WE will be permanently moving to France in spring. What is the most advantageous way to have my present company pension and future state pension paid - either direct into my existing UK bank account or our new La Poste account? C.I.P.
YOUR pensions will be taxed in France irrespective of whether they are paid into a bank account in the UK or France.
If you use the French bank account, then most banks will not levy bank charges for receiving regular foreign sums of money transferred automatically via the banking system, as opposed to making a charge for receiving funds irregularly from abroad if you do the transfer yourself.
The other main issue concerns the actual value of the pension due to currency exchange.
Accordingly, two options are open to you:
Option one is to have the pensions paid into your French bank account directly by the pension organisation. The currency exchange will be done automatically by the banking system in processing the payment and you will receive your pension in euros. At the end of the tax year, all you do is add up the euro value of the pension income and declare this on your tax déclaration.
Option two is for you to transfer what you need, when you need it. However, with this system, what you actually transfer is not the basis for taxation. It is the pension income itself that is taxed, irrespective of whether you brought it to France or not.
So, at the end of the year, irrespective of what you actually transferred from the UK to France, you take your UK sterling pension and then convert it into euros at the average exchange rate given by the French inland revenue (Le fisc), in mid-January (£1=€1.25968 for 2008).
This method can work to your benefit just as it can work against you (as can the method above), as the whole of the year's pension income is converted at an average rate for the year.
On average, most people tend to use option one, the direct automatic transfer, as it saves banking costs. However it is true that you are then dependent on the exchange rate on the day of the automated transfer.
On the plus side, you would know that these amounts are then the figures that would be used as the basis for working out your tax liability. If you do wish to use the direct automatic payment system, bear in mind that if you ask your former employer to pay you in euros they will definitely refuse as they will not want to be involved in currency transfers and costs.
Accordingly, as you will need to inform your pension payer of the bank account to which to pay your pension, all you need to do is provide the pension payer with your French banking account RIB (relevé d'identité bancaire) which contains your bank account details, and the payment will go through without any problems.