My Situation

PipPip

Just interested to know what the experts on here suggest I do and where to go to for advice as my situation is quite complicated. I will try to summarise as much as possible the key points:

- I am 39 years old and employed by a UK company but currently 2 years into a 3 year expat contract in France
- My tax status is that I fall within the UK system for National Insurance and the French system for tax. Meaning French salary has UK national insurance deducted and paid across to the UK and submit/pay an annual French tax bill.
- I have quite a good income at around €110,000 cash plus preference shares worth around €15,000 per year plus share options with a value estimated at around €15,000 per year. Since I have been in France 2 years I have €60,000 worth of shares/options which vest in 2 and 3 years time and will get another €30,000 worth next year.
- Investments: no ISAs as I cannot benefit from the UK tax breaks in France. Basically we have: main home worth c£400k with £220k mortgage paying 1.35% interest currently and c£45k in an offset account, so net £175k mortgage. We own a ski apartment in France, not sure of exact current value that from my research today looks to be around €300,000 against which we have a mortgage of €125,000. I also have shares in the company shareplan of c€50,000.
- Company pensions: a bit of a mess. An old Equitable Life scheme from when I contracted out of SERPS with maybe £5,000. A DC company pension from a past employer with c£60,000 and current employer scheme with c£40,000. My employer pays around £8,000 per year into the UK pension scheme for me whilst I am in France but I pay nothing.
- My wife has around £10,000 in an old employers DC scheme and around £10,000 cash savings earning around 7% interest in a Czech bank account (she is Czech). She is paying voluntary NI in the UK.

We may not return to the UK next year as planned and may stay in France or I may be asked to go to another country. The problems I see are:
- I want to retire at 60 and am starting to feel that I need to get a better investment plan in place.
- I am overweight in property. My "pension" is in reality the ski apartment in France and our UK home, my company pensions being DC schemes with relatively small sums invested.
- I do not think that I have enough exposure to a diversified portfolio of equities. Although being a French tax resident I do not qualify for pensions relief on UK contributions and cannot benefit from ISAs. If I invest in the French equivalent (Life assurance wrapped investment product) the charges are rediculous compared to UK products (5% initial charges, 3% pa on asset value ongoing charges) but gains/income are tax free. If we leave France we lose any tax benefits anyway.

Any suggestions/thoughts from the experts on here? Am I missing a tax efficient way of investing in equities or should I just continue the relatively lazy path I have so far adopted of putting spare money into the offset account (earning only 1.35% net since that's the mortgage rate) until we have settled somewhere? Trouble is I move a lot with work and if I keep on deferring things I'll be in my mid 40s and it will start to be too late.....

marklv

Yet another rich guy trying to get free advice on this forum! Yawn.

PipPip

Apologies, I didn't know this is a means tested forum.

marklv

PipPip wrote: »

Apologies, I didn't know this is a means tested forum.

I was joking

marklv

PipPip wrote: »

Just interested to know what the experts on here suggest I do and where to go to for advice as my situation is quite complicated. I will try to summarise as much as possible the key points:

- I am 39 years old and employed by a UK company but currently 2 years into a 3 year expat contract in France
- My tax status is that I fall within the UK system for National Insurance and the French system for tax. Meaning French salary has UK national insurance deducted and paid across to the UK and submit/pay an annual French tax bill.
- I have quite a good income at around €110,000 cash plus preference shares worth around €15,000 per year plus share options with a value estimated at around €15,000 per year. Since I have been in France 2 years I have €60,000 worth of shares/options which vest in 2 and 3 years time and will get another €30,000 worth next year.
- Investments: no ISAs as I cannot benefit from the UK tax breaks in France. Basically we have: main home worth c£400k with £220k mortgage paying 1.35% interest currently and c£45k in an offset account, so net £175k mortgage. We own a ski apartment in France, not sure of exact current value that from my research today looks to be around €300,000 against which we have a mortgage of €125,000. I also have shares in the company shareplan of c€50,000.
- Company pensions: a bit of a mess. An old Equitable Life scheme from when I contracted out of SERPS with maybe £5,000. A DC company pension from a past employer with c£60,000 and current employer scheme with c£40,000. My employer pays around £8,000 per year into the UK pension scheme for me whilst I am in France but I pay nothing.
- My wife has around £10,000 in an old employers DC scheme and around £10,000 cash savings earning around 7% interest in a Czech bank account (she is Czech). She is paying voluntary NI in the UK.

We may not return to the UK next year as planned and may stay in France or I may be asked to go to another country. The problems I see are:
- I want to retire at 60 and am starting to feel that I need to get a better investment plan in place.
- I am overweight in property. My "pension" is in reality the ski apartment in France and our UK home, my company pensions being DC schemes with relatively small sums invested.
- I do not think that I have enough exposure to a diversified portfolio of equities. Although being a French tax resident I do not qualify for pensions relief on UK contributions and cannot benefit from ISAs. If I invest in the French equivalent (Life assurance wrapped investment product) the charges are rediculous compared to UK products (5% initial charges, 3% pa on asset value ongoing charges) but gains/income are tax free. If we leave France we lose any tax benefits anyway.

Any suggestions/thoughts from the experts on here? Am I missing a tax efficient way of investing in equities or should I just continue the relatively lazy path I have so far adopted of putting spare money into the offset account (earning only 1.35% net since that's the mortgage rate) until we have settled somewhere? Trouble is I move a lot with work and if I keep on deferring things I'll be in my mid 40s and it will start to be too late.....

Your financial affairs are pretty complex to say the least. As a high net worth individual you would be well advised to seek professional advice from an IFA.

My feeling is that you are not clear at all about what investment strategy you wish to follow - you have a mix of different things. I agree that you have too much in property - do you really need all that? As you live abroad you also need to get advice in your country of residence, as the laws and regulations vary greatly.

PipPip

I don't think I'm a HNW individual, still got plenty of mortgage debt and a good amount of the value is in my home, a situation common to many. The main source of value is the ski apartment that we bought off plan 7 years ago when we could barely afford the mortgage on it. It was a big gamble in a resort that is tiny but has developed as well as I had hoped at the time. Also my wife does not work due to us having a baby and toddler and my income level is not so different to an average two income family of professionals.

I've only really started thinking about this as previously my mortgage was on a highish fixed rate so putting any spare money into the offset account seemed to be logical in a time of low savings rates and extreme stock market volatility. However, it just came off the fixed rate onto a BoE base rate plus 0.85% so suddenly the money in the offset account is earning peanuts and equities seem to be stabilising/entering a bull run.

Anyway, I've done some research last night and discovered a Paris based whole of market IFA firm which specialises in UK expats. I think I will see them as I have so many questions like how do French tax authorities treat ISAs, how would they treat UK pension contributions if I made a lump sum contribution, how does this change if my status changes from temporarily in France and outside of the social security regime to permanent resident, should i get a separate tax effective international SIPP product (I've heard such a thing exists) etc.

jamesd

marklv, that's not anywhere near close to being high net worth. Not into seven digits and most of it is not liquid and investable.

PipPip, have you considered SICAVs and OEICs outside any tax wrapper? When you're in a position to benefit from UK tax rules, if ever, you could then gradually sell and use the proceeds for pension investing.

That IFA firm seems promising, though I expect that the fees will be quite high. Perhaps worthwhile if they find you good options that you don't know about, though.

The subject you used for this discussion is unfortunately non-specific so it's unlikely to attract those who are more familiar with the issues of British expats working and living in France. "Investment options for UK expat in France?" might have done better.

PipPip

jamesd wrote: »

marklv, that's not anywhere near close to being high net worth. Not into seven digits and most of it is not liquid and investable.

PipPip, have you considered SICAVs and OEICs outside any tax wrapper? When you're in a position to benefit from UK tax rules, if ever, you could then gradually sell and use the proceeds for pension investing.

That IFA firm seems promising, though I expect that the fees will be quite high. Perhaps worthwhile if they find you good options that you don't know about, though.

The subject you used for this discussion is unfortunately non-specific so it's unlikely to attract those who are more familiar with the issues of British expats working and living in France. "Investment options for UK expat in France?" might have done better.

Thanks for the comments. I will look into OEICs and SICAVs. I have a general awareness of what they are but no more than that. I don't start threads on forums very often and your advice on the "subject" is noted. You are also right that the investable assets are today quite small, so hardly HNW territory and hence I was even questioning whether its worth paying an advisor. However, as my share options start to mature and if I stay in my current role for a few more years (the expat role means most of our major living expenses are covered, like property rent/bills and tax is low) the amount available to invest will grow quite rapidly. Also I think we may sell the ski apartment in 5 years time as its a lot in one basket and if global warming is true.....so its not a comfortable feeling not knowing the best place to invest. If I was back in the UK it would be simple: ISAs and additional Pension contributions.

marklv

PipPip wrote: »

I don't think I'm a HNW individual, still got plenty of mortgage debt and a good amount of the value is in my home, a situation common to many. The main source of value is the ski apartment that we bought off plan 7 years ago when we could barely afford the mortgage on it. It was a big gamble in a resort that is tiny but has developed as well as I had hoped at the time. Also my wife does not work due to us having a baby and toddler and my income level is not so different to an average two income family of professionals.

I've only really started thinking about this as previously my mortgage was on a highish fixed rate so putting any spare money into the offset account seemed to be logical in a time of low savings rates and extreme stock market volatility. However, it just came off the fixed rate onto a BoE base rate plus 0.85% so suddenly the money in the offset account is earning peanuts and equities seem to be stabilising/entering a bull run.

Anyway, I've done some research last night and discovered a Paris based whole of market IFA firm which specialises in UK expats. I think I will see them as I have so many questions like how do French tax authorities treat ISAs, how would they treat UK pension contributions if I made a lump sum contribution, how does this change if my status changes from temporarily in France and outside of the social security regime to permanent resident, should i get a separate tax effective international SIPP product (I've heard such a thing exists) etc.

You are higher net worth than over 90% of the population! That is high enough to warrant using specialist advice. I was not saying you were necessary wealthy.

My advice to you is to get rid of the ski apartment and focus on using the proceeds creatively, either by reducing your own mortgage or investing it in the markets. That choice is up to you. The decision you make will be critical to your future well being hence the need for detailed advice.

jamesd

marklv wrote: »

You are higher net worth than over 90% of the population!

According to the Office for National Statistics the top ten percent of households have net worths of four million Pounds and higher. In this case net worth seems to be about £660,000 and that puts it just about at the average UK net worth, perhaps just into the upper half. It seems to be growing very healthily and looks to have a good chance of being in the top 20% by age 60. The top 30% should easily be achievable.

There's more detail available in the ONS paper Wealth in GB, based on the Wealth and Assets Survey.

According to 2007-2008 HMRC figures an income of above £100,000 but below £150,000 placed it in the top 2% of UK incomes. That's a very healthy position indeed. While I'm looking, the top 8% of UK tax payers had an income over £50,000 and the top 25% over £30,000. But note this is taxpayers, not whole population.

Shimrod

Interesting statistics jamesd, but I'm confused by the top 10% net worth. According to Zoopla, there are less than 200,000 £1million plus properties in the UK (http://www.dailymail.co.uk/news/article-1225288/The-number-homes-worth-1million-fallen-past-years.html), but the ONS figure has the top 10% having net property worth of around £1.3-£1.4 million. Now even assuming none of those £1m houses have a mortgage, the implication is that the around 9% of the top households own multiple properties.
Is it not more likely that the average of the top 10% is being significantly skewed by the top fraction of 1% that are likely to own several 10's of millions of property? The same would hold true of the other figures and therefore a net worth of £660,000 would actually put you significantly higher than average if the figures were at a more granular level?