As France debates pension reform, many foreigners, including retirees, living in France have wondered whether any of the proposed changes could impact them.
While people who are already of retirement age likely will not be personally affected by any changes to their pension as a result of the proposed reform, there are some things that retirees in France should still be aware of – including a potential French government benefit they may qualify for.
Here is what you need to know;
Government aids for older people
For foreigners who have been living legally in France for at least 10 years there is a state aid for elderly people called the Allocation de Solidarité aux Personnes Agées (ASPA).
Some have confused this benefit for being a pension, but in reality it is a top-up benefit – intended to help elderly French citizens who receive a very low state pension.
It is also available to foreigners in France, but only those who have been legally resident in France for at least 10 years. In general, to qualify you must be at least 65 years old.
As of July 2022, this state aid (which is means-tested) can offer up to a maximum monthly income of €961.08 for an individual. The amount offered will depend on your income, including any pensions you receive from other countries.
You can find more information at THIS French government website.
The French government also announced plans to offer grants for home improvements such as installing a stair lift or widening a doorframe to allow wheelchair access for older people and those with decreased mobility.
When applying, the applicant must be able to demonstrate that they are an independent retiree and need (this could be based on income, age, health, etc) to adapt their housing in order to make it more accessible.
The amount of assistance offered will be means-tested based on financial status. Some examples of work that might qualify for assistance might be: adapting the bathroom (for example, adding grab bars or enlarging the door); replacing the bathtub with a shower; installing a bathtub with a door; installing a stair lift; and adding access ramps to the home.
The French government also offers various tax reductions and exemptions for older people living in France – especially those on modest incomes. There’s an income tax allowance for over-65s, and a reduction on taxe foncière for homeowners over 65 before an exemption kicks in for those aged 75 and over, depending on income level. You can learn more about other old-age benefits HERE.
What to know about claiming your foreign pension
If you have retired to France you can (in most cases) still claim your pension from the country you were working in. There are some exceptions, however, if your country lacks a social security agreement with France.
For most people, their foreign pension will be paid in the currency of their home country, so if isn’t the euro bear in mind that fluctuations in exchange rates will affect how much money you get each month.
You may need a bank account in your home country, as some nation’s require that state pensions be paid into bank accounts issued in their country. For example, many Brits in France have run into this issue, as UK pensions usually must be paid into UK-based bank accounts.
For Brits living in France, pensions are often an area of particular concern. Maeve Hoffman, a partner at Spectrum IFA Group, told The Local in a previous interview that one post-Brexit issue people have been running into is that they can access their pensions “but options have been limited.”
Many Brits bought and paid into flexi-access pensions, with the goal that they would be able to have more options when drawing down the funds.
“There were many changes in recent years to pensions in the UK to give people more options, like the flexi-access drawdown,” she said.
“Basically, people bought into these pensions with this intention and now are being told ‘you cannot access it anymore.’”
Offering a hypothetical scenario, Hoffman said “say you have enough money this year, you can leave the pension where it is, but next year you might want to take more money out for a big trip.”
The flexi-access drawdown would allow you to “control it from a tax perspective and from the tax flow – that was a big selling point for pension reform in the UK.”
However, post-Brexit some pension companies in the UK have stopped offering this to EU residents.
“The problem is that it’s random, it is up to individual pension companies to interpret the laws and see how it applies to them,” added Maeve.
For American retirees living in France, tax expert Jonathan Hadida, who works for Hadida Tax Advisors, a company specialised in tax consulting and helping Americans living in France to be tax compliant in both countries, advised that people should still report their US pensions on their French tax returns.
For example, you still need to report a 401K distribution. However, under Form 20-47, you report (to the French) that it is foreign pension from the United States. Then, France will give you, under the tax treaty, a deemed credit equal to the French tax.
“Basically, it’s reported on your French tax return for rate purposes, and you get a credit for the tax,” Hadida said. “And at the end of the day you wind up paying no French tax.”
In general, Americans living in France should be aware that citizenship-based taxation limits some investment options in France and that there are some fiscal rules to be aware of when it comes to private pension plans based in the United States. You can learn more HERE.
If you are Australian, you should beware the ‘pensions trap’ resulting from the lack of an international social security agreement.
The lack of a bilateral social security agreement has made it so that many Australians of retirement age who live in France cannot claim an Australian old-age pension, even if they have spent their lives working and paying taxes in Australia. You can find the full details here.
A final key point is for foreigners who receive a state pension from their home country, you may need to have access to a bank account in that country to collect the funds.
This article is a general view of the pension system and does not constitute individual financial advice. If you are are unsure about your pension rights, seek independent financial advice.