Current pension and healthcare rights may survive Brexit

It may be early days in the Brexit negotiations, but so far there is some reassurance for expatriates living in Portugal and other EU member states.

On June 26, Theresa May’s government published what they called a “fair and serious offer” on EU citizens’ rights after Brexit. While this focuses on residency and benefits for EU nationals in the UK, it also pledges to protect existing pension and healthcare provision to Britons living in Europe.

The Prime Minister confirmed that, so long as mutual agreements were in place, “the UK will continue to export and uprate the UK State Pension and provide associated healthcare cover within the EU”.

What this means for pensions

Currently, Britons living in most countries outside the European Economic Area (EEA), such as Canada and Australia, have the value of their State Pension payments frozen when they leave the UK permanently. Meanwhile, retired expatriates within the EU/EEA are eligible for annual increases in line with the government’s ‘triple lock’ commitment – whichever is highest: the rate of inflation, earnings or 2.5%.

Theresa May’s offer to “export and uprate” the State Pension means British pensioners living in the EU post-Brexit can expect to continue receiving increases in their State Pension payments each year. Increases are set to stay linked to the triple lock until at least 2022.

While this is clearly encouraging, most expatriates do not rely solely on their State Pension to fund their retirement. It is important to consider how your other pensions, savings and investment income can provide for your future, and how they may be affected by Britain leaving the EU.

What this means for healthcare

The UK’s offer on citizens’ rights also provides some comfort that existing entitlements to free healthcare may continue for Britons in Portugal after Brexit. The proposal states the government will “seek to protect” current healthcare arrangements. For expatriates, this means healthcare costs would continue to be reimbursed by the UK through the S1 system (or similar), and that holders of the European Health Insurance Card (EHIC) would remain eligible for free or reduced healthcare when visiting another EU country.

However, this is subject to negotiations and depends on the EU27 making similar guarantees for their nationals living in the UK. You may prefer to secure peace of mind, whatever happens, by lining up private health insurance for your family.

The path to securing agreement

Of course, this is just the opening gambit of Brexit negotiations and there are no guarantees that what the Prime Minister is proposing will be accepted by the other EU member states. She has made it clear that her offer only stands if she can secure a reciprocal deal with the EU27 that they will provide similar concessions to their citizens living in the UK.

Crucially, both sides agree that securing reciprocal rights for citizens is an absolute priority.

Earlier in June, the EU27 pledged a lifetime guarantee of UK citizens’ current rights in the EU – so long as Britain could match the terms. Some feel that the UK government’s formal offer falls short of this. One sticking point on securing agreement is likely to be who has the authority to guarantee the rights of EU citizens in Britain. Theresa May has rejected the EU27 demand for the European Court of Justice (ECJ) to have jurisdiction, insisting British law should apply.

How best to prepare

Despite agreeing that citizens’ rights are top of the agenda, it could take some time to iron out the full post-Brexit terms. Meanwhile, up to the date Britain leaves the EU – on track for March 29, 2019 – there will be no change in your current rights and freedom of movement.

However, the final terms of any new reciprocal agreements could prove less favourable for expatriates than today. With under two years of certainty left, now is the time to review your residency, estate planning, investments, pensions and general tax planning options.

As well as securing your position, this can enable you to identify and take advantage of current opportunities that may have a limited shelf-life, such as transferring your private UK pension funds without paying UK tax. Given these unchartered waters, it is also sensible to look into the best currency mix for your investments and make sure you have a diversified portfolio – not overly exposed to UK assets – that can weather any Brexit turbulence.

Speak to a regulated professional adviser about your options for future-proofing your finances against the uncertainty ahead. Armed with the right strategy, you can make the most of your chosen lifestyle in Portugal and adapt accordingly as Brexit negotiations take shape.

All information in this article is based on Blevins Franks’ understanding of legislation and taxation practice at the time of writing; this may change in the future. It should not be construed as providing personalised taxation, investment or pension advice. You should take advice for your circumstances.

By Dan Henderson
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Dan Henderson, Partner of Blevins Franks, is a highly experienced financial adviser, specialising in retirement, investment and succession planning. He holds the Diploma for Financial Advisers and advanced CII qualifications in pensions and investment planning.