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Mythbuster: The facts about the Brexit Withdrawal Agreement

Withdrawal Agreement, transition period, trade deal - it's all very confusing when it comes to Brexit. Here citizens' rights expert Kalba Meadows of France Rights busts some of the biggest myths around the subject.

Published: 18 February 2020 15:54 CET

Mythbuster: The facts about the Brexit Withdrawal Agreement

Photo: AFP

MYTH: We don’t yet know which of our rights will be covered and we’ll all have to wait until the end of the transition period to find out, so there’s no point in bothering about any of it yet.

FACT: The Withdrawal Agreement, which is now in effect, sets out clearly which rights will be covered and how they will be covered in all these main areas: residence, healthcare, pensions and social security, working rights and professional qualifications and future family reunion.

Like all EU countries, France must implement these rights in full, and will have to incorporate them into its own national legislation. It can’t downgrade your rights from those contained in the Withdrawal Agreement, now or in the future, or impose any extra conditions to obtain or retain your rights. So we do in fact already have certainty about our future rights (although some of the administrative processes in France are still to be confirmed), and we can already make plans for the future based on what the Withdrawal Agreement says.

The full ratification documents of the Withdrawal Agreement being delivered to the European Parliament in January 2020. Photo: AFP

MYTH: The Withdrawal Agreement only covers us until the end of the transition period (currently December 31st 2020).

FACT: Your rights will be guaranteed by the Withdrawal Agreement for the whole of your lifetime as long as you meet the conditions and remain resident in France (see this page for the amount of time you’re allowed to be outside France without losing your rights).

MYTH: We’ll have to wait until December 31st 2020 anyway as the Withdrawal Agreement will become null and void if the negotiations on trade and the future relationship break down and there is ‘no deal’ at the end of transition.

FACT: If no agreement on the future relationship is reached, the UK would automatically default to trading on WTO terms with the EU.

But the Withdrawal Agreement itself would not be affected; now that it has come into effect, it remains in effect even if there’s no agreement on trade and the future relationship.

The rights that it includes for us remain guaranteed and cannot be removed even in the absence of a trade/future relationship agreement at the end of the transition period. Our rights under the Withdrawal Agreement are guaranteed for our lifetimes whatever happens with the future negotiations as long as we continue to fulfill the conditions under it.

These conditions depend on the rights in question eg broadly the conditions and personal scope for residence and other rights are different to those for social security rights. So a failure to conclude a trade deal might be a 'no deal' situation for the UK, but not for us.

MYTH: The Withdrawal Agreement only covers people who were legally resident before Brexit day, January 31st 2020.

FACT: Anyone who is legally resident before the end of the transition period – currently set as December 31st 2020 – will have their rights guaranteed by the Withdrawal Agreement – this includes those who move during 2020.

So for those hoping to move to France (or another EU country) there is still a window during which you can do this – you haven’t missed the boat! Remember that being legally resident is more than just having a foot on the soil – you need to meet the conditions that apply to your situation and in order to successfully apply for a residence card you’ll have to provide evidence to show that you meet them. You can find out more about this here.

TELL US: Have you experienced any problems with French officials since Brexit?

MYTH: A future far right government in France could decide to dispense with the Withdrawal Agreement and downgrade our rights.

FACT: The Withdrawal Agreement is an international treaty with the force of international law, and as such it trumps national law.

This means that France can't downgrade the rights you hold under the Withdrawal Agreement either now, by wrongly transposing it into national law, or in the future. It also has direct effect, which means that if France were to implement the Withdrawal Agreement incorrectly now, or adopt legislation contrary to the Withdrawal Agreement in future, citizens could rely directly on the provisions of the agreement before the courts.

And of course any dispute would also ultimately be subject to the jurisdiction of the European courts.

MYTH: I already hold a carte de séjour so none of this concerns me.

FACT: Every British citizen living in France will have to apply for a new status and carte de séjour under the Withdrawal Agreement, whether you currently hold a carte de séjour or not. In brief, if you hold a valid carte de séjour permanent you will be able to exchange this for a new card, while everyone else will need to make an application. The new cards will all carry the mention ‘accord de retrait’.

Kalba Meadows works with British in Europe and France Rights, groups which work to protect the rights of British people living in the EU. Find out more here.

For more information on driving, healthcare, travel and pets after Brexit, head to our Preparing for Brexit section.

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6 pension questions British people should ask before retiring to France

Retiring to France is a dream for many, but before turning that dream into reality there are some serious financial questions that you need to ask yourself to ensure that your retirement is a financially comfortable one.

For most retirees, their main or only income will be a UK pension, so it’s important that you understand how your pension will work once you make the move.

There are some specific rules and restrictions on taking pensions out of the UK, while there is also the question of how UK pensions interact with the French tax system.

Financial adviser, Maeve Hoffman, from Spectrum IFA Group, emphasised that people should not take these decisions lightly, telling The Local: “Figuring out what to do with your pension should be part of your wider financial plans for your life.

“This may be your most important asset, besides your home, and the best answer for what to do with your pension is highly individual. There are no sweeping generalisations when it comes to advice on private pensions. Everyone’s situation is different,” she said.

This article is intended as an overview of how the system works for UK pensioners and is not intended as a substitute for individual financial advice. The article is aimed at people who have worked most or all of their career in the UK and then intend to retire in France – the situation is slightly different for people who work in France and then retire here.

You can find an overview on French tax rules for pensions HERE.

Long-term or short-term

The first thing you need to carefully consider is whether or not your move to France will be for the long-term or short-term.

When it comes to your UK pension, there are some options that may be advantageous for French residents looking to stay here permanently, but they could make your life very complicated if you end up returning to the UK in the future.

Do not be afraid to ask yourself the tough questions – is there any chance you will have grandchildren in the future that you will want to be geographically close to? Have you ever spent a significant time in France, aside from short holidays? Do you have roots in France, such as friends, family or a home? If your health deteriorates, will you want to be cared for in France or the UK?

If are unsure about the answers to these questions, then take some time to really think about them. There are alternatives to permanently moving to France if you are unsure – for example, you could spend a few months a year here on a short-term visitor’s visa.

Understanding the different tax rules

British retirees should be aware that the UK and France have very different tax systems.

Once you become a tax resident in France, you have to file a yearly declaration, including your global income. The country that gets to tax that income is determined based on the tax treaty between the UK and France, which seeks to eliminate double-taxation.

As for your UK-based pension, the treaty states that if you have a UK government or civil service pension (eg a state school teachers’ pension), then this will remain taxable only in the UK. Some old NHS pensions were considered ‘government pensions’, but modern ones might not be. You can check if your pension is classified as ‘government’ here.

You still have to declare this income to the French tax authorities, but you will not be subject to tax in France on it. That being said, it will count towards your total household income, and could end up pushing you into a higher tax bracket which is something you should carefully consider, particularly if you want to take a large sum at once.

The same is not true of private pensions: these are taxed in France, not the UK, as soon as you become a tax resident here. Confusingly, the UK state pension is also considered a private pension, even though it is paid by the government.

You can find a complete guide to how UK pensions are taxed in France HERE.

As a result, you will want to think about whether your previous plans for your private pension were only advantageous to you as a UK resident. Once you become a French tax resident, they could have unforeseen implications.

You can find more information about tax rates in our tax guide.

Get reliable, expert financial advice before doing anything

If you have decided you want to be in France permanently, then you will need some expert tax and pension advice – but you need to be careful who you take advice from, this is a highly specialist area and it’s unlikely that high street financial advisers will have the knowledge that you need.

Brexit has also made getting financial advice more complicated, with fewer experts available.

Maeve told us: “Because of Brexit, you cannot use a UK-based financial adviser anymore – you have to use an EU-registered one. This has made things more complicated. When picking an adviser, seek out someone who has expertise on the local taxation rules in France. They should also be regulated with the financial regulator where you live and where they work.”

It can be especially complicated to parse out who you can and cannot take advice from – for example, some UK-based advisers have continued to give advice to EU-based clients, even though this can be particularly risky if the investments they recommend do not follow EU regulations.

There are also expat-oriented financial advice services that are located outside of France, but seek to offer tax advice to people in France.

She added: “Be smart and sensible. If you choose an adviser in Dubai or Spain for example, you will now be adding another regulatory organisation into the mix, plus another language.

“There are free, government-based services in the UK that can help you understand your private pension – Pension Wise and Money Helper. Before doing anything, you should consult the free services. Any financial adviser worth their salt would recommend this too.

“These services have begun to have longer wait times, so be sure to book well in advance of when you plan to draw from your pension.”

Deciding whether to transfer your pension

Another question that is important for Brits to think about is whether or not to transfer their pension into either a UK-based SIPP for non-residents, or a QROPS (Qualifying Recognised Overseas Pension Schemes).

The SIPP will keep your pension in the UK, while the QROPS moves it out of the UK, to Malta specifically.

These options can be helpful for French residents, but you need to familiarise yourself with their benefits and drawbacks.

“The QROPS is not for someone who is unsure of their future in France, as if you return to the UK within five years of the pension transfer HMRC will seek their tax back as if it was a full encashment,” Maeve said.

In France, a QROPS is considered a trust, you may also have additional reporting requirements to fill out along with your annual declaration (more info here).

You should beware of scams on this subject, as the post-Brexit period saw many scammers seeking to persuade Brits that it was now mandatory to transfer their UK pension – always be wary of any cold-calling or unsolicited financial advice.

Determining how you will want to draw from your pension

The next question is how you want to receive your pension – either as regular income or as a lump sum. The option that you chose will have tax implications in France.

If you receive it as a regular income, when doing your yearly French tax declaration, you will add up your pension income for that year and you will be taxed at the normal marginal rates for income (the barème). These rates go up to 45 percent (for the highest earners only) plus social charges if they apply (more on this below).

Pension income can also benefit from a 10 percent tax deduction, as long as it does not exceed €4,123 or fall below €422 per household.

Lump-sums are more complicated. Technically, French tax authorities would allow a return of once off pension capital to be taxed at a flat rate of 7.5 percent.

But in reality, Hoffman explained that anyone seeking to do this would need the express, written confirmation from French tax authorities that this rate will be applied.

She also explained that the type of private pension matters when seeking to get the lump-sum flat rate.

“There are plenty of different types of private pensions in the UK, but the old ‘defined benefit schemes’ have been the gold-plated standard. These are the types of pensions that give you a portion of your salary for the rest of your life.

“In principle, you should be able to take out lump-sum of 25 percent of your ‘defined benefit scheme’ pension and be taxed at the 7.5 percent flat-rate. That being said, some people get refused, so you cannot make any assumptions and you need clarification from the French tax office.

“As for all of the other types of private pensions in the UK, like the money purchase or personal pension schemes, these are considered to be ‘funds’. If you want to benefit from the lump-sum then you would have to take out the entire pension. You would not be able to just take out 25 percent and get the lump-sum rate.

“For anyone considering taking their whole pension and seeking to use the 7.5 percent rate there are conditions to be met, so I advise people to write to their French tax office and explain their own situation in detail. Be sure to clarify the tax rate you are seeking to have applied and ask what documents they would need from your UK pension company to confirm that the contributions to this pension have been tax deductible.”

Healthcare and social charges

Deductions in France come in two types – impôts (income taxes) and prélèvements sociaux (social charges).

People who retire to France (and have never worked in France) and have already reached the state pension age can apply for the S1 – this means that the UK continues to pay for their healthcare costs and they would not be charged prélèvements sociaux. Non-working spouses of an S1 holder can also benefit from this.

People who take early retirement and make the move before they reach state pension age may have to pay social charges in addition to taxes until they reach the state pension age and can apply for their S1. However, there are several exemptions to social charges, so even if you expect a bill, you may not end up being charged. More information in our guide.

Social charges help pay for a lot of services from the French government, including access to healthcare. In France, you can access the state healthcare system (and get a carte vitale) after three months of residency.

READ MORE: Why you might get an unexpected French health bill

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