Expats have a Brexit pension dilemma as the clock ticks down to the UK leaving the European Union.
The likely scenario is Britain will officially leave the EU on March 31, 2019 but will remain in a limbo transition period until December 2020.
For expats in Europe, the dates are a knife-edge for QROPS pensions.
No one really knows if Brexit will impact on Qualifying Recognised Overseas Pensions (QROPS) for expats.
QROPS were introduced in April 2006 to comply with EU freedom of movement for capital rules to let expats port their pensions as they moved around the bloc.
Will QROPS benefits equalise with UK pensions?
The pensions come with features and benefits that exceed those offered by UK onshore pensions.
The likelihood is the government would want to equalise these benefits after Brexit, and that’s unlikely to happen by hiking UK pensions to meet the standards set by QROPS.
These benefits include a tax-free lump sum of up to 30%, no lifetime allowance savings limit and payments in one of several local currencies.
Another possibility is the government leaving QROPS rules as they are but extending the overseas transfer charge to cover Europe.
Currently, if expats move their pensions to a QROPS in a European Economic Area country, they do not pay the charge regardless of where they live in the EEA.
Outside Europe, expats must live in the same country as their QROPS is based to avoid the charge.
Budget footnote
If not, they must pay over 25% of the fund they transfer to HM Revenue & Customs.
Expats have a major retirement saving decision to make – transfer now and see the rules change in the future or don’t move and see what happens.
The second option could mean losing the financial advantages of a QROPS.
Whatever happens, the government is likely to leave QROPS alone for the 110,000 or so expats who have switched an estimated £10 billion to one of the offshore pensions since 2006.
But do not expect to see QROPS covered in the Brexit agreement – their future will probably come as a footnote in the 2021 Budget speech that tidies up loose financial ends after Britain finally leaves the EU.
