Should you be worried about a Brexit ‘cliff-edge’ for your money?

, ,
Brexit money

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

Expatriates living in the EU may lose access to UK private pension and insurance payments after Brexit unless a deal is agreed for UK providers. Is this really likely and is there anything you can do to protect your benefits?

Attention has recently focused on a potential aspect of a post-Brexit world – whether expatriate Britons receiving private pensions or insurance payments from the UK will lose access to their money.

As things currently stand, many UK businesses that conduct financial transactions in the EU or European Economic Area (EEA) are set to lose the legal right to continue cross-border trading after Brexit. However, this is only the case if nothing were to change between now and the date the UK actually leaves the bloc. The reality is that this is one of the crucial issues being addressed in Brexit negotiations.

With citizens and businesses potentially affected on both sides, it is of mutual benefit to agree to a solution in time.

Brexit and money – framing the current situation

Today, UK businesses that provide financial services to Britons living in EU countries are able to do so under the EU’s free movement of capital rules as members of the bloc. After Brexit, unless similar arrangements are in place, they are set to lose the right to operate within the EU.

For expatriates with UK personal pensions and insurance contracts – which can run into decades beyond Brexit – this means they may no longer be able to receive payments in the EU post-Brexit (the UK State Pension is not affected). Providers would face the dilemma of choosing between breaching contract law (by failing to honour their contracts with members) or breaking European law.

Shared interest in securing a solution 

The problem runs both ways – also affecting EU nationals in the UK receiving payments from EU companies. UK chancellor, Philip Hammond, acknowledged it is in the interest of all parties to protect their citizens and businesses by avoiding a cliff-edge. He confirmed work was already underway to put “comprehensive plans in place for the full range of possible outcomes” that would “avoid unnecessary costs and disruption on individuals and businesses as the UK leaves the EU.”

So far, the UK has offered to extend existing arrangements for EU companies operating in the UK throughout the Brexit transition period (up to 31 December 2020). While the EU has not yet reciprocated, Brexit negotiations are ongoing and much depends on what is agreed. For example, in the event of a ‘softer’ Brexit, there may be little disruption here. If the UK remains in the customs union (or similar arrangement to the EEA), maintaining cross-border access for UK businesses would be relatively straightforward.

However, it is important to remember that overseas access to UK payments is not exclusive to being within a trading bloc like the EU. Many British expatriates living abroad, such as those retired in Australia and Canada, are able to legally receive their UK pension today without any problems.

Can you do anything to protect your benefits?

While there is little cause for expatriates affected by this issue to panic, there may be action you can take to ensure you maintain uninterrupted access to UK-based private pension and insurance payments.

Depending on your situation, you may be able to transfer your benefits into a structure that is already compliant in your country of residency. By transferring UK pensions into an EU/EEA-based Qualifying Recognised Overseas Pension Scheme (QROPS), for example, you could unlock additional benefits, such as tax efficiency and currency flexibility. Having the freedom to choose whether to invest and draw income in Euros or Sterling is not only convenient for expatriates living in Europe, it can reduce exchange rate risk during these volatile times. Moving your money to a QROPS or similar structure would also shelter it from future UK taxation (including lifetime allowance penalties) and offer more choice in who will inherit your pension benefits.

See the pros and cons of transferring to a QROPS

Even if the potential ‘cliff-edge’ issue does not affect you, it is a good idea to review how your pensions, investments and assets are structured. The key reasons for this are three-fold in the face of Brexit. First, you need to make sure your financial planning suits your particular situation, including your income requirements, appetite for risk and estate planning objectives. Second, your wealth and assets should be as held as tax efficiently as possible for your life abroad. Third, you should ensure you take advantage of available opportunities while you can, as it is likely that some rules may change after Brexit, especially around taxation of UK pensions.

For the best results, explore your options with your local Blevins Franks office. With our cross-border experience we can establish the most suitable approach for your personal situation and objectives. Act sooner rather than later to make sure you secure the best outcome for you and your family, regardless of Brexit.

Contact us to arrange a free consultation

Blevins Franks accepts no liability for any loss resulting from any action or inaction or omission as a result of reading this information, which is general in nature and not specific to your circumstances. 

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.