EU Expats Living in the UK may face HMRC Pension Transfer Block

In a surprise move by HMRC, French and Italian expats working and living in the UK are to be blocked from transferring their pensions to their home countries should Brexit force them to leave the UK.

All French and Italian pension schemes on HMRC’ list of permitted international schemes have been removed in an unexpected move by the UK’s financial watchdog. Last month’s HMRC list of accepted overseas pension scheme showed 19 Italian and seven French pensions, all of which had disappeared from December’s updated list.

The move blocks all French and Italian expats living in the UK from transferring their investments back to their home countries, and is considered especially worrying for French and Italian nationals either wishing to return home or being forced out due to Brexit. As is normal, when asked for the reasons behind the deletions, a spokesperson from HMRC declined to explain, giving the scripted answer that ‘we do not comment on identifiable schemes or jurisdictions’.

Industry professionals have their own explanations for the regulator’s move, beginning with HMRC worries over pension cash flowing to offshore schemes which may not be compliant with UK rules. One especial concern seems to have been certain schemes which allow the taking of pensions cash before the age of 55, an option which attracts heavy tax charges in the UK.

French household name schemes now removed include some provided by Axa, Swiss Life and UK-listed Aviva, possibly because French law allows pension cash to be taken before the 55-year cut-off. However, this law only applies in cases of exceptional hardship such as serious illness or unemployment.

Insurers believe the move will have a significant impact on savers planning to move their pensions to either France or Italy. UK pension savers planning to move to either country on retirement are also expected to be hit, as transfers of pensions cash are now effectively blocked on a permanent basis to those schemes. There is no blockage however on transferring funds to a third-party jurisdiction.

Per experts, around 1.5 billion GBP of pension money was transferred offshore last year, although it is almost impossible to calculate how much of the sum ended up in Italy and France. Some 300,000 French and Italian workers in the UK are expected to be affected, their only option now is to transfer to third party jurisdiction schemes such as Malta or Gibraltar.