No social charges on UK pension?

Finance expert Hugh MacDonald answers your questions

25 October 2010
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QUESTION: Most of your queries are from retired Britons and the impression is given that all British people who get a retirement pension from the state will get an E121 for healthcare and will not pay CSG, etc on the pension.
I have worked in France since 2001 and get my UK state pension, but the DSS says I am not entitled to an E121.
I am paying social charges on the state pension and understand that, when I start to draw my French pension (I am still working here), I shall also have to pay social charges on my French pension.
Why do I pay social charges on my state pension? You said it was exempt from CSG, CRDS and PS, because it was funded by social charges (national insurance) and social charges cannot be applied to income arising from social charges. O.B.

ANSWER:

First, the entitlement to the E121 is independent from liability to the three social charges on pension income (CSG, CRDS and the PS), even though both may stem from the fact of being entitled to and having a UK state pension.

One must also distinguish between the social charges exemption because of your state pension and the exemption to the prélèvement sociale (PS) through not being a liability to the French health system

Yes, you will have to pay social charges on your French pension, but you should not be liable to charges on your UK pension.

Something seems amiss, possibly because you are not submitting the 2047 form for foreign income?

There is an issue with one of the social charges, which is the prélèvement sociale, since you are dependent on the French state system for the provision of your healthcare.

However, your entitlement to French healthcare is being paid for through your employment in France.

There is a quid pro quo offset in that your liability to the French health system is compensated by the fact that you are paying a contribution to the health system through your employee social charges.
Accordingly, you should write to the French tax office, saying your UK pension is exempt from the social charges under EU law.

Otherwise, use a competent tax adviser here in France who will be accustomed to doing this, in order to have the social charges liability on your foreign pension stopped.

I HAVE a query on the definition of pension income. I am 76, a French resident and taxpayer, and I have an E121. My state pension has never been subject to social charges, but two other pensions have faced charges since I first got them in 1999.
The first is an annual payment made in respect of accumulated contributions to a company pension scheme of former employer.
The second is from another insurance company, in respect of a one-off contribution that I made during my working years into a personal pension scheme.
I was advised to enter these as rentes viagères à titre onéreux on tax form 2047, but I now wonder if that was correct advice. Should they have been entered as pensions, retraites, rentes, and not subject to social charges.
If they should have been declared as pensions, then I have paid a not inconsiderable sum over the past 10 years in social charges. Can I reclaim those payments? M.C.

In the UK, there are two types of annuities: a simple purchased life annuity (bought from one’s own funds, providing an income) and a pension annuity, where money for the annuity is from a pension fund.

France only has the ordinary purchased life annuity and they do not understand that the second, even though still an annuity, should be treated as a pension.

You need to change your tax returns, although the French are increasingly only now allowing corrections to be made for the last three tax years: 2007, 2008 and 2009.

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