How will a no-deal Brexit affect my pension as an expat in Poland?

In the wake of Theresa May’s resignation and the likelihood that her replacement will come from the “brexiteer” side of the Conservative party, I thought that it would be worth looking at the implications of a no-deal Brexit on pension payments for expats in Poland.

The first thing to be clear on is that, irrespective of the nature of Britain’s exit from the EU, those living in Poland or elsewhere in the EU will still receive their pension payments.

The issue lies with exactly how much these payments will be worth and how they will be paid.

State pension

Currently,  state pension payments for UK nationals living in Poland/the EU rise in line with increases in the cost of living (also known as the triple lock).

What is the triple lock?

Introduced in 2011 by the coalition government, the triple lock guarantees that the basic state pension will rise by a minimum of either 2.5%, the rate of inflation or average earnings growth, whichever is highest.

There is frequent speculation that this lock might be watered down as it is incredibly expensive for the government to maintain. However, there is a commitment to keep it in force for at least the duration of the current parliament.

Brits retired in most countries outside the EU do not benefit from payment increases in line with the cost of living. Once they retire, their payment levels are frozen.

In the event of a no-deal Brexit, there is a risk that payments to those retired in Poland or other EU countries will be frozen too.

Personal pensions

In the event of a no-deal Brexit, it is possible that anyone in Poland who is getting an annuity payment from a UK insurance company will no longer be able to receive those payments directly.

This is because the insurance company would not be authorised to make payments to bank accounts in the EU and would risk a fine for doing so.

To get around this, they would need to set up a subsidiary in the EU or make a deal with a European counterpart; all of which takes time.

They could make payments for people living in the EU into a UK bank account if the individual in question has one.

But with a no-deal Brexit, the cost and difficulty of transferring those funds on to a bank account in the EU could be greater.

Actions you can take now

  • Speak to your current pension provider to find out what plans they have in place for Brexit.
  • Investigate whether transferring your UK pension to a QROPS or international SIPP would be a worthwhile option for you.
  • A lot rests on your individual circumstance, i.e. where you live now and where you plan to retire (if you haven’t already retired). Therefore, it would be worth understanding how taxes in both of those countries can affect your pension plans.
  • Make sure that your personal or employer pension is invested in a globally diversified portfolio and not heavily exposed to the UK as most are (also known as home country bias). By doing so, you can cushion yourself against possible exchange rate fluctuations.
  • Have sufficient cash resources available, so that you can withstand some disruption if you are already living of pension payments.

If you are already retired or are planning to retire in Poland, I would be happy to talk through your options with you.

Whether you are looking for advice on pension transfers or simply want to make sure that your pension arrangements are in order, feel free to book a time and date for a chat.