Investors are concerned about the impact of Brexit on their pension entitlements should they move to another country.

In particular, there are major concerns from EU nationals who have worked in the UK for a number of years and built up substantial private and state pension entitlements.

They are worried about losing some or all of the pensions they have built up, should they be forced to leave the UK following Brexit.

Don't panic

The indications from the main political parties and their European negotiating counterparts suggest EU citizens who currently live
and work in the UK will not be forced to leave.

And when it comes to private pensions, whatever you have built up belongs to you and therefore whether or not you move to a different country should have no bearing on your retirement pot.

If you have a defined benefit or ‘final salary’ pension plan – providing a guaranteed annual income based on your salary and years of employment – the contract is between you and   your employer.

Provided the company sponsoring the scheme continues trading, you will receive your pension in exactly the same way regardless of where you live.

If it is a defined contribution scheme, the pot of money belongs to you and you can decide what to do with it. If you do move to another country you could leave the money invested in your UK plan or, if you’re aged 55 or over, you could start taking an income.

Provided you move to a country which has a ‘double tax treaty’ with the UK, your money will only be taxed once in the country where you reside. The UK has 130 such deals with countries around the world. You will also maintain your entitlement to 25% tax-free cash from age 55.

Paying out your private pension

Whether you have a defined benefit or defined contribution pension – or both – you’ll need to check whether your employer or provider will pay the money directly into an overseas bank account, and if any extra charges will apply.

Alternatively, you could ask for your pension to be paid into a UK bank account and then withdraw your money with a debit card abroad, or transfer the money yourself into a foreign account.

If you want to alleviate the risk of currency movements creating volatility in your pension payments you might want to consider moving your UK defined contribution pension into a Qualifying Recognised Overseas Pension Scheme, or QROPS.

The tax rules governing these schemes are quite complicated and the charges can be high, however, so speak to an FCA regulated financial adviser first.

What about the state pension?

Just as your private pension entitlement belongs to you, so does your state pension entitlement as long as you have 10 years or more of qualifying National Insurance contributions.

The actual amount you receive will depend on both your number of qualifying years and whether or not you ‘contracted out’ of the State Earnings Related Pension (SERPS) or State Second  Pension (S2P).

You can choose to have your state pension paid either into an existing UK bank account or an account in the country to which you have moved.

One grey area

The one current area of real uncertainty surrounding your state pension relates to future increases in the amount paid.

In the UK, the state pension rises in line with the highest of average earnings, inflation or 2.5%, known as the ‘triple lock’. This may well be scaled back in the near future, but it will still likely benefit from a ‘double lock’ to earnings or inflation.

Membership of the EU means at the moment anyone who retires to the continent continues to benefit from the ‘triple lock’.

However, it remains unclear whether this will continue to be the case after Brexit – although the Government has strongly hinted it expects to reach a deal on social security payments, including pensions.

There is no doubting we are living through a period of huge political and economic volatility.  And while pensions are not immune to these challenges, you can at least be confident the savings entitlements you have already built up will still be there when you reach retirement.

Tom Selby,

Senior Analyst, AJ Bell

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