Telling it like it is on post-Brexit annuity payments and SIPPs

For British expat retirees in EU member states, the position as regards annuity payments and SIPPs post-Brexit has been as clear as mud.

For Britons already retired in EU member states as well as those approaching retirement and planning to head overseas, the ongoing confusion about pension payments has caused stress and fear. Advisors can only offer ‘what ifs’, as negotiations don’t seem to have even touched on the effect on expat pensioners of insurers losing their present-day passporting rights. If there have been such discussions, the results haven’t been shared with those who need reassurance before they decide what to do next with their lives.

On the other hand, press coverage of expat dilemmas has been ongoing, especially for those with annuities from UK-based insurance companies. It’s not good news, as from 29 March next year it’s unlikely accessing annuity income will be possible. It’s not that the contracts will become non-valid, it’s that the provider will not be authorised to undertake insurance activities in EU member states.
The impact of not being able to honour its contracts with expat pensioners is as yet unknown, but the impact on those not able to receive their monthly cash is obvious. The only way out seems to be for insurers to establish legal entities located in and authorised by EU laws. As regards SIPPs, the government’s already released guidance paper fails to cover payments of taxable income originating from a UK pension scheme to expats tax-resident in EU member states.

At present, such income is paid under a double taxation agreement between UK expats’ countries of residence and the UK itself, thus ensuring the recipient is only taxed once, normally in their country of residence. So far, nothing has been said that would force a change to this, but the process of remitting money to an EU state would take longer and will be more expensive. However, SIPPs may be impacted as regards the investments held, again by the withdrawal of passporting rights post-Brexit. Currently, UK-based fund managers can passport to EU member states, thus allowing expat residents to invest in UK-based funds. If a hard Brexit is the final result, this will no longer be possible, leaving EU-based British investors unable to access UK-domiciled funds. Apparently, the UK government is committed to providing a temporary permissions regime aimed at allowing EU advisors to passport into the UK, but the EU has failed so far to agree to reciprocate. As a result, fund managers at present operating out of the UK are applying precautionary measures by setting up EU-based offices and seeking authorisation.