Retirees are the biggest group of expats living in France, and the back and forth on the terms of a Brexit deal, and even whether there will be a deal at all, makes it difficult to make financial planning decisions. Here’s a look at the possible repercussions on the possible changes for UK pensions in France after Brexit.
Expats who rely on a pension paid in sterling suffer a blow whenever the pound is in crisis, but this is true even before Brexit and most pensioners are already used to exchange rate fluctuations and have secured a forward contract with a currency broker to protect their pensions from such fluctuations.
The main concern is whether or not a future UK government will abandon the ‘triple-lock’ agreement by which anyone who retires to a country within the European Economic Area sees their UK pension rise in line with inflation, earnings or by 2.5% – whichever is the higher. Uprating will probably continue if the UK agrees a withdrawal agreement with the EU, according to the BBC, depending on the terms agreed.
When a British state pensioner moves to live abroad their pension is frozen unless they move to an EU country, where currently uprating must be applied under EU free movement and social security coordination regulations, or, if outside the EU, to a country that has a reciprocal agreement. Such is the case with the US, Jamaica, and Israel, for example. Residents in other places do not benefit from uprating such as Australia, Canada, New Zealand and South Africa.
This ‘triple-lock’ agreement between the UK and the EU would end after Brexit unless expressly included in an exit deal, and it would be up to the UK Government to decide whether British pensioners in Europe should continue to enjoy triple lock protection (which protects other social security payments as well as pensions). The difficulty in case of a no-deal exit would be that the mechanism would have to be negotiated with each individual member country. As France does not freeze the pensions of its retirees abroad, it is expected that a reciprocal deal would be likely.
As regards state pensions, the UK Government announced that British pensioners living abroad in the EU will be uprated in April of 2020, 2021 and 2022 even if there is a no-deal. During the 3-year period, the UK government said it plans to negotiate a new arrangement with the EU to ensure that uprating continues.
Another complication brought by Brexit is claiming a pension in France with some of the years worked in the UK. Currently a single claim can be co-ordinated by French authorities, but in case of no deal then further negotiations would be needed. A similar case concerns time worked in France which is currently counted towards the minimum years required to claim a pension in the UK, which would also have to be revisited in case of no-deal.
Currently, most retirees can transfer to a Qualifying Recognised Overseas Pension Scheme or QROPS to France completely tax-free (there are exceptions), but after Brexit this advantage would not be guaranteed. The government has stated that the tax-free status would be dependent “upon the terms of future exit agreement between the UK Government and the EU”. If you are near or considering transferring, consult with a professional to see if it might be advisable to act on it quickly before the exit date.
This guide is provided for general information purposes only and does not intend to be a substitute for professional advice. We encourage you to consult your estate agent, legal or tax adviser.
[Last updated in November 2019. Originally written in July 2016 by Miranda Ingram]