UK retired expats could see their pension payments stopped as they are deemed illegal under a no-deal Brexit outcome, the Association of British Insurers (ABI) has warned.
Speaking yesterday (24 July) in Parliament at a hearing of the Exiting the European Union committee, Huw Evans, ABI’s director general said the issue needed to be addressed urgently as part of the withdrawal agreement arrangement.
He said: "A no-deal situation would leave insurance contracts in a legal limbo, where insurers would be unclear if they could legally pay claims for contracts that have been written pre-Brexit, which would have to be paid out in countries in the European Union [EU].
"Because in many countries in the EU, if you’re not authorised to transact business there, then it is illegal to pay a claim, to fulfil a contract."
Mr Evans noted this also applied to expat pensioners.
He said: "If UK citizens retire to a EU country and they have an insurance-based pension, which is paid to them in the domestic bank account of the current country in which they reside, that may also be deemed illegal if there is no arrangement found for this problem."
According to figures from the Office for National Statistics (ONS), there are 900,000 Brits currently living in the EU, of which 112,000 live in Ireland. Of these, 220,000 are aged 65 plus.
Mr Evans said the problem could be resolved, but it required regulatory cooperation and political agreement to do so.
He said: "Up to now the European Commission and [the European Insurance and Occupational Pensions Authority] Eiopa, the European regulator, have refused to engage in those discussions because of the overall state of negotiations.
"Each EU country has different arrangement around this. We aren’t saying this is a blanket risk across all 27, but it is a classic issue of the type that requires regulators, with political blessing, to sort the issue out themselves."
This potential problem will only be an issue in 2021 since the government announced yesterday (24 July) that European rules will continue to apply to the UK until the end of 2020.