How to check your investments stay on track for life in France

Moving to France is the perfect opportunity to have a fresh look at your savings and investments.

You need to adjust your tax and estate planning to take account of the French tax and succession regimes and it makes sense to review your investment capital at the same time.

Besides the convenience of getting everything done at once, it is all interrelated anyway.

How you hold your assets can affect your tax liabilities today and what succession tax your heirs will pay.

It can also impact who you can leave the assets to on death and whether they will need to go through probate or can be easily passed on.

Bank interest rates may finally be going up, but they are still far lower than inflation – which means bank savings continue to generate negative rates of return, adjusted for inflation.

When the UK bank rate went up to 4% in February, inflation was 10.5%.

Likewise, the European Central Bank deposit rate was 2.5%, compared to 6% inflation in France.

The increase in the livret A bank savings rate from 2% to 3% was welcome news, but again, this was still half the inflation rate.

If you made a good profit on selling your UK home or business when moving to France and these funds are sitting in the bank, you might be wondering how best to invest them to give you better income and growth prospects.

Or you might have received an inheritance while living here.

You have probably made various investments too over the years, whether in ISAs, company shares, equity and bond funds.

They may have been good decisions at the time, based on your objectives back then, but are they suitable for your life today in France and do they work well together as an overall portfolio?

Start your review by asking yourself some questions:

• What are you looking to achieve? Do you need income to help finance your retirement? Or are you looking for growth to protect the value of your savings for the long term? n What is your time horizon? Do you need your savings to last just your lifetime or to pass on wealth to your children? Or will you need the cash within a few years?

• What are your circumstances? What are your monthly expenses? What pension savings/ income do you have? Do you have family to consider? Are you in good health? Will you live in France long-term? Are you expecting to buy or sell property?

• What currency? Converting sterling funds into euros for your expenses puts you at the mercy of exchange rate movements. British expatriates might wish to hold a mix of currencies and/or use investments with currency flexibility;

• How much investment risk are you comfortable with? And what level does your portfolio have?

• How much French tax are you paying on investments? What was tax-efficient in the UK is unlikely to be so here. Re-structuring your capital could save you tax.

Your overall strategy should be designed around your answers to these questions and your portfolio created and managed to meet your circumstances and goals.

An ill-fitting portfolio might not work as hard as you need it to, or be eroded by inflation, or be too risky, or difficult to access.

Your appetite for risk

Establishing your objectives and determining your risk tolerance are the starting points for a successful investment strategy.

You need to pinpoint the right risk/return balance for you, but it is extremely difficult to effectively assess your own risk profile.

You will benefit from third-party professional objective guidance.

There are some sophisticated ways of evaluating your risk appetite, such as psychometric assessments.

These give greater understanding of your attitude to risk and help position your portfolio so it is neither too risky nor too cautious.

Asset allocation and diversification

Diversification is key to managing risk within a portfolio.

Different investments carry different levels of risk, so determine which balance works for your risk profile and objectives.

Your investments need to be suitably diversified to ensure you are not over-exposed to any given country, asset type, sector or stock.

By spreading across different asset types (equities, bonds, property, cash) and markets (UK, US, Europe, emerging markets, etc), you give your portfolio the chance to produce positive returns over time without being vulnerable to any single area or asset class under-performing.

This can be extended one further step – utilising a ‘multi-manager’ approach.

Tax-efficient investment arrangements

A tax-efficient structure can keep most of your investments in one place, making them easier to manage, and provide protection from paying too much tax.

Investment income in France is taxed at either a fixed rate of 12.8% or, by election, at the normal scale rates of income tax (currently ranging from 11% for income over €10,777 to 45% for income over €168,994).

Social charges are paid on top: generally 17.2%, but potentially reduced to 7.5% if you have Form S1 or are covered under another EU/EEA healthcare system.

There are investment arrangements in France that provide considerable tax benefits.

An assurance vie, for example, includes tax-free income and gains rolled up within the policy.

For withdrawals, only the growth element is taxed and the 30% (or 20.3% if you hold Form S1) rate is available on approved post-2017 policies.

From the ninth year onwards, the first €4,600 (€9,200 for a couple) of growth withdrawn is tax-free.

It can also provide succession tax savings for heirs.

Regular reviews

Even if you have re-structured your capital investments since moving to France, it is still important to review your portfolio annually to confirm it remains on track.

Your circumstances might have changed, or your risk weighting shifted as values rise and fall.

To ensure your portfolio is both tax-efficient and suitable for you now, spend time with a professional financial adviser so they can get to know you and your objectives and recommend personalised wealth management that covers investing, tax and estate planning.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our, Blevins Franks, understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual is advised to seek personalised advice.

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