"The possibility that UK providers may not be legally able to pay out pensions or insurance contracts to citizens in the EU – including UK expats – is a stark example of the consequences of a “cliff edge” Brexit."
Nicky Morgan MP, Chair of the Treasury Committee, has written to Philip Hammond about the treatment of cross-border pensions and insurance contracts written prior to Brexit.
Morgan has raised concerns that UK expats could lose their pension payments unless a post-Brexit deal is found.
She says that although the UK and European Commission have published papers covering the status of goods already placed on the market, "less consideration has been given to services that are being supplied at the point of exit, and particularly the hundreds of thousands of insurance contracts sold under passporting arrangements with a duration that extends beyond 29 March 2019".
Morgan warned that without further action, "insurers will lose the legal authorisation to service these contracts: they must break the contract or break the law".
Discussing the implications of insurers being unable to honour cross-border contracts, she highlighted the risk that UK expats with personal pensions could face difficulties in getting paid.
Morgan said: “The possibility that UK providers may not be legally able to pay out pensions or insurance contracts to citizens in the EU – including UK expats – is a stark example of the consequences of a “cliff edge” Brexit.
“Both the UK and the EU have a strong mutual interest in resolving this problem, in line with their shared objective of a smooth and orderly Brexit.
“It is therefore surprising that there have been no position papers from the Commission or the Government proposing how it might be addressed. I have written to the Chancellor to get further clarity on the Government’s thinking.
“The Committee will no doubt want to examine the scale of the problem with the regulators, and may take evidence from the insurance industry.”
Tom McPhail, head of policy at Hargreaves Lansdown, commented: “Given the extent to which European regulation and legislation already sets the agenda for domestic UK regulation of financial services, it shouldn't be too challenging to reach an accommodation whereby business can continue as usual. Nevertheless the ABI is right to highlight the risks of not making sure a solution is identified and implemented in a timely manner.”