The end of the Brexit transition period on 31 December meant that some UK banks closed the accounts of EEA residents. What does this mean for UK pensioners living abroad - and should trustees even get involved, or is it between the bank and its customers? 

 

Since 1 January, the UK is a third country in relation to the European Economic Area, with direct implications not just over here, but also for UK citizens abroad who receive their pension into a UK bank account. 

 

Passporting arrangements that allowed UK banks to operate in the EEA without having to get direct authorisation are no longer in place. This means some UK banks no longer offer their services in certain countries. 

 

The M&S Pension Scheme was one of those schemes that notified its members that paying the pensions of some British expats could face obstacles unless they take action. “As a result of Brexit, we understand that some UK banks have closed accounts for people living in the EU and the European Economic Area,” the scheme told members. 

 

It asked those members living abroad whose bank account had closed to inform the scheme of their new bank account details by 19 January, just eleven days after posting the notice, and warned: “It is your responsibility to inform us of any changes to your bank account details. Failure to do so may result in your pension being suspended.” 

 

 

Gillian Graham, a client director at Punter Southall Governance Services, said the issue came to her and her colleagues’ attention in early November last year. “The proactive administrators brought this to our attention,” she said. 

 

Graham said trustees and administrators have taken differing views on how this should be dealt with. “You could take the view that this was mainly a matter for the banks to sort out with their customers,” she said. 

 

The other view was one where trustees should seek to help their members with the practicalities of receiving a pension they are entitled to. 

 

“Bearing in mind that many pensioners are elderly and [that], being based overseas, communication can be difficult, and they may not have been aware of this situation until their payments were stopped, I think that the more that was done to assist them, the better,” she opined. 

 

But it can be difficult to reach pensioners who live overseas. 

 

“I had suggestions from administrators that we should be contacting the pensioners who may have been affected in this way in terms of not being able to receive deposits into their foreign banks. However, given it wasn’t all banks, and pensioners who live abroad are particularly difficult to keep track of, I have not been proactive on this issue,” said Melanie Cusack, a client director at trustee firm PTL. 

 

She noted that schemes also cannot pay money to another account without the pensioner providing all the necessary details and security checks.   

 

“The pensioners should have been informed by their banks if this was an issue. If they don’t receive their anticipated pension, they will get in touch and we will have an opportunity to update their contact details and make the payment at the same time,” she said. 

 

 

Administrator XPS made its clients aware that pensioners living in EU countries – primarily Germany, Holland, Ireland, Italy, Portugal and Slovakia – who bank with Lloyds, Barclays and Coutts would receive a letter from their bank advising of the intention to close the account from 31 December 2020. “They told us at that time that other UK banks have yet to make a decision,” Graham said. 

 

She added that XPS wrote to all pensioners who may be affected, even if their bank had yet to make a decision, advising them to contact their bank in the first instance. The administrator enclosed two bank forms: a UK bank form should the member wish to change to another UK bank; and a mandate for Equiniti which would allow the scheme to make payment directly to an account in another country, alerting them also that payments made by Equiniti would attract a fee of £2.74 for each transaction.  

 

Administrator Capita also made clients aware of a potential problem with overseas payments in early November, after the Financial Conduct Authority advised that ‘passporting’ of financial institutions would end. 

 

“We then provided clients with a number of options to assist if they had any overseas members that would be caught up in this problem,” said Bobby Riddaway, Capita’s UK pensions consulting market director. 

 

The options were: explaining the situation to members, making it clear that unless they heard otherwise, they would continue to pay their pension into the existing UK account; prompting members to speak to their bank account provider; providing a bank mandate form for completion if necessary. 

  

“As a result, we are not aware that any of our clients have subsequently had problems in this area,” Riddaway added. 

 

 

Others believe the situation did not pose a big problem in the first instance. “We have had virtually no reports of our overseas pensioners being impacted by this change,” said says Daniel Taylor, director at administrator Trafalgar House. 

 

He added: "We believe this is because the vast majority of our non-UK domiciled pensioners already receive their payments into foreign bank accounts. Because of advances in overseas payment systems there is very little delay or additional cost for having pensions paid into foreign bank accounts.”