Brexit is likely to linger on the european economy for some time and this will include British pensioners. With Rishi Sunak’s March budget quickly approaching, Peter Cranwell, an IFA at Purely Pensions, examined what could be forthcoming for retirees with Brexit outcomes in the year ahead.
Peter began by examining what may be announced in the March budget: “Although the Government will be looking to boost public finances and cut costs as the recovery from COVID-19 takes shape, pension reform is likely to be lower down the agenda.
“The Government has already confirmed the triple lock on State Pensions will remain in place in 2021-22, while the COVID- 19 vaccine rollout and avoidance of a No-Deal Brexit will give a boost to pension values and the savings pots of individuals.
“As most UK expats hold assets in pound sterling, stability created through the Brexit deal could cause pensions to surge in value by around 10 percent to 20 percent.
“Alongside this, news of the COVID-19 vaccine being approved in November 2020 caused the markets to rally, with stocks rising by 14 percent and recovering most of the losses they suffered in 2020.
“Together with the news of the Brexit deal, the wider vaccine rollout could even cause the FTSE 100 to hit an all-time high by the end of 2021.
“As a result, the Government will be under pressure not to make any changes that could affect the value of peoples’ pensions.”
While getting a Brexit deal sorted no doubt eased tensions among savers, Peter went on to warn British expats based abroad may need to get ready for some costly changes: “Regardless of the Brexit deal though, retired expats should still be prepared for potential changes to their pension due to Brexit.
“While the Qualifying Recognised Overseas Pension Scheme was a popular option that allowed non-UK residents to transfer their UK pensions into qualifying structures overseas, and tax-free if they live in the European Economic Area, this may no longer be possible.
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“There is a chance that the EU may introduce an additional tax on these transfers, meaning expats will no longer be able to reap the rewards of these structures and instead face higher charges to their pensions.
On December 31, the DWP detailed the Government does not expect the current rules on how the UK allows workplace pensions to be paid overseas to be changed as the UK leaves the EU.
For those who are still unsure, the Government urged retirees to contact their pension providers for additional information.
Additionally, if a workplace pension is paid into a UK bank account, the bank in question should contact holders if they need to change the way they receive their pensions after brexit.
In late December, a research briefing on brexit and private pensions was published and the following information on what to expect was laid out: “If you’re an EEA citizen, or a UK citizen living in the EEA, you could be affected if you have a UK provider who can’t continue to operate in the EEA after the transition period ends, although many UK providers are planning to continue providing you services.
“For example, many firms have transferred business to an EEA part of their group of companies, so they can continue to do business with you.
“If you’re an EEA resident currently using your UK bank account, your bank will let you know if it plans to close your account because of Brexit.
“If you’ve been told that your UK account is set to close, you should look to make alternative banking arrangements.
“You may be using your UK bank account to pay into or receive payments in relation to a pension, annuity, income drawdown, insurance, investment or savings product.
“If this is the case, and your bank has told you it will close your account, you should get in touch with your relevant product provider (insurer, pension or savings provider, etc) to check what arrangements need to be made.
“This includes telling your provider about your new bank details, so they can transfer (or receive) the relevant payments.
“We understand that many providers have the facilities to pay into or receive contributions from overseas accounts.
“We expect firms to contact you if you are affected or need to make any changes. If you have any concerns about whether you might be affected, you should contact your financial product providers.”