Speaking to FTAdviser, Pinsent Masons’ head of strategic development for pensions Robin Ellison, said that under European Union rules around freedom of services and capital markets, anyone can in theory transfer pension benefits to another scheme within another member state.
“There are no legal obstacles, so long as the transfer is to a scheme registered on the UK pension system, although people may have issues depending on their native tax regime.”
He said the possibility may be particularly attractive to those living in places like Germany, Spain or the Netherlands, where pension rules are far less flexible upon retirement than those coming into force in the UK from April.
The European Insurance and Occupational Pensions Authority confirmed to FTAdviser that European savers can transfer to access their pension, but outlined a number of criteria set out in current rules.
EU citizens will need to set up residence in the UK, have a UK registered scheme willing to accept the transfer, and retain some “vested interest” in the UK, for example undertaking some work in the country. The transfer would also need to come from an overseas pension recognised by the UK tax authority as a qualifying overseas scheme, or Qrops.
A spokesman for the European regulator added that European citizens may be put off by the fact providers are not obliged to sell them an income product, there may be significant administrative fees, and that cash equivalent transfer value calculations may vary.
The spokesman also similarly raised the issue of tax, adding: “EU retirees who took their pensions would have to be careful on the tax treatment of their pension income, should they move to another EU Member State which comes under bilateral agreements/double taxation treaties.”
Mr Ellison noted a conceivable further barrier could come in the form of political pressure, noting similar reforms in Belgium 15 years ago that saw those in neighbouring Netherlands move across the border to free their pension pots, until an agreement was reached stopping the moves.
Tom McPhail, head of pensions research at Hargreaves Lansdown, said that he was not sure anyone has entirely thought this through yet.
“Logically it could happen and I believe that under EU legislation it would be quite hard to stop. This comes back to the problem that it has all happened so fast that there hasn’t been time to work through all the risks and unintended consequences.”
In a report looking at this issue, Towers Watson pointed out that the EU Portability Directive was finally adopted last April and member states have four years within which to transpose its provisions into national law.
Many countries impose requirements that need to be met for accrued pension benefits to be transferred, which may prohibit transfers altogether or allow them only when certain conditions are met, it added.
“We wouldn’t rule out the likelihood that others around Europe might be interested in investigating whether a transfer is possible – and, if so, whether this might be advantageous.
“However, whether this is possible and, if so, what the tax consequences might, be is going to be something that will vary from country to country,” a spokesman said.
Mr Ellison explained that in the EU there are different rules in each member state and most allow transfer to personal pensions or an industry-wide scheme.
“Domestic tax rules may not be used to place a barrier on the free transfer of pension rights, this has been established in a string of European Court of Justice cases. It is true that some workplace pension schemes may put a barrier on transfers-out and that for the moment is still legal, although the EU is looking at freeing up workplace transfers.”
peter.walker@ft.com
