Brexit, Expats and Pensions

Brexit, expats and pensions

Brexit, expats and pensions have been headline news in March 2017 for two significant reasons.

  1. Brexit has been triggered by Article 50(2) and,
  2. The Budget 2017  introduced the OTC – The Overseas Transfer Charge.

Why would Brexit have anything to do with pensions at the best of times, but specifically what is the connection between Brexit, expat and pensions?

Gibraltar and the EEA rules is the answer and this could end up costing pension holders a lot of money in the future depending on negotiations. For example, UK expats in the EU may be approached to transfer their UK pensions to a QROPS within the EEA- namely, Gibraltar and Malta to avoid a 25% tax charge. However, how long will Britain and Gibraltar stay in the EEA?

This makes it higher risk than other alternatives. Additionally, given the lack of Double Tax Treaties that Gibraltar holds, one wonders whether this option is going to be worth consideration by most expats ( there will always be some advice-based solutions that would allow for Gibraltar but the new 30/70 rule, confirmed in April 2017- probably limits them ).

Brexit, Expats and Pensions

– The EEA

The Government on 30th March confirmed that Brexit included leaving both the EU and the EEA.

If we consider the situation where someone transfers a pension to an EEA state while being resident in the EEA, no OTC is payable.

But, what if the expat returns to the UK within 5 years? At the moment, no one knows what will happen over the next two years and so this is a real possibility for many.

If the expat returns to the UK, being a non-EEA country, will that cause them to lose 25% of their transferred pension to the OTC?

Brexit, Expats and Pensions

– The future

Contrary to what many offshore websites are suggesting, transferring to a QROPS while in the EEA is not the panacea it is being made out to be. If an expat has genuine reasons for transferring to a QROPS in the EEA and knows the move is permanent, whatever Brexit holds, that is one thing.

However,  it is not the end of the world if an expat transfers and finds that a return to the UK is unavoidable. The OTC is not applied on a transfer back to a UK registered pension within the 5 year period, even if the member then moves back to the UK after that or off to another non-EEA country.

Of course, the costs of moving a pension, to and fro, will be expensive and perhaps it would have been better if it had remained in the UK in the first place!

The views expressed in this article are not to be construed as personal advice. You should contact a qualified and ideally regulated adviser in order to obtain up to date personal advice with regard to your own personal circumstances. If you do not then you are acting under your own authority and deemed “execution only”. The author does not except any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

This article was published on 3th April 2017


Chris Lean

Chris is a Chartered Financial Planner who writes blogs and articles to simplify and explain some of the financial issues that affect UK expats. Subjects include; hot topics, regulation and the ever-changing world of finance.

Related Stories:
Advise Me

Share this story