If you are currently one of in excess of 220,000 people living overseas with a UK pension, you will be pleased to hear that you will continue to receive your pension whatever the outcome of Brexit.
Your concern should be what your pension will be worth as time goes on. The UK currently has an agreement with the European Economic Area (including EU countries as well as other countries) under which residents living abroad in these countries see their state pension rise at the cost of living. UK residents living in such countries therefore see their pensions rise annually in line with the triple lock (i.e. by the higher of average earnings, inflation or 2.5%), as they would in the UK.
The intention is certainly for this to continue, but with a ‘no deal’ Brexit on the horizon there is a possibility that the UK Government may need to liaise with each individual country to reach new agreements. The only alternative is that UK pensions would continue to be paid to those living overseas, but the pension level would be frozen. This is currently the case for some UK pensioners living in Canada, for example.
A no deal Brexit without any agreement would also have a bearing on private pensions. Any UK insurance company paying an annuity to a UK ex pat in Spain, for example, would no longer be authorised to do so. Clearly investment organisations need to come up with some sort of alternative to get around this, such as the creation of a subsidiary within the EU through which they could keep paying into a European bank account.
If these issues are likely to affect you, it would be advantageous for you to contact your investment organisation and check what your pension provider plans to do and whether your payments will continue in the future.
The Association of British Insurers is clearly investigating matters carefully and it feels that cooperation between the UK and EU regulators could rectify the issue and allow people living abroad to continue drawing private UK pensions post-Brexit.
The UK Government has said that it will give temporary permission for financial firms in the European Economic Area to pay people in the UK post-Brexit. For example, a Spanish pensioner living in the UK or someone who has worked in Europe but intends to retire in the UK will not have the same problem as a British ex pat living in Europe – at least not in the short term.
If you have retired and you plan to remain in the UK you may feel that Brexit will not affect you. However, this may very well not be the case as the impact of Brexit on the UK economy and UK pensions policy could affect the value and sustainability of UK workers’ pensions.
Any fall in interest rates or company profits could put pressure on employers’ final salary schemes. Other workplace pensions (known as defined contribution schemes) depend on the performance of investments. Any fluctuation in the stock exchange could affect the value of pension pots and the retirement income annuity that can be bought with them. A considerable proportion of pension savings is of course invested in secure government bonds as individuals approach retirement, but the value of these would also be relevant.
Anyone with a pension pot can now access it in different ways from the age of 55, which has meant that many people have left their savings invested for longer than they would have done normally. However, if investments are hit and people receive a smaller payout in the short term, they may have to work for longer.
For further reading on this subject, we recommend this article from the BBC.
These notes are intended for information purposes. They are not a full statement of the law and should not be relied on as specific legal advice.