How Brexit has affected retirement plans for many Britons

Brexit has had implications for many different people based in the UK and abroad, but arguably some of those hit hardest by the changes are those within the expat community. While some people engaging in expat retirement planning have thankfully remained largely unaffected, there are many expats who may have to rethink their plans based on the changes made after the UK left the bloc.

We’ve taken a closer look at how Brexit has affected retirement for expats to help you get a better understanding of whether these changes could impact on your plans for the future.

Travelling in the EU

If you were hoping to split your retirement between two or more countries, changes prompted by Brexit could have an impact on your expat retirement planning. Changes to shorter visits have been relatively small, with travellers still allowed to spend 90 days within the Schengen zone during any 180-day period without the need for a visa. This means retirement for expats who want to spend no more than 180 days per year abroad — split across the year — will be unaffected by the changes. Similarly, the only changes to passport rules that could affect expat retirement planning is that they must now have at least six months remaining validity and your passport must have been renewed within the past 10 years.

Unfortunately, for multi-national expats or those considering a dual-country retirement plan, these changes are likely to have a significant effect. This is particularly true of those who have already invested in property overseas in advance of their retirement. Specifically, the new rules state that anyone who owns a holiday home in the European Union is no longer allowed to simply come and go as they please. In fact, those who live within the zone for more than 90 days at a time within the stated 180-day period could be fined or even banned from entering the Schengen zone as a result of flouting the rules.

Unfortunately, the only way around this problem post-Brexit is to apply for the correct visas. Each country will now have its own rules, so you must take the time to research the entry criteria for the country you wish to live in or visit before travelling. Sadly, this exercise can be both time consuming and costly, and in some cases you may even be required to apply for full residency before you will be allowed to visit your overseas property on your own timeframe. While this is certainly an option for some, it does mean that you will need to forego a number of rights in Britain, including no longer being allowed to pay UK taxes and subsequently forfeiting any rights to NHS care or other state provisions.

Pension changes following Brexit

Arguably the most important retirement consideration for expats and UK residents alike is pension planning. Without a pension, it is unlikely that you will be able to afford to retire or to live where you wish once you have given up work. Following Brexit, there have been a number of changes made to the way pensions work, so it is important to find out whether they affect you.

State pension

Your UK state pension can be paid into any bank account, including an overseas account. If you are banking abroad you will simply need to provide HMRC with an international bank account number (IBAN) and bank identification code (BIC) to confirm your identity and the validity of your account. Once this is confirmed, you will then receive your pension in your local currency. This can impact on the amount you are paid due to exchange rates, so if you are a multi-national expat you could consider having your state pension paid into a UK account, should that option leave you financially better off.

As was the case before Brexit, in order to claim your state pension you must be within four months of your state pension age. This is slightly different depending on you circumstances, but you can check you eligibility via HMRC if you are unsure. Your pension can only be paid into a single country, so select the destination of your funds carefully when you apply. Remember — if you move to a different address before retiring you must update HMRC beforehand to ensure you are informed when you are eligible to apply for your pension or you may face delays.

Private pension

Thankfully, Brexit is looking set to have minimal impact on private pensions. This is largely due to the fact that HMRC operates a qualifying overseas pensions scheme (QROPS) list that allows free pension transfers to recognised schemes based abroad. Under the QROPS rules, expats can transfer money to an overseas scheme without facing tax as long as your chosen scheme meets certain criteria:

  • It must be recognised: Your chosen scheme must be recognised for tax purposes in its jurisdiction, and it must be registered with the jurisdiction’s tax authority. It must also be open to all people living within the area and tax relief must be offered on member contributions.
  • It must be regulated: The scheme must be regulated by the local pensions regulatory body in the jurisdiction where it is based.
  • It must be recognised abroad: The scheme must be recognised overseas, and the same tax rules on pension benefits must apply to both tax residents and non-residents alike.

One benefit of moving to a QROPS is that the scheme can be based in any country. As a result, you can choose to hold your pension in a private pensions scheme based in a tax-free jurisdiction, and thus reduce your tax liabilities. You may also have the option of enjoying this tax-free growth beyond the UK’s lifetime allowance limit, which means you can save even more before you begin withdrawing from your pension pot.

Monitoring your bank account

Even if your pensions are likely to be unaffected by Brexit, it is important to consider the impact Britain’s exit from the bloc could have on your bank account. Many UK-based pensions, including your state pension, are paid directly into UK bank accounts. However, there are some banks who are now closing UK bank accounts for expats who are living overseas.

If you have been given notice to this effect then you have two main options: you can move to a bank account that operates in the country you live in or you can speak to your pension provider to see if they will pay your pension into a foreign bank account. Often, both options are possible and it’s simply a matter of choosing the right path for you. However, should you find that neither works for you and your circumstances, you can request that your pension provider sends payments via a check to your home address in your new country of residence.

How should you move forward?

While we hope our advice has helped to shed some light on your options, it is important to gain expert guidance before making any decisions about your future. ExpatRoute suggests all expats who have retired or are planning to do so should seek independent financial advice. With personalised guidance, you could avoid all pitfalls associated with Brexit and enjoy the stress-free retirement you had always planned.

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