase to as much as 45%.
In France, the tax system is organized around fiscal households rather than individuals, which means that married couples must file joint tax returns. The number of units in a household is calculated based on the marital status and the number of children, with married couples being counted as two units, married couples with children as 2.5 units, and so on. It's worth noting that widows over the age of 74 receive an additional 0.5 units, which entitles them to tax reductions.
France has a double taxation agreement with the UK, so you won’t have to pay taxes twice.
The official state pension age in France is 62 years old. This is the earliest age you can claim your state pension, although you don’t have to retire then. You can choose to keep working and get a pension rate increase. This is part of government incentives to keep employees working longer, by offering rewards for each extra quarter you work beyond the statutory retirement age.
For people who were born on or after 1st January, 1955, the retirement age is 67 years old. It’s only when you reach this age that you can claim your full-rate state pension pot.
There are certain circumstances where early retirement (earlier than the statutory retirement age) may be possible. For example, if you have a disability or have worked in arduous, stressful or unhealthy environments. The latter refers to work that is repetitive, in extreme temperatures, excessively noisy or carried out mainly at night.
You may also be able to retire early if you’ve worked long years - there’s a handy calculator here to help you work out if you’re eligible.
If you do qualify for early retirement, you may be able to retire up to two years earlier than the official state pension age.
Now, we come to the important part - who is eligible for the state pension in France? Crucially, is it available to foreigners? Let’s take a look.
If you want to claim the minimum state pension, you must work for at least 10 years in France. To access the maximum pension rate of 50%, you must be employed in France for a whopping 40-43 years. However, the number of years you’ll need to pay into the system depends on what year you were born.
If you haven’t worked long enough in France, but have worked in other EU countries, you may be able to combine these working years. This could make you eligible for the French state pension, even if it is at a reduced rate.
If you’re eligible to claim the French state pension, you’ll need to apply for it. The best way to do this is to contact the Caisse Nationale d’Assurance Vieillesse (CNAV).
You’ll need to request, complete and submit a pension application form, providing all the required supporting documents. The CNAV should let you know exactly what you need, but it will nearly always involve providing a valid form of ID.
**You should apply for your pension at least six months before your retirement date. **
Access to the French state pension system can be quite restrictive and complex, particularly for foreigners. There are many conditions to meet, including working in France for no less than four decades to be eligible for the full state pension.
So, it’s not surprising that many UK retirees don’t qualify for the state pension. But don’t worry, there are alternatives available which can help you manage your retirement finances in France.
Whether or not you can claim the French state pension, you can arrange your own private pension plan. Some workers have private pensions alongside the state and compulsory supplementary pension, with the aim of further boosting retirement income.
There are a couple of options. The first is to arrange a private pension with an insurance fund, bank or pension fund. Alternatively, you may be able to access a ‘Company Savings Plan’ with your employer. If available from your company, you should be able to choose from a five or ten year plan, and make contributions from as little as €50 a month.
While the French pension system may be a little complicated, it does have some degree of flexibility when it comes to transferring in pension savings from other countries.
After weighing up the benefits, drawbacks and tax implications with a pensions advisor (definitely recommended), you may choose to:
- Transfer your UK state pension through the Qualified Recognized Overseas Pension Scheme (QROPS). This can help you to consolidate all your pensions into one plan, and move it over to France. There are lots of benefits, along with tax and other implications too. Plus, not everyone is eligible for QROPS and you may need to seek permission from HMRC to transfer over your pension.
- **Receive payments from your UK self-invested personal pension (SIPP). **This can help to boost your retirement income in France, but like many things pension-related, it can be complicated. Although your UK SIPP may be officially classed as an offshore pension fund, it is still taxable. The good news though is that you can’t be taxed on it twice, in the UK and then again in France. This is because the two countries have a double taxation agreement in place⁴.
If you have worked the required number of years in France to be eligible for the state pension, you should still be able to claim it if you move back to the UK.
To work out the tax implications of receiving your French pension in the UK alongside your UK state pension, it’s a smart idea to speak to a pensions specialist. The rules relating to international pensions transfers can sometimes be complex, and vary from country to country.
A pensions advisor can also give you the lowdown on where to apply for your French pension - in the UK or France.
There’s also the matter of actually receiving your pension payments. If you have payments in EUR sent over to the UK from France, you could potentially lose money to fees and poor exchange rates.
Luckily, there is a way round this, which we’ll look at next.
Open a Wise multi-currency account and you’ll have an easy, secure and low-cost way to manage your money while enjoying a blissful retirement in France.
You can also use the contactless Wise debit card which does a very clever thing - it automatically converts GBP to EUR at the mid-market rate whenever you spend. This saves you a trip to the local Bureau de Change, and from having to carry cash around.
But that’s not all. If you’re planning to transfer in a UK pension to boost your retirement income while in France, Wise can help you save money. If your pension pot is quite large, it could potentially save you a small fortune.
Here’s how. When your UK pension is sent over to you in France, the banks involved in the transfer will choose the exchange rate to turn GBP into EUR. This rate usually comes with an expensive mark-up on top, plus international transfer fees. In short, this means you lose money.
But if you get pension payments sent to your Wise multi-currency account instead, no currency conversion is needed. You can use the UK account number and sort code that comes with your Wise account to get paid in GBP.
Then, you can convert to EUR using Wise and benefit from a far fairer exchange rate, and only a small fee for the conversion. This gives you full control of your pension payments, and it’s secure and fully regulated.
After reading this handy guide, you should have all the essentials you need to know about the state pension in France. We’ve covered the basic facts, eligibility, how to claim and alternatives, plus a handy way to swerve terrible exchange rates by using Wisefor international pension transfers.
There’s no getting away from it though - the French pension system is quite difficult to get your head around. To make sure you fully understand it and make the best decisions for your retirement, it’s recommended to speak to an independent pensions advisor. Good luck and enjoy your retirement in France!
Sources used for this article:
- Natixis - Global Retirement Index
- Expatica - state pension in France
- Cleiss.fr - the French social security system
- Gov.uk - France tax treaties
Sources checked on 18th April 2021
This publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from Wise Payments Limited or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date.
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