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Private Pensions Post Brexit

Nicky Morgan, the chair of the Treasury Committee has issued a warning to Chancellor Philip Hammond in a letter she wrote to him regarding Britain’s exit negotiations with the EU. The Treasury Committee is an influential Parliamentary committee and they have highlighted a potential issue surrounding the legal ability of pension and insurance firms to make payments to expats post Brexit. Ms Morgan said:-

“The possibility that UK providers may not be legally able to pay out pensions or insurance contracts to citizens in the EU – including UK expats – is a stark example of the consequences of a ‘cliff edge’ Brexit.”

Ms Morgan goes on to explain how both the EU and the UK have published papers addressing concerns about the status of goods on the market post Brexit but has failed to show the same amount of concern to services with specific regards to the:-

“hundreds of thousands of insurance contracts sold under passporting arrangements with a duration that extends beyond 29 March 2019”.

Current legislation stipulates that in order for insurance and pension firms to sell a contract to an EU client, receive premiums or even make payments to their clients in the form of insurance claims or pension instalments then they must be authorised in the country in which the insurance client or pensioner is resident. As things currently stand this would mean that post Brexit it will be illegal for an insurance or pension firm to carry out any of the above processes.

In response to this issue being highlighted by the Treasury Committee the Association of British Insurers is calling for an arrangement in which contracts written prior to Brexit retain the same regulatory treatment as when they were first written.

Whilst it is likely that a resolution to this problem being faced by insurance and pension firms will be reached, it further emphasises the many challenges created as a consequence of Brexit and the continuing uncertainty felt by expats living across the EU.

This uncertainty amongst other reasons has prompted many expats to review their UK sited pensions often resulting in them switching to a more EU friendly and future proof structure such as a qualifying recognised overseas pension scheme. For expats, the privilege of being able to review and potentially transfer their pensions in this manner is afforded to them as a result of an EU directive with which the UK has to comply – namely the ‘free movement of capital’. Obviously the UK will no longer need to comply with this directive post Brexit meaning that the option of moving a pension away from the UK into a more favourable structure / environment could be revoked. It is for this reason that it is more important than ever for any expat still holding UK sited pensions whether in payment or yet to be accessed at retirement, review those pensions whilst the facility to do so remains.

The decision to transfer a UK pension is not one that can be made without a full financial review which takes an analytical look at both the pros and cons of leaving the pension where it is in contrast with moving it to another jurisdiction. For many people the right decision is often to leave the pension in the UK and retain the benefits offered by the existing pension scheme. Alternatively there are also many people whom could heavily benefit by transferring to a qualifying recognised overseas pension scheme for many different reasons. It could also be very detrimental to leave a pension in the UK in certain circumstances. As I have outlined in a previous article, the vast majority of defined benefit (final salary) schemes are massively underfunded with many collapsing and being absorbed into the pension protection fund.

https://www.citizensadvice.org.es/truth-final-salary-pensions/

If you have a UK personal or occupational pension which you are yet to review then please contact me so that we can conduct a free no obligation review whilst the opportunity is still there.

Chris Pickering – International Financial Adviser

christopher.pickering@citizensadvice.org.es

 

 

Please note: The information provided is based upon our understanding of current legislation. It is not legal advice but is provided freely to enable you to be properly informed. We recommend that if you are considering taking action, you should seek professional advice.

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