The Government has said it ‘alive’ to the risks Brexit could pose to expat pensions after starting talks with the industry over safeguards.
The chair of the influential Treasury select committee Nicky Morgan wrote to Chancellor Philip Hammond last month sounding a warning over the future of long-term pensions and insurance policies that are currently sold by UK companies throughout the EU, whose passporting rights could be hit by a sharp Brexit.
In her letter, Morgan asked the Government to clarify its position and called on Hammond to raise issues such as insurers paying out on cross-border contracts with EU officials.
She wrote: “The possibility that UK providers may not be legally able to pay out pensions or insurance contracts to citizens in the EU — including UK expats — is a stark example of the consequences of a cliff-edge Brexit.”
Hammond has now replied, saying that “the Government is alive to the risk that the UK’s withdrawal could in some cases create legal uncertainties as to the status of existing cross-border insurance, pension and other financial services contracts sold under passporting arrangements.”
“The Government has been actively engaging with the financial services sector – including the insurance and pensions industry – to understand how the UK’s exit from the EU could impact financial services firms and their customers, including through the effect of withdrawal on existing contractual relationships.”
Hammond reiterates his hope that the Government will negotiate: “a time-limited interim period, to provide certainty and avoid a cliff-edge for business and individuals during the transition from the current structures of membership to the new relationship.”
He adds: “These arrangements should be designed so as to ensure that businesses do not face two sets of changes as we adjust from our current relationship with the EU to the deep and special partnership that we are seeking to secure.”
Industry bodies such as the Association of British Insurers have been vocal on the need for clear rules post-Brexit on cross-border contracts. Unless transitional arrangements are extended, they would not last not enough to safeguard rights for many long-term products.