As 2020 continues to spin from one crisis to the next, Brexit seems to have faded into the background. After all, the UK has already left the European Union, and nothing seems to have changed dramatically in the interim.
This false sense of security may cause a big wake-up call come January 2021.
We are currently in the ‘Transition Period’, which runs up to 31st December 2020. During this phase, there are no changes to policies or procedures, which means it might feel like Brexit has fizzled out and disappeared from the front pages without the anticipated fireworks.
However, after the end of this year, changes are most assuredly coming. Chase Buchanan aims to provide guidance and support to ensure you know what those changes are likely to look like – and what you can do now to secure your financial future.
UK Expat Pensions in Europe – What’s Changing?
Millions of British nationals choose to retire abroad, and for a range of reasons. Better weather, better housing prices, a better quality of life and better tax regimes are all appealing options if you’re approaching retirement and are seeking the ideal way to enjoy your well-deserved golden years.
With Spain, Portugal, France and Cyprus among the most popular expat retirement destinations, Brexit looks set to put a permanent dent in those plans, unless swift action is taken.
What is likely to change? Here are some of the most vital considerations:
- Pension Transfers: Currently, you have several options for transferring a UK pension pot overseas. These choices depend on the country, and your type of scheme, but there are appealing options to reduce tax liabilities and avoid currency fluctuation risks. There is the potential for the UK to introduce huge 25% Overseas Transfer Charges to all overseas fund movements – thus taxing a quarter of your pension fund before you have drawn a single payment.
- State Pension Eligibility: As an EU/EEA member country, expats in Europe continue to receive their UK State Pension, including the annual cost of living allowance. Countries outside of the EU do not all offer such an option. It is therefore vital to understand how State Pension eligibility might change from 2021 onwards.
- Uncertainty for New Expats: For those already resident abroad, many impacts will be minor, such as potentially needing to renew a residency card. However, for prospective new expats and those approaching retirement, there is much uncertainty about freedom of movement, pension transfer options and taxes payable when retiring to Europe.
For more detail about changes to UK pension schemes for expats in Europe after Brexit, you can download our FREE Guide: UK Pension Schemes – The Impact of Brexit.
Preparing for EU Retirement Post-Transition Period
So, what actions are available to you? As it happens, rather a few.
Creating a future-proof strategy now is vital to ensure you don’t fall foul of changing tax treaties and pension entitlement legislation. Most changes will take effect from 1st January 2021, so if you have the option of securing residency beforehand, you might slip into current entitlements, and avoid needing to make any significant changes to your retirement plans.
Where new announcements are anticipated, they will also likely have an implementation period. Therefore, consulting a financial advisor or wealth management expert now could save a great deal of headaches in the future, while there is still time to consider the options that could improve your status in the future.
The urgency arises partly due to the scant time left before the Transition Period ends, and partly because of the timescales involved with making changes to your pension schemes and retirement assets. For example, pension transfers (such as transferring a UK private scheme to a Recognised Overseas Pension Scheme, or ROPS), take several months from start to finish.
By considering the implications of such a transfer as far in advance as possible, you have the flexibility to decide to proceed with a transfer – provided your advisor recommends this as the most advantageous option – with the assurance that the paperwork and transactions will complete in advance of regulatory changes.
What Other Retirement Implications Should EU Expats Consider?
Pensions are always a headline consideration, given the importance of securing your investment funds to see you through a comfortable retirement.
However, it is easy to forget the scale of Brexit, and how this could considerably change your position with regards to multiple cross-border assets:
- Inheritance and succession taxes.
- State wealth taxes on capital and property.
- UK taxes on British property.
- Currency fluctuation issues.
- Overseas savings and investments.
- Double tax treaties and tax residency status.
Brexit is an extensive alteration in the way the UK trades with the EU – and it is crucial to consider each and every asset, account, investment and fund to determine how Britain’s departure might impact that. For example, assets currently taxed on beneficial rates as an EU member state, may suddenly become subject to non-EU rates and restrictions.
Double tax treaties may change, be removed, or require separate applications and treatment to avoid paying duplicate taxes in both your home and host countries. Properties owned overseas might be taxed at source, or be taxed according to local tax regimes, depending on your tax residency status, level of income, and the type of property owned.
The fundamental point here is that, while Brexit may bring about far-flung changes, being prepared means avoiding any short, sharp shocks, and having the assurance that your assets are held in the most stable, safe and secure vehicles possible.
Expert Support for UK Retirement Planning
The Chase Buchanan team is committed to providing the highest-quality professional financial support for UK expats who are planning to retire abroad or are currently resident in an EU country.
Whether you are concerned about the solidity of your retirement plans, would like support with structuring investments and assets in alignment with your aspirations, or need to protect your pension fund in advance of Brexit, our teams are on hand to help.
Our FREE Guide: UK Pension Schemes – The Impact of Brexit explains all of the potential changes and a short-list of the most beneficial actions available to smooth your way through the end of the Transition Period. Download your free guide today, or contact the Chase Buchanan team for bespoke advice and tailored recommendations to secure your retirement in Europe.