I’m moving to France with £500k cash. What should I do with it?

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Q. I’ve recently quit my London senior manager job and bought a house in France where I intend to settle. I am selling my London house and expect to have about £500,000 once the sale completes. I am taking a break from any work but do intend to work in consultancy in the future. I am married, with adult kids and a pension fund of £200,000. What should I do with my cash please?Stephen, Charente, France
Before Brexit, advisers based in the UK could continue giving advice to clients who moved to the EU. Sadly this is no longer the case, and therefore I first suggest you make contact with a firm that has the necessary approvals to provide advice in both locations. An accountant with expertise in the intersection of UK and French tax would also be a good idea, as I believe the French system does not recognise UK-based tax-efficient wrappers such as Isas.
At Killik & Co we recommend a “three pot approach” to saving and investing. The first pot should be for rainy day savings and three to six months’ worth of expenditure is a good rule of thumb for this. It should be set aside in an easily accessible cash account.
The second pot should consist of any cash required to cover unusual expenses, such as a new car or home refurbishments. Any money left after filling the first two pots can then be invested. The best way to invest the money will depend on your financial goals.
Investing for incomeIf you are taking a break from work, it may be the case that you will require an income from an investment portfolio. At the lower end of the risk scale, you could invest in a portfolio of government bonds and corporate bonds (bonds are a way of lending money to a government or company in return for a fixed rate of interest).
A bond portfolio would generate an annual income of 4 to 6 per cent, but the capital appreciation of the portfolio would be limited and therefore the capital value of the portfolio would not keep pace with inflation if you withdrew all the income. Alternative assets such as commercial property and infrastructure funds can provide a combination of income and capital appreciation.
At the upper end of the risk scale, equities have historically provided higher returns than other asset classes but they have also exhibited volatility. A portfolio of global equities would probably have an income yield of 1 to 2 per cent per year and should also generate significant capital returns over long investment periods.
Currency riskIf you intend to settle in France, then converting some or all of the £500,000 to euros may be a consideration. The pound has strengthened against the euro during the past five months, when the exchange rate has risen from 1.15 to 1.20. In terms of investments, there are some great euro-denominated companies, including SAP and ASML in the technology sector, and L’Oréal. The so-called Granolas, the biggest 11 companies in Europe, are the continent’s equivalent to the Magnificent Seven tech stocks.
GiftingIf gifting to your adult children is one of your financial objectives, then a good time to do this could be after the receipt of the sale proceeds from your home. Based on the present UK rules, a gift would be classified as a “potentially exempt transfer” for inheritance tax purposes, and would fall outside your estate after seven years. This may change in the forthcoming budget so this is an important area to keep an eye on.
Rachel Winter from the wealth management firm Killik & Co offers her advice