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EUROPEAN UNION

Pensions in the EU: What you need to know if you’re moving country

Have you ever wondered what to do with your private pension plan when moving to another European country?

Pensions in the EU: What you need to know if you're moving country
Flags of the EU member states flutter in the air near a statue of the Euro logo outside the European Commission building in Brussels, on May 28, 2020. (Photo by Kenzo TRIBOUILLARD / AFP)

This question will probably have caused some headaches. Fortunately a new private pension product meant to make things easier should soon become available under a new EU regulation that came into effect this week. 

The new pan-European personal pension product (PEPP) will allow savers to take their private pension with them if they move within the European Union.

EU rules so far allowed the aggregation of state pensions and the possibility to carry across borders occupational pensions, which are paid by employers. But the market of private pensions remained fragmented.

The new product is expected to benefit especially young people, who tend to move more frequently across borders, and the self-employed, who might not be covered by other pension schemes. 

According to a survey conducted in 16 countries by Insurance Europe, the organisation representing insurers in Brussels, 38 percent of Europeans do not save for retirement, with a proportion as high as 60 percent in Finland, 57 percent in Spain, 56 percent in France and 55 percent in Italy. 

The groups least likely to have a pension plan are women (42% versus 34% of men), unemployed people (67%), self-employed and part-time workers in the private sector (38%), divorced and singles (44% and 43% respectively), and 18-35 year olds (40%).

“As a complement to public pensions, PEPP caters for the needs of today’s younger generation and allows people to better plan and make provisions for the future,” EU Commissioner for Financial Services Mairead McGuinness said on March 22nd, when new EU rules came into effect. 

The scheme will also allow savers to sign up to a personal pension plan offered by a provider based in another EU country.

Who can sign up?

Under the EU regulation, anyone can sign up to a pan-European personal pension, regardless of their nationality or employment status. 

The scheme is open to people who are employed part-time or full-time, self-employed, in any form of “modern employment”, unemployed or in education. 

The condition is that they are resident in a country of the European Union, Norway, Iceland or Liechtenstein (the European Economic Area). The PEPP will not be available outside these countries, for instance in Switzerland. 

How does it work?

PEPP providers can offer a maximum of six investment options, including a basic one that is low-risk and safeguards the amount invested. The basic PEPP is the default option. Its fees are capped at 1 percent of the accumulated capital per year.

People who move to another EU country can continue to contribute to the same PEPP. Whenever a consumer changes the country of residence, the provider will open a new sub-account for that country. If the provider cannot offer such option, savers have the right to switch provider free of charge.  

As pension products are taxed differently in each state, the applicable taxation will be that of the country of residence and possible tax incentives will only apply to the relevant sub-account. 

Savers who move residence outside the EU cannot continue saving on their PEPP, but they can resume contributions if they return. They would also need to ask advice about the consequences of the move on the way their savings are taxed. 

Pensions can then be paid out in a different location from where the product was purchased. 

Where to start?

Pan-European personal pension products can be offered by authorised banks, insurance companies, pension funds and wealth management firms. 

They are regulated products that can be sold to consumers only after being approved by supervisory authorities. 

As the legislation came into effect this week, only now eligible providers can submit the application for the authorisation of their products. National authorities have then three months to make a decision. So it will still take some time before PEPPs become available on the market. 

When this will happen, the products and their features will be listed in the public register of the European Insurance and Occupational Pensions Authority (EIOPA). 

For more information:

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp/consumer-oriented-faqs-pan_en 

https://www.eiopa.europa.eu/browse/regulation-and-policy/pan-european-personal-pension-product-pepp_en 

This article is published in cooperation with Europe Street News, a news outlet about citizens’ rights in the EU and the UK. 

Member comments

  1. The cap of 1% fees is welcome but frankly way too high. If you compare to the fees charged by Vanguard or Fidelity in the US you can see how even 1% over the savings lifetime of 30-40 years is a real gouge. This is plain vanilla arithmetic. I have a managed individual retirement account at Vanguard in the US that charges me .16%. And note that is a managed fund. The purer index funds, which simply track the whole market whether bonds or shares, are even less costly.

  2. I have been paid a complementary pension by Agirc-Arrco ( after much difficulty trying to claim it during the pandemic). I received it ( I thought ) under the terms of the Brexit Withdrawal Agreement ( financial section) which states that a person should not be worse off re their financial situation ( french complementary pension) after Brexit. Although I lived and worked in France for
    Ten years and accumulated many points in the scheme…for which I have been paid monthly…now they have blocked my
    account due to completely ambiguous wording of the INFO RETRAITE formulaire which I used for instructions in sending my certificat de Vie. I am 68 years old and worked hard years to accumulate this pension….who to speak to ? I am hoping that the French state part of my pension will be paid as usual as that account isn’t blocked. Any help appreciated.
    .

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For members

TAX DECLARATION

Late fees, fines and charges: What you risk by missing French tax deadlines

The deadlines for the annual French tax declaration are upon us, but what are the penalties if you either miss the deadline or fail to file your return at all? We take a look at the sanctions.

Late fees, fines and charges: What you risk by missing French tax deadlines

The annual Déclaration des revenues – income tax declaration – involves virtually everyone in France filling out a form giving detailed information on their income to French tax authorities.

If you live in France, it’s almost certain that you will have to complete this – even if you’re a salaried employee and your tax has already been deducted at source, or if all your income comes from outside France (eg a pension received from the UK or USA).

There are only a very few exemptions to the requirement to fill out the tax declaration and they are listed here

Declarations for the 2021 tax year opened in April 2022 and the deadline is either late May or early June, depending on where you live – find the full calendar here

But what happens if you miss the deadline?

For most people there is a staggered system of late charges.

If you are less than 30 days late your overall tax bill can be increased by up to a maximum of 10 percent.

Once you receive a notice of late payment, the overall bill can increase by up to 20 percent, or 40 percent if you have still not filed within 30 days of receiving the later payment notice.

You will also be charged interest on late payments.

What if I don’t pay income tax in France?

If you have no taxable income in France – for example your only income is a pension from another country – then you still have to fill in the declaration.

If you file late the increases cannot be applied, since your tax bill is €0, but you can instead be liable for a late fee of €150.

What if I have exceptional circumstances?

If you know that you will not be able to file in time, you can ask the tax office for a remise gracieuse (remission) in order to avoid late fees and penalties.

You will need to outline your reasons for not being able to file in time and while there isn’t a list of accepted excuses, the reason must be exceptional circumstances such as serious illness or the death or a loved one.

If you have previously missed deadlines, the tax office will be less likely to accept your request.

The request should be made by June 29th either in person at the tax office or through the messaging system in your online tax page.

What if you don’t declare everything?

If you have not declared income which is subsequently discovered by authorities, the increase in your overall tax bill can be up to 80 percent – the maximum penalty is usually reserved for people who have deliberately tried to hide parts of their income.

We have a full guide to what you need to declare HERE, but the basic rule of thumb is that you need to declare everything, even if it is not taxable in France, eg income from a rental property in another country.

France has dual taxation agreements with countries including the UK and USA so if you have already paid tax on income in another country you won’t need to pay more tax in France – but you still need to declare it.

What about foreign bank accounts?

Another item that frequently catches out foreigners in France is overseas bank accounts.

If you have any non-French bank accounts, you need to list them on your tax declaration, even if they are dormant or only have a very small amount of money in them.

This also applies to any foreign investment schemes you have, such as life insurance policies. 

The penalty for not listing accounts is between €1,500 and €10,000 and that applies for each account you fail to declare. 

What if I made a mistake on my declaration?

In 2018 France formally enshrined the ‘right to make mistakes’, giving people the right to go back and correct their declarations without attracting a penalty.

So if you realise you have missed something off or added the wrong info you can either go back into your online declaration and correct it or, if you file on paper, visit your local tax office.

However the ‘right to make a mistake’ does not extend to late filing.

What if I didn’t make a declaration?

The French tax system is often confusing for foreigners, with many people wrongly assuming that if they are not liable for tax in France then they don’t need to fill in the declaration.

For people who persist in not making the declaration, even after the arrival of the notice of default, tax authorities can make an estimate, based on earnings and lifestyle, and present the bill.

However for new arrivals in France it’s likely that they will not be registered with the tax office and will therefore never receive a notice. 

In this instance it’s always better to come clean – if you have made a genuine mistake and you approach the tax office  (rather than waiting for them to watch up with you) you will usually be dealt with quite leniently. 

How can I get help?

If you’re struggling with the system, there are ways to get help.

The tax office has an English language information page here, and a dedicated helpline for internationals on + 33 1 72 95 20 42.

You can also visit your local tax office, every town has one and you can simply turn up without appointment and ask for help (although if the office is small and your query is complicated you may need to make an appointment for the full discussion). Surprising as it may sound, employees at the tax office are generally pretty friendly and helpful and can guide you through the forms you need to fill in.

If your tax affairs are complicated and/or your French is at beginner level, it may be better to hire an accountant to ensure that everything is in order. You can find some tips on getting professional help HERE.

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