Vulnerable UK Expat clients and their UK advisers left short by lack of Professional Indemnity cover
Brexit has led to many unintended consequences surrounding financial services for UK expats living abroad. The main one being that most UK financial advisers will not now be able to advise or manage their clients UK financial products such as pensions and investments whilst their clients are living in the EU. Now the latest hurdle UK financial advisers are facing is Professional Indemnity Insurance (PII) which will not extend to UK expats resident in the EU.
With passporting rights being a thing of the past, PII is not going to cover any of their EU based clients and means that both clients and their UK financial advisers are effectively in limbo. This lack of PII also stops cross border advice. However, this does not apply to Global firms with worldwide cover such as Blacktower.
Put simply, this means there should no longer be UK-based advisers with EU-based clients. So where does this leave you and who will service your plans and provide the right kind of protection? This might not be all bad news and could actually be good news, since French compliant products are better for UK expats living in France as they can offer significant savings with regards to income tax and inheritance tax.
One of these such products is Assurance Vie. Most of us have heard of this if we have done any kind of research or lived in France for any length of time, but very few understand what it is and there are many misconceptions when I speak to clients about Assurance Vie. One of the biggest is that you can’t access your money for 8 years. Depending on which company you use to set-up your Assurance Vie you can have as much or as little access as you want. What happens after 8 years is that you are given an additional tax-free allowance of €4,600. This means that if any part of a withdrawal you make is subject to tax, then the first €4,600 will be treated as nil-rate. It is an added bonus to encourage people to keep their money invested for the longer-term.
As an international company we can offer you an international version of the Assurance Vie, which benefits from all the tax efficiency of being a French-compliant investment, but it allows you to keep your savings in GBP or convert to Euros or USD, if you would prefer. This might help from a point of view of longer-term succession planning, if you intend to leave some of your money to your family, friends or charities in the UK. If that is the case, it may not be the best option for you to convert your current savings to Euros.
Additionally, to this, if you move to a different European country or back to the UK it is possible to port the Assurance Vie with you and it would simply become an offshore bond, that would remain tax efficient in the UK from both a growth perspective and income perspective.
Of course, you can always leave your savings and investments in the UK, but what was tax-efficient whilst you were a UK resident, is no longer tax-efficient in France and the onus is on you to report the interest and gains on these correctly and pay potentially 30% in investment tax and prélèvement sociaux each year, regardless of whether or not you withdraw any money.
This article is based on the opinion of the financial adviser and author, and does not reflect the views of Blacktower. The above information is based on current legislation which is subject to change and does not constitute as investment advice, or investment research and you should seek advice from a professional adviser before embarking on any financial planning activity.
Blacktower Insurance Agents & Advisors Ltd is regulated in Cyprus by the Insurance Companies Control Service and registered with ORIAS in France. Blacktower Financial Management (Cyprus) Ltd is regulated in Cyprus by the Cyprus Securities & Exchange Commission and is registered with the AMF in France.