British expat retirees in Cyprus confused by pension payment options

British expat retirees in Cyprus confused by pension payment options

British expat retirees in Cyprus confused by pension payment options

British expats who’ve made their new lives in Cyprus are unable to relax due to continuing Brexit uncertainty.

Cyprus has always been a favourite with British expatriates, perhaps due to the years when it was a British possession. Their worst nightmare is that no-deal will really mean no-deal some time in the very near future, and their carefully-planned lives will begin to unravel as a result. The same fears are causing sleepless nights for older Brits who’d planned to spend their retirement enjoying the island’s warmth, its friendly locals and its spectacular beauty.

A major worry now exists for those about to retire on a work-based pension as well as the state pension. The combination gives them enough monthly income to feel secure against unexpected health problems as well as allowing for life’s little luxuries and regular visits to family in the home country. Of course, the state pension will still be paid as usual due to a deal made last year between the British and Cypriot governments which safeguards the state pension even if the UK crashes out of the EU without an agreement. Those looking to apply for their state pension are also safe, as the necessary arrangements will still be able to be made, but arrangements for the private pension payments necessary for a comfortable retirement are another story.

In the case of a no-deal Brexit, unless previous arrangements have been made, a number of UK-based pensions will not be paid as UK pension providers will have lost the right to operate in the remaining EU member states. In addition, a problem common to both pensions is that they are paid in sterling. On top of the fall in the pound’s value since the referendum result was announced, a further drop is inevitable should a no-deal Brexit be the final result, cutting sharply into the spending power of Cyprus’s euro currency when it’s exchanged with the pound.

For those worried about the exchange rate, it’s possible to take private pensions as cash and, due to the Cyprus double tax treaty with the UK, pensions cash isn’t taxed on the island. Unfortunately, if you take out the entire pension pot as a lump sum, 75 per cent of its value will be taxable in the UK. Another alternative is to transfer your savings to a fund not threatened by Brexit but, If you decide to go down this route, extreme care should be taken as to your choice of financial adviser.

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