The situation
Over the years, the client had built up pension rights under different public, employer-sponsored and individual arrangements. Some plans could be paid as an annuity, others as a lump sum, and each country applied its own tax rules.
The client wanted to understand the level of income available at retirement, choose when and how to draw the different plans, and avoid double taxation.
Our support
- 01
Reconstructing pension rights across several countries
We first prepared a consolidated overview of the client’s pension rights, including:
- French statutory and supplementary pensions;
- foreign social security pensions;
- employer-sponsored pension plans;
- individual retirement savings arrangements;
- rights accumulated during periods of international mobility;
- benefits available as an annuity, a lump sum or a combination of both.
We also identified periods of employment that were incomplete or missing from the relevant pension records and coordinated with the institutions concerned to determine whether they could be regularised.
Point of attention. An international career often results in pension rights being spread across several institutions and countries. Reconstructing those rights is the first step in making an informed retirement decision. - 02
Comparing different retirement dates and payment options
We modelled several retirement scenarios based on:
- the proposed retirement date;
- the date on which each pension could be drawn;
- the option to receive benefits as an annuity or a lump sum;
- the impact of continuing to work for an additional period;
- the possibility of regularising missing contribution periods;
- the client’s expected income needs after retirement.
Where relevant, we compared the cost of purchasing additional French pension quarters with the resulting increase in the future pension. The cost of such a purchase depends on factors including the option selected, the individual’s age and previous professional income.
Example: paying an additional contribution today may increase the pension received each year after retirement. The decision should therefore be based on the net cost of the contribution, the additional annual pension and the client’s expected retirement horizon. - 03
Determining the tax treatment of each pension
We analysed each arrangement separately to determine:
- which country had the right to tax the pension;
- whether the benefit qualified as a pension for French tax purposes;
- whether a lump-sum payment was taxed in the same way as an annuity;
- whether a tax treaty modified the domestic tax treatment;
- how any foreign withholding tax could be eliminated or credited;
- which supporting documents were required.
Foreign retirement benefits are not all treated in the same way. A lump sum paid by a foreign plan may, depending on the characteristics of the arrangement and the contributions made during the accumulation period, fall within the rules applicable to pensions or within another category of income.
Example: a lump-sum pension payment of €500,000 should not be analysed solely by reference to the amount received. Its treatment may depend on the nature of the plan, the tax treatment of the contributions and the applicable tax treaty. - 04
Defining a withdrawal strategy
We compared the tax and cash-flow consequences of drawing the different plans:
- in the same year;
- progressively over several years;
- before or after a change of tax residence;
- as an annuity rather than a lump sum;
- alongside other income such as deferred compensation or investment income.
Our analysis included personalised estimates of the net amount available after tax and recommendations on the sequencing of the withdrawals. This type of international retirement review can also cover the practical steps required to obtain relief from foreign withholding tax.
Point of attention. Receiving several pension lump sums in the same year may produce a different outcome from spreading them over time. The sequencing should be reviewed before any irrevocable payment option is exercised. - 05
Coordinating the position across countries
We worked with advisers in the countries concerned to ensure that the treatment adopted in France was consistent with:
- the legal nature of each plan;
- the taxation applied in the source country;
- the relevant tax treaty;
- the documentation issued by the pension provider;
- the mechanisms available to eliminate double taxation.
Where tax had been levied in both countries, we also assessed whether a refund claim, tax credit or treaty-based relief could be requested.
The result
The client obtained a consolidated view of their pension rights and the net income available under several retirement scenarios.
The analysis made it possible to coordinate the timing and form of the different pension payments, document their French tax treatment and anticipate the interaction between the countries involved.
The client was therefore able to make retirement decisions based not only on the gross amount of each pension, but also on the expected net income, the applicable tax rules and their wider personal and patrimonial objectives.
This case was handled by the firm, in light of the law and case law in force at the time of the engagement, and in the light of circumstances specific to it. It is presented for illustration purposes only: it does not constitute advice and does not predetermine the treatment that might be adopted in another matter.