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BY AXIS STRATEGY CONSULTANTS

PENSION

How the Brexit vote affects your British pension in France

Des Cooney from Axis Strategy Consultants looks at how the UK state pension will be affected by Brexit and what expats in France can do to protect their money.

How the Brexit vote affects your British pension in France
Photo: Susan Sermoneta/Flickr
The decision by UK voters to leave the European Union has been unsettling for expats based in Europe. As their status becomes uncertain there is increased concern felt by many British, especially on the pension front. The Brexit vote will have a major impact on the UK economy in the months and years ahead and could have far-reaching consequences for pensioners living abroad.
 
The political landscape is continuously shifting with financial markets reacting to every move. For British expats in France, who are dependent on income from the UK, the recent decline in sterling of circa 10 percent may pose a significant challenge, as their purchasing power is linked to the value of the pound. As such, the proceeds of British pensions, inheritances or rental income will now buy less in France.
 
How will the UK state pension be affected?
 
Concerns that UK state pensions may be frozen have become real now that Britain has chosen to leave the EU. Under the existing system, the state pensions of retired Britons in Europe increase annually in line with either inflation or a figure of 2.5 percent; whichever is the highest.
 
The aim of this policy was to make it easier for people to move freely between EU countries during their working life without suffering penalties in retirement for doing so. The “no” vote has now created a predicament wherein existing bilateral agreements between the UK and countries in the European Economic Area (EEA) will have to be renegotiated. If no new agreement is reached, the UK’s DWP has confirmed that the state pension could be frozen i.e. no future annual increases.
 
At present the flat-rate state pension is set at £155.65 per week. Failure to secure a suitable arrangement would mean that the reported 472,000 EU-based British citizens aged 65 and over, who are currently in receipt of the state pension, would run the risk of losing up to £50,000 in pension increases over a 20-year period.
 
Government figures from 2015 show that there were around 61,000 British recipients of UK state pensions resident in France. The UK government has pledged to negotiate protections for expat pensioners in the wake of the Brexit vote. However, such negotiations are not straightforward; the process is likely to take a considerable amount of time. 
 
Pressure on expats to return to the UK
 
Any changes to the existing system are likely to have a negative impact on pensioners who rely on their benefits keeping in line with inflation. There are fears since the Brexit vote that a large number of pensioners currently living in the EU may have no choice but to return to the UK. This particular problem would be exacerbated if Member State governments were to stop or restrict access to free healthcare. Retired British expats may suddenly find themselves having to pay for private medical cover in France, which would put an even greater strain on their financial resources.
 
What to do with private pensions
 
With a number of experts forecasting a possible recession in the UK, it is important for investors to review their pension funds to ensure that they are suitably diversified in terms of asset allocation. Warnings of a slump in the commercial and residential property market along with a cooling banking sector are signs of an economic downturn.
 
For those with Defined Benefit (DB) pension schemes, it is likely that falling gilt yields as a result of the ‘no’ vote will further drive up pension deficits. Brexit triggered a rush of investors to buy the safest government bonds, pushing prices up and yields down. As a consequence, the UK’s 6,000 private sector DB schemes, which guaranteed inflation-linked annual incomes based on salaries to 11 million workers, now find themselves struggling to meet their pension promises. 
 
The latest figures suggest that 5,000 DB schemes are now in deficit; as such there is increasing pressure for the Pension Protection Fund (PPF), the government’s lifeboat fund, to come to pensioners rescue. Unfortunately, the shortfall between assets and liabilities in all UK schemes has actually risen from £820bn on the day of the EU referendum to £925bn as of the end of last week. The problem for the PPF is that it now runs the risk of being overwhelmed.
 
 
Based on 5945 schemes in the PPF 7800 index (Souce: PPF)
 
Take back control of your UK pension
 
One positive aspect of a reduction in gilt yields is the increase in transfer values wherein DB schemes increasingly look to offload liabilities by offering members attractive payouts as an alternative to a guaranteed income stream. 
 
Although such a move will exert further pressure on the DB schemes themselves, it is indeed good news for those wishing to transfer out of such schemes. The downside is that any continuous deterioration in the funding levels of schemes may result in a liquidity crisis for the pension sponsor. A ‘run’ on transfers out of schemes may eventually result in a freeze on all transfers out by individuals.
 
In the mean-time expats should consider taking back control of their UK pensions whilst the window of opportunity exists. This can be done by transferring to a Qualifying Recognised Overseas Pension Scheme (QROPS). Under existing legislation expats can transfer to a QROPS and benefit from the choice of currency along with a much wider range of investment funds on offer from providers. 
 
Whilst uncertainty remains in the British economy we can expect to experience ups and downs in the value of our pension savings. The challenge is to try and manage such movements by adopting a more nuanced approach to pension planning.
 
For more visit www.Axis-finance.com
 
 
How Brexit might affect you in France and how to react
 
By Des Cooney, AXIS Strategy Consultants
 

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VISAS

‘Be ready to wait’: Your tips for getting a French visa post-Brexit

Now that Britain is out of the EU, just how much harder is the process of moving to France from the UK after Brexit? British readers share their experiences of applying for visas as 'third country nationals’.

'Be ready to wait': Your tips for getting a French visa post-Brexit

Whether you’re moving to France to live, or you’re a second-home owner wanting to spend more than 90 days out of every 180 in France, if you’re British you will now need a visa.

You can find more on how to apply for a visa, and how to understand what type of visa you need, in our visa section HERE.

But how these systems work in practice is not always the same as the theory.

To learn more about the process of getting a visa as a UK national, The Local asked British readers for their experiences of going through the system.

The consensus among respondents was that the whole thing was bureaucratic, though there were notable differences in experiences that ranged from the “easy” to the “complicated” and “time-consuming”, while the advice for future applicants was, routinely, have all your paperwork ready – and be prepared for a lengthy wait at one of the UK’s TLS centres

Appointments

Like most visas, French visas for UK nationals must be applied for before you leave home. You can find a full explanation of the process here, but the basic outline is that you apply for the visa online, and then have an in-person appointment in the UK in order to present your paperwork. 

Sue Clarke told us: “As long as you get all your paperwork together correctly and in the right order, the time it takes to receive your passport back with the visa in it once TLS has sent it off is only a few days.

“TLS – the centre which works on behalf of the French Embassy to collate your application – is so very busy,” she added. “That part of the process took hours even when you have an appointment.”

READ ALSO EXPLAINED: What type of French visa do you need?

“The visa process itself was fairly well run, and a decision for the initial visa was quick,” wrote Ian Sheppard, who successfully applied for a visa in July 2022. 

“Although getting the follow up residence permit was a pain, [and] took longer than expected, and there was little to no communication with severely limited ways to get in touch about the application.”

Sheppard thought that, biometrics apart, the process could have taken place online, and wondered whether the follow-up residence permit application could be more closely linked to the initial visa application, “rather than effectively submitting the same application twice”.

Georgina Ann Jolliffe described the process as “stressful”. 

“A lot of the initial stage was unclear and I needed a lot of reassurance about the visa trumping the Schengen 90 days. (The Local helped on that one),” she wrote. 

“[The] lack of ready communication was very stressful. It could be slicker, however staff at Manchester TLS were excellent.”

Jacqueline Maudslay, meanwhile, described the process as “complicated”, saying: “The waiting times for the appointment with the handling agent (TLS in the UK) are long and difficult to book online. We applied for a long-stay visa and were given a short-stay visa, with no reasoning and no option of talking to anyone.  

“We had met every criteria for the long-stay visa. There needs to be a contact link with the French Consular website directly for discussing visa applications.”

Handling agent TLS’s website – the first port of call for applicants from the UK – was a target for criticism.

“The TLS system is probably the most user unfriendly system I have ever used,” wrote Susan Kirby. “It throws up errors for no legitimate reason and even changes data you have keyed in. Dates are in American format so you have to be very careful and it can be very difficult to edit.”

Bea Addison, who applied for a visa in September 2021 with a view to retiring in France, agreed that it was complicated and believes the French system is chaotic and badly organised compared to other countries. “Even staff in the French Embassy in London were not knowledgeable of the process and documentation,” she wrote.

“The renewal in France was applied for in July 2022 … we have received an attestation that we will be granted renewal visas, which expired in October 2022, but we have not yet received a date to attend the préfecture due to a backlog.

Second-home owners

Many of our survey respondents were not moving to France, but were instead second-home owners who did not want to be constrained by the 90-day rule.

They have the option of remaining residents of the UK and applying for a short-stay French visitor visa – which must be renewed every year.

Second-home owner Peter Green told us: “Our appointment with TLS was delayed by two and a half hours and the whole experience was chaotic.

“We now have to go through exactly the same process again to get a visa for 2023. With second-home owners there should be a fast track that just involves proving financial viability, nothing else has changed. The system needs to be fully computerised.”

Second-home owner Alan Cranston told us his application met with no problems, but came with “unwanted cost and effort”. 

“Our six-month visa was for our first stint at our house in France in the spring, and that then overlapped our second visit in the autumn which was under Schengen. How that is handled seems to be a muddle (we did not leave the country for a day at the end of the six months, as some advise),” he said. 

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