British Insurers Potentially Barred from Paying Pensions to Expats
Post-Brexit cross-border payments still unresolved
Retired Britons living in the EU countries risk losing access to their private pensions after transition ends.
British pensioners who are residing in Europe could face a serious problem accessing their pensions after the UK leaves the EU in March next year.
Those private pension incomes that are guaranteed by insurance contracts (such as annuities) may be prevented from being paid out to overseas customers after Brexit if the insurer is a British company.
Currently British insurers utilise their passporting rights to provide services for customers in the EU. However, they won’t be able to do so after Brexit, unless new arrangements are agreed.
According to Treasury committee chair Nicky Morgan, 38 million Britons residing in various EU countries have policies with UK insurers. This includes numerous retirees in Spain, France, Germany, etc. who rely on their private pension incomes covered under passporting rights.
When passporting rights disappear (as they will after March 2019), it will be illegal for insurers and pension providers to send payments into the EU.
A deal on passporting rights is needed to resolve the situation, but at present retaining passporting rights after Brexit is not on the government’s agenda.
The UK promised that EU pensioners living in Britain and receiving payments from insurance policies in the EU would be allowed to continue to do so, however the EU hasn’t reciprocated.
One of the options for financial companies to preserve their right to do business in the EU is to open an office in a EU country which can give them passporting rights, such as Ireland. This solution is costly and takes time.
Uncertainty and vagueness about the whole of the final Brexit agreements don’t help either. Financial companies need to know exactly where they stand as far as Brexit is concerned, so that they can plan their actions accordingly.
State pensions aren’t dependent on the same passporting rules to operate, so Brexit doesn’t pose the same risk to those payments.