Updated: July 22, 2019

Brexit and Pension Transfers

Read our guide to find out how the longer-term impact of Brexit could affect your pension transfer options

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Tony Stevens

Author: Tony Stevens - Finance Expert

Updated: July 22, 2019

Among the many areas hit by the UK’s withdrawal from the European Union, are pensions. In particular, pensions transfers between the UK and EU countries.

With so many unknowns for the longer-term impact of Brexit, it’s possible that pension transfers in a post-Brexit world could become costly and complicated or potentially, even impossible. To help you understand a little more about the potential impact of Brexit on pension transfers, in this article we cover:

Will Brexit affect pension transfers?

Yes, Brexit is likely to affect pension transfers between the UK and EU countries. Prior to Brexit the UK and EU operated under a shared and agreed set of rules about how pension transfers should be treated, with regards to tax and management and everything else that’s important.

But, the UK leaving the EU, will change things. At the moment, the UK have said that people with a UK pension who live in, or move to an EU country will still be able to make a transfer and vice versa. But, the rules surrounding those transfers will likely change. Among other details, that suggests there could be tax implications.

If HMRC brings it into line with tax rates charged on transfers to countries like the US and Canada, then a 25% tax could make a big difference to the value of your pension.

Will you still be able to draw your pension from the UK without transferring it?

It shouldn’t be a problem for people with a UK pension living in the EU to continue to draw and receive their pension – subject to the usual currency fluctuations.

However, it’s possible that expats who have purchased an annuity, living in the EU with a UK pension will be unable to receive their payments because UK companies will lose their EU passport rights and won’t be able to release funds from a UK fund into the EU.

This could mean a period where UK pension holders can’t receive their pension until the UK pension fund provider either comes to an agreement with a local business or creates their own EU subsidiary to handle those payments.

For the most part, both the EU and the UK do appear amenable to ensuring a reciprocal agreement on pensions is made to ensure pension holders don’t lose out. However, it might not work out that way in the fullness of time.

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How will Brexit affect pension transfers?

At the moment there are no definite decisions on exactly how Brexit will affect UK pension transfers to EU member countries. In September 2018, in response to a question, Guy Opperman, the minister for pensions and financial inclusion, told Parliament that current pension transfer rights  between the UK and the EU will remain as they are, even in the event of a no-deal Brexit.

Specifically, he said that pensions transfers by UK and EU citizens holding a UK-based pension will be able to make transfers during the transition and afterwards. But, he didn’t give much more detail.

Indeed, speaking soon after Opperman, economic secretary to the UK Treasury, John Glen, said that whether or not UK pension transfers to the EU remained tax free in a post-Brexit scenario depends on the terms of the exit.

That means that even though pension holders will still be able to make pension transfers, its possible, that in line with the tax treatment of pensions transfer to other countries, that HMRC could place a tax upon such activity.

With a lack of certainty over the future of UK pension transfers to the EU, time spent speaking with pension transfers expert could be very useful.

If you wish to speak with an experienced pension transfer expert who is keeping abreast of all the Brexit related pensions news, then get in touch with us. We’ll connect you with the right advisor for your specific situation to answer your questions and assist you with any pension transfer decisions you make.

Can you transfer your pension after Brexit?

The UK and EU are in agreement that pension transfers between the two countries will be able to continue after Brexit happens. For a set period at least, the terms of such transfers – a UK pension to an EU country or an EU-held pension to the UK – will continue to follow the current rules.

However, once this initial period is over and the UK is completely independent of the EU, new rules will likely be put in place. Because HMRC and the Government are keen for UK pension funds to remain in the UK, it’s possible any changes could include ways to encourage holders of UK pensions, to keep them invested in the UK.

That could mean a pension transfer tax, or additional costs for pension advisors and providers who offer the service of a UK-to-EU pension transfer.

So, while you may still be able to transfer your pension from the UK to an EU country in the early months following Brexit, possible future changes may mean it’s no longer financially beneficial to do so.

Will you be able to transfer your state pension post-Brexit?

The current rules around a UK state pension are that it cannot be transferred overseas. However, you can still access the payments made from your state pension, via your UK bank account.

This is not expected to change after Brexit and it’s also likely that the current agreement between the UK and the EU covering inflation-related rises to payments will remain in place.

What will happen to pension transfer values post-Brexit?

It’s never easy to offer any real certainty of what will happen in the future. In the case of anything relating to Brexit it’s even more difficult, simply due to the level of uncertainty over pretty much everything!

Having said that, there are still some suggestions as to what could happen to pension transfer values

For defined contribution pensions, either company or personal options, taxes and charges aside, transfer values should still reflect the amount that’s been paid into it and also, the gains made from related investments.

For defined benefit, or final salary schemes, however, the broadly held view is that pension transfer values, also known as cash equivalent transfer values (CETVs) could fall.

The reason for that post-Brexit outlook is that the investments typically associated with defined benefit or final salary pensions, for which pension transfer values are most often associated with, are expected to fall and become less valuable.

If the investments a pension are in become less valuable, then the transfer value of the defined benefit pension will also fall. If you were to keep your defined benefit pension, then you will still receive the final salary and other benefits detailed.

However, not everyone agrees with that assessment. Some experts suggest defined benefit pension transfer values could rise after Brexit, due to the weakness of the British pound and any action the Bank of England might take to support the economy.

To find out more about how Brexit could affect your pension transfer value, a chat with an experienced pension transfer expert, like the ones we work with, could be helpful. Contact us and we can put you in touch with an expert pension transfer advisor who has the right knowledge and experience you need.

Can you still complete a final salary pension transfer after Brexit?

At the moment, final salary, also known as defined benefits pension transfers to overseas QROPS are expected to continue. Although, charges and taxes associated with them and any CETV you’re quoted, could change now that Brexit is complete.

Company defined benefit pensions typically offer excellent retirement benefits including:

  • A guaranteed lump sum upon retirement.
  • Annual payments equivalent to a proportion of your final salary.
  • Inflation linked payments.

While CETVs in the wake of the vote for Brexit were high and many people opted to transfer out of their defined benefits pensions, the post-Brexit scenario isn’t so bright and many expect CETVs to fall.

While you will probably still be permitted to transfer out of your defined benefits pension and move the CETV into an overseas scheme after Brexit, it might not be the best financial decision.

The Financial Conduct Authority (FCA) has ruled that anyone with a defined benefits pension that’s worth £30,000 or more, must seek advice from a registered pension advisor before they make any transfer decisions.

If you have a defined benefits or final salary pension and have questions about a possible pension transfer to the EU, get in touch with us. We’ll connect you with an experienced pension transfer advisor who can answer any questions you have relating to a defined benefit pension transfer overseas.

Have the rules around teacher and NHS pension transfers changed?

People who have a teacher pensionNHS pension or police pension, are already no longer able to transfer their defined benefit pension to an overseas scheme or even, a defined contribution pension, or a Self-Invested Personal Pension (SIPP), except for in limited, specific circumstances.

That’s because these pensions are unfunded public sector pensions and aren’t underpinned by specific investments. Public sector workers who have these pensions are only permitted to transfer them if:

  • They have been in the role and collecting the pension for two years or less.
  • They’re planning to transfer to another public sector defined benefits pension in the UK.

That means that in most circumstances, an NHS, police or teachers defined benefits pension, cannot be transferred out of the UK to an overseas scheme. This is not something that is expected to change following Brexit.

Instead, holders will only be able to access their pension benefits through their UK bank account. This could mean that when lump sum and/or regular income payments are made, they could be hit by weak currency levels or any future new rules the UK may impose.

Speak to a UK pensions expert today

If you’re interested in finding out more about transferring your UK pension overseas, including the potential impact of Brexit, from an experienced advisor you can trust, call us today on 0808 189 0463 or make an enquiry here.

Then, you can just sit back and relax while we do the hard work of finding the right advisor for your needs.

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We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.

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Tony Stevens

Tony Stevens

Finance Expert

About the author

Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.

Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.

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