What’s Happening To Expat Pensions Post Brexit?
One of the most unpredictable outcomes of Brexit is the state of expat pensions. How is Brexit going to impact expat pensions in 2021?
How Brexit Might Impact Expat Pensions
One of the biggest issues facing the state of pensions belonging to UK expats is the degree of uncertainty regarding the matter. In Spain many expats are in two minds on various issues regarding Brexit. Amongst those issues is the fact that many UK residents own second homes in Spain while both countries share an uneasy truce over Gibraltar.
There are also voices claiming that Brexit may force many expats to return home, which is a likely part of Brexit’s multi-layered strategy. What can be said with certainty is that in order to qualify for a full state pension, 35 years of national insurance contributions is required, while a minimum of 10 years will still get you something. In the past, working in the EU meant that pension contributions continued and the same was vice versa for EU citizens working in the UK. As of the finalisation of Brexit this all stands to change, although the UK government is keen on a deal that will ensure that things remain business as usual, mostly.
Can Expats access their private pensions now?
The immediate response is, hard to say. Now that Brexit has been finalised, word has gotten out that certain banks will be closing their doors, only creating more uncertainty. For instance, it’s possible that a number of UK pension providers may stop making payments into EU bank accounts. The same thing can be seen in reverse with some UK banks closing expat accounts.
As if this information isn’t enough to cause anxiety and further fan the flames of uncertainty, then the predicted shifts in the currency value of the pound is sure to do just that, especially for retirees. A shift in the value of the pound can slightly and even significantly impact the lives of those living abroad. Suddenly eating out five times a week becomes only eating out three times a week, maybe even just twice. The uncertainty of Brexit’s impact on expat pensions means it might be time for those affected to diversify their financial portfolios. Some may go so far as to seek out income streams from Forex and online trading.
Some light at the end of the tunnel
It does however appear that there might be some light at the end of the tunnel as both the UK and EU governments have reached an agreement regarding pension increases. As part of the agreement, British pensioners residing in the EU will continue to receive the annual state pension increase – for 2021 it’s 2.5%. This agreement is also applicable to those residing in Norway, Iceland, Liechtenstein and Switzerland – all part of the European Economic Area.
Those who stay in countries like Australia, Canada, New Zealand and the US will not be entitled to the increase and can thus expect the value of their pension to decrease over time. This will emphasise the importance of financial portfolio diversification solutions to ensure they optimise their investment income. For sophisticated investors online trading may be an option. Examples include CFD (Contract For Difference) trading or speculative trading, which means that instead of buying stock, traders predict whether an applicable stock or a currency for that matter will rise or fall.