Obtaining income in retirement

Many expats from the UK will be used to being obliged to take an annuity at retirement with at least part of their pension fund. This is still the case with some of the schemes mentioned above, where tax relief is given on contributions, but a large proportion of French plans are more flexible. For example, plans in the ‘assurance vie’ fiscal framework can take the proceeds as a capital lump sum and this can be switched or reinvested to provide income.

One option is to put the money in the bank but the low interest rate environment we are in today means that the rate of return is going to be fairly low. However, a good financial advisor will have a greater range of options available.

Another option is to invest in property and live off the rental income. However, there are a number of disadvantages, which should be considered before doing this. Property is not very tax efficient, money can be difficult to take out if the property market slumps, tenants need to be managed, maintenance costs need to be considered etc. Depending on the amount of funds available, direct investment in property is best as part of a larger portfolio of diversified investments. A property fund might be a simpler way of accessing the property market.

Many people invest in a bond fund or bond portfolio, as this can provide a high level of income but with a low level of risk to the capital. A bond fund can be accessed with relatively small amounts of capital. Plus, for those with capital over 150,000€ it should be possible to create a portfolio consisting of several investment grade bonds, with the income boosted by a small proportion being invested in a high yield fund. This combination can provide income over 7% and if capital preservation is part of the portfolio mandate then this should be sustainable for a long period of time with relatively low risk.