Technical Update

Brexit Update

globe icon Brexit

With Brexit day looming (or possibly not) TPR has issued a statement setting out the steps that it considers trustees and sponsors should be taking. The statement references earlier guidance provided in 2016 and 2018 which, amongst other things, points out that trustees should consider any implications for scheme investments and whether the strength of the employer covenant is affected.

It also points to the need for contingency planning in the event of a ‘no-deal’ Brexit, and confirms that further guidance on how it expects trustees to manage potential risks will be included in its 2019 Annual Funding Statement (due to be published in March).

The statement also references DWP guidance in respect of the payment of pensions in a ‘no deal’ scenario. This guidance states that UK nationals living in the EU will still get their State Pension but casts an element of doubt on whether these pensions will be updated.  The government is committed to providing increases in 2019 and 2020, but beyond that, increases are dependent on the agreement of reciprocal arrangements with other EU countries, under which they increase British pensions and the UK increases the pensions of EU pensioners living in the UK.

In respect of occupational pension schemes, the DWP does not foresee any problems with pension payments continuing to be paid to British pensioners living in the EU.

Similarly HMRC has published a Partnership Pack: Preparing for Changes at the UK Border After a ‘No Deal’ EU Exit. The document advises firms on how to prepare for a no-deal scenario and re-emphasises the importance of being prepared for all eventualities. As with the DWP guidance, there does not appear to be any specific impact on pension payments to the EU. However, we are in unchartered waters, and therefore Premier and its pension payment partner have explored the possible issues and any steps that may need to be taken.

The critical issue is that double taxation agreements are between countries, rather than between the UK and the EU or the EU and third countries. As a result, these double taxation agreements should hold under most Brexit scenario’s and pensioners should continue to receive their pension payments as normal. We will continue to follow the situation closely and provide an update if this is unlikely to be the case.

Premier’s payment partner does not foresee any noticeable differences in the way they service client’s. They have “passported” their license to the UK and across the EU, where they operate as an ‘EEA Branch’ of their UK business. In anticipation of Brexit they have applied to the FMA and the UK Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) for their UK business to be licensed as a “Third Country Branch”.  This should enable them to operate under all eventualities (a) No Deal (b) Transition Deal Approved (c) No Brexit.  If this changes a further update will be provided.

Adam Simons

Senior Consultant