investment for retirement

EdInvestor

Excellent. When you move you can get a form from the Revenue which enables your agent ( or the tenant if you have some other arrangement) to pay the income into your account with no deduction of tax, so that makes the UK end pretty tax- efficient.

Of course you should put the money in high interest deposit accounts first.But you will pay 20% tax on the money and it's not a good idea to park large cash sums for the long term because inflation will eat away at the value of the capital. I would aim at a max of 250k on deposit when you are fully sorted out.

A better spot for a chunk of the rest might be a diversified portfolio of high yield blue chip shares which pay you out a tax-free dividend income. You can generate around 5% income this way. Dividends are more stable than interest rates and the kind of portfolio I mean has a lot of defensive type shares in it, so usually will survive a downturn pretty well.

As this one did

The HYP idea is a winner IMHO.You pay effectively no charges, and once you've bought the shares,it needs virtually no attention.

If the idea of shares is a bit scary, then "equity income" funds are based on the same principle, but of course you have to pay charges, so you lose 1-2% of your income which is A LOT, when the income is 5% (worse than tax!)

You do need to be able to cope with some equity risk of course, but you would balance this by having other money invested in lower risk assets.

cheerfulcat

shiredeon wrote:

hi ed, funnily enough i do have a flat in manchester which i am just letting, it has a small mortgage which i will pay off shortly, i don't anticipate ever returning to the uk as i've had a gutfull of the place i suppose i could just try and find some internet based deposit accounts and hope they will generate sufficient income, at least that keeps the money easy to move and accessable.

shiredeon, the deposit accounts will generate, at today's rates, ~£25,000 a year. However, taking the interest as income means that your capital will be being badly eroded. The value of your income will be eaten by inflation as well. As a result of even only 3% inflation ( official figures but the real rate is much higher ) after 10 years you would have the equivalent of £368,000 in capital and £18,000 annual income, assuming that interest rates remain the same. So you would be taking some massive risks without even knowing it. Currency risk will also affect you, possibly adversely.

Ed's HYP idea is not a bad one but presupposes that you could cope with holding individual shares which I have to say I doubt. You'd be better off with a portfolio of funds IMHO. If I'm wrong and you do fancy the idea of the HYP I would suggest that you build it using companies ( preferably French ones ) which pay their dividends in Euros to avoid the currency risk.

EdInvestor

Re the currency risk, I assume that shiredeon is going to keep a biggish chunk of money in the French version of (say) ING to pay ongoing costs? Fortunately Euro rates are going up a bit. That ought to provide some leeway if there's any major unexpected divergence between the pound and the euro, such that he can allow UK generated income to mount up.

The trouble with investing in French shares is that divis tend to be lower in Europe and the US. Plus there's no one to help him research which companies would be appropriate, plus he'd have to deal with French brokers ( language,possible cost problems). Isn't there also some kind of withholding tax? Whereas it's easy peasy in the UK with all the info and help available on the Fool.

In any case seems to me that it's better to get an understanding of the "structure" of the asset allocation in UK terms first.Then shiredeon can check it out against French tax law etc to see if it needs tweaking.

cheerfulcat

Re the currency risk, I assume that shiredeon is going to keep a biggish chunk of money in the French version of (say) ING to pay ongoing costs? Fortunately Euro rates are going up a bit. That ought to provide some leeway if there's any major unexpected divergence between the pound and the euro, such that he can allow UK generated income to mount up.

I think that an awful lot more thought needs to go into this on shiredeon's part regarding asset allocation and the like.

Anyway, I have found a BB which might be useful, populated by expats in France - Living France.

Another one - Total France .

shiredeon

i really appreciate both your inputs, i'll try and find someone who's been in a similar situation on one of the sites, and learn from there mistakes or hopefully lack of them, thanks again

shiredeon

incidently, how would you go about generating 25k from deposits in uk, i guess you'd have to have a large number of accounts as those that offer good rates seem to be capped.

EdInvestor

I I read this correctly, it seems the latest tax laws will exempt 75% of shares owned by retired people from wealth tax calculations.

More and more it seems like you'd be best to get an understanding of the optimal way to be invested from the French tax point of view *first* and then see how that can be matched up to your attitude to risk ( including the currency question).

BTW they've also just reduced the top rate of tax from 50 to 40%.

cheerfulcat

There's a very good ( and very relevant ) thread here on the Total France board, btw ( I really should be getting on with my work! ).

Ed, I don't think that you are reading it correctly; the exemption applies to executives and employees holding shares in the company for which they work.

EdInvestor

Doh!!

As you say, interesting thread CC.

One poster who seemed fairly authoritative, said:

1.1 If you have paid tax at source on interest, dividends etc , you declare the gross income and the net income on 2047. Normally they will not tax you again on this - so no CSG. At least that was the situation last year.

So do you reckon the tax credit would be acceptable over there, no further tax to pay for BRTs?

[Useful to know these things,it's a racing certainty this will crop up as an HYP issue at some point.Is it the same in Spain I wonder? ]

shiredeon

hi all so one last question i promise, if say i realised 500k would i be foolish to invest say 300k in http://www.fool.co.uk/valueinvesting/2005/vi051118.htm
and the rest in high interest accounts in either uk or france, bearing in mind that i have the flat in manchester.