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Cross-border occupational pension schemes: arrangements following the end of the Brexit transition period

Guidance

This guidance is for UK cross-border occupational pension schemes and UK employers that are contributing to occupational pension schemes established outside the UK.

You may have been contacted directly by us or a regulator from an EU/EEA country about changes that apply from 1 January 2021. This guidance is intended to supplement any such communication.

Issued: October 2019
Last updated: March 2021

31 March 2021
Information updated for automatic enrolment duties.

9 February 2021
Information updated following the end of the Brexit transition period on 1 January 2021.

18 December
Minor updates to information about the transition period ending and plans to update this guidance early in 2021.

12 March 2020
Information added to the beginning of the guidance about the transition period until the end of 2020.

8 October 2019
First published.

Introduction

The Brexit transition period ran from 31 January until 31 December 2020. During the transition period, the UK was no longer an EU member, but nearly all EU rules still applied in the UK.

From 1 January 2021, the UK stopped being a member of the EU Single Market or Customs Union.

Most of the EU laws that applied to the UK during the transition period became part of UK domestic law after 1 January 2021, including nearly all of the pensions laws that came from EU Directives and Regulations. These pensions laws have therefore become part of UK law and they continue to apply to UK schemes on that basis.

However, the UK laws that previously governed schemes operating cross-border between the UK and EU/EEA countries have largely been revoked, meaning that the previous cross-border legal regime that operated until the end of the transition period has changed significantly. This change will impact occupational pension schemes that were previously authorised and approved to carry out EU/EEA cross-border activity.

There is a relatively small number of schemes that operate cross-border between the UK and other countries - around 40 in total as at the end of the transition period. If you run such a scheme, or you are an employer paying into one of these schemes, please read this guidance and take the steps needed to comply with the law which came into force on 1 January 2021. This may include considering whether you need to take independent legal or other advice.

Where relevant, you should also check the guidance issued by other countries outside the UK, including EU/EEA member states.

If you are not sure whether you are running a non-UK cross-border pension scheme, or are an employer paying into one, you should check your records to see if the scheme was previously authorised by TPR to operate cross-border. If you are still unsure, please contact us or the relevant regulatory body.

UK-based cross-border schemes

If you are the trustee of a UK cross-border scheme that accepts contributions from employers based outside the UK, you may be able to keep those arrangements.

Currently UK law does not prevent an employer in another country contributing to a UK scheme, but you should check that the rules in the other country allow this.

See regulatory bodies' contact details

If you are an employer based in a country outside the UK who makes contributions into a UK-based occupational pension scheme

You may be able to keep paying into this pension.

However, you should check with the regulatory body in your country, or take appropriate legal or other advice, to find out if there are any restrictions on paying into a UK scheme.

See regulatory bodies' contact details

If you run a UK occupational pension scheme and you intend to set up new arrangements that will accept contributions from non-UK employers, or in respect of employees where the employment relationship is governed by the law of a country outside the UK, you should consider taking independent legal advice about whether this is compliant with the law in force in each of the relevant countries.

If you think you are either a UK-based cross-border pension scheme or you are a UK-based employer contributing to a non-UK scheme, but you have not received an email or letter from us or your host or home regulator about what you should do differently from 1 January 2021, please get in touch at brexitxb@tpr.gov.uk.

Will EU/EEA members of UK-based occupational pension schemes be protected by the Pension Protection Fund (PPF) if the sponsoring employer becomes insolvent?

PPF eligibility doesn’t depend on where the employer of the pension scheme is based. To be eligible for the PPF, a pension scheme has to have its main place of administration in the UK. This is not affected by the UK’s exit from the EU, so members of these schemes will continue to be protected by the PPF in the same way.

However, the mechanism for triggering PPF entry for schemes that have EU/EEA-based employers could be affected. PPF entry can still be achieved, but a UK insolvency event will be required. All this means is that EU/EEA employers are now in the same position as non-EU/EEA overseas employers were before the end of the transition period. Trustees are encouraged to seek legal advice on the mechanism by which PPF entry could be secured, for example a winding-up order in the UK courts.

Will EU/EEA residents still be able to receive their PPF compensation?

All members of an eligible scheme that transfers to the PPF are eligible for PPF compensation regardless of nationality or residence. If you are an EU-resident member of a UK scheme, you should check the PPF’s guidance for EU-resident scheme members affected by Brexit to make sure that your payments continue uninterrupted.

UK employers contributing to pension schemes based in a non-UK country

If you are a UK-based employer [1] making contributions to an occupational pension scheme based outside the UK, you might be able to keep paying into this pension. You should take steps to assess whether you can continue to pay into your EU/EEA or other third country cross-border pension scheme. This may include taking independent legal or other advice as appropriate. 

Assessing whether you can continue to pay into your non-UK cross-border pension scheme

If you are a UK employer, to keep paying into an occupational pension scheme based outside the UK, the non-UK scheme must [2]:

  •  be established under trust and
  •  have a trustee, or a trustee appointed representative, who is resident in the UK

This is the case whether or not your employees are based in the UK.

You should also check with the regulatory body in the relevant non-UK country to find out if occupational pension schemes in that country are able to accept contributions from a UK employer, or in respect of an employee whose employment is governed by UK law. This may vary across different countries.

See regulatory bodies' contact details

You may also wish to obtain your own independent legal advice as to whether the arrangement is compliant with both UK law and the law governing the relevant non-UK scheme.

You should be aware that any UK employer paying into a non-UK scheme that does not comply with the above two requirements could be subject to a penalty under section 10 of the Pensions Act 1995 [3].

If your scheme does not meet the criteria above (ie established under trust and a UK resident trustee or representative), and/ or if the non-UK country will not accept contributions from UK employers, you should put in place alternative arrangements for your employees as soon as possible.

You should also check if the non-UK scheme should be registered with HM Revenue and Customs in the UK for tax purposes. For more information, please contact 0300 123 1079 (Outside UK: + 44 (0) 300 123 1079), Monday to Friday: 9am to 5pm or go to the HM Revenue and Customs contact page for pension scheme enquiries on the GOV.UK website.

Assessing whether you can continue to use an EU/EEA pension scheme for your automatic enrolment duties

This part of the guidance applies to you if you are an employer using, or proposing to use, either of the following to comply with your automatic enrolment (AE) obligations:

  • a non-UK occupational pension scheme; or
  • a non-UK personal pension scheme

In this guidance, 'non-UK scheme' means a scheme with its main administration outside the UK, and includes schemes with their main administration in an EU or EEA member state.

Since the end of the Brexit transition period, the rules for using EU/EEA-based schemes to meet AE duties have changed. You should check whether you are still able to use your EU/EEA scheme to satisfy your AE obligations and consider taking your own independent legal advice where appropriate.

Whether you can continue using your EU/EEA scheme for AE purposes after 1 January 2021 will depend on whether it is an 'automatic enrolment scheme' or a 'qualifying scheme'.

An employer can meet their AE obligations by automatically enrolling the relevant workers or employees[4] into an 'automatic enrolment scheme', unless they are already active members of a 'qualifying scheme' with the employer.

Since 1 January 2021, it has no longer been possible to use any non-UK scheme, including one based in an EU/EEA country, as an 'automatic enrolment scheme' to satisfy your AE duties. This means that if you were using an EU/EEA based scheme as an automatic enrolment scheme at the end of the Brexit transition period, immediate automatic re-enrolment will have been triggered on 1 January 2021.

If you are currently using a non-UK 'automatic enrolment scheme', you should take urgent steps to automatically re-enrol any affected jobholders into an alternative automatic enrolment scheme. The alternative scheme should meet all legal requirements to be an automatic enrolment scheme, including that it is established in the UK.

If your EU/EEA or other non-UK scheme was a 'qualifying scheme' at the end of the Brexit transition period, you may be able to continue using the scheme after 1 January 2021. The scheme would still need to meet the relevant quality requirements and other prescribed requirements for non-UK qualifying schemes. Please note that if you continue to use a non-UK scheme as a 'qualifying scheme', you would still need to ensure that you have an 'automatic enrolment scheme' in place for any new joiners who meet the relevant automatic enrolment criteria. If you are unsure whether your scheme satisfies your AE obligations, you should take your own independent legal advice.

If you fail to comply with your AE duties, you may be subject to enforcement action, which may include a fine.

If you have any questions, please get in touch at brexitxb@tpr.gov.uk.

Trustees / administrators of non-UK occupational pension schemes receiving contributions from UK employers (in respect of any employees) and non-UK employers (in respect of UK employees)

From 1 January 2021, new requirements[5] have applied to EU/EEA occupational pension schemes receiving contributions from UK employers or in respect of UK employees.

These requirements apply where any non-UK scheme (including one based in the EU/EEA) receives contributions from either of the following:

  • a non-UK employer paying into the scheme in respect of an employee who is employed in the UK; or
  • a UK employer, whether or not the employees are employed in the UK

The two requirements that must be met by a non-UK scheme in these circumstances are that:

  1. your scheme is established under trust; and
  2. you appoint a trustee or a trustee representative that is resident in the UK[6] 

If your non-UK scheme meets these two requirements, you should contact the relevant UK or non-UK employer(s) and let them know that their existing pension arrangements can continue, provided there is nothing in the home country’s law to prevent this.

If you are seeking to appoint a UK-resident trustee or trustee representative, you should follow the relevant procedures in your country and as set out in the trust deed or other governing document for your scheme, ensuring that the new trustee or representative has the right skills and experience for the role, as you would for any other trustee.

Once you have appointed a UK-resident trustee or trustee representative

Please tell the relevant UK or non-UK employers that you have appointed either a UK-resident trustee or representative and confirm that your scheme is set up under trust. They could be fined if they keep paying into a scheme that does not meet these requirements, so it is important they have confirmation from you. 

Please also write to us at brexitxb@tpr.gov.uk

For UK-resident trustees or trustee representatives appointed by a non-UK occupational pension scheme

If you are:

  • a UK- resident trustee or trustee representative appointed by a non-UK scheme receiving contributions from a UK employer or
  • a non-UK employer in respect of UK employees

and you are concerned that a UK member’s benefits are under threat, or if UK employers are not being treated fairly, you should raise this as a matter of urgency with the scheme’s trustee board or, where appropriate, with the relevant regulator in the country where your scheme is based.

You should also report your concerns to us at customersupport@tpr.gov.uk

Regulatory bodies' contact details

German schemes, employers or members

Federal Financial Supervisory Authority
Abteilung VA 1
Graurheindorfer Str. 108
53117 Bonn
Germany
Tel: 00 49 228 4108 0
Email: poststelle@bafin.de

Further guidance
Federal Ministry of Finance

Irish schemes, employers or members

The Pensions Authority
Verschoyle House
28/30 Lr Mount St
Dublin 2
Ireland
Tel: 00 353 1613 1900
Email: international@pensionsauthority.ie

Further guidance
Government of Ireland

Belgian schemes, employers or members

Financial Services and Markets Authority
Congresstraat 12-14
1000 Brussels
Belgium
Tel: 00 32 2 220 5832
Email: pensions@fsma.be

Further guidance
Belgian Federal Government

Luxembourg schemes, employers or members

Commission de Surveillance du Secteur Financier 
283, route d’Arlon 
L-1150 Luxembourg
Tel: 00 352 26 25 1- 1
Contact form: https://www.cssf.lu/en/contacts/
Email: brexit@cssf.lu

Footnotes

[1] This includes employers making contributions in respect of employees where the employment relationship between them is governed by UK social and labour law.

[2] See section 253 Pensions Act 2004, as amended by the Occupational and Personal Pension Schemes (Amendment etc) (EU Exit) Regulations 2019.  

[3] See section 253(6) Pensions Act 2004.

[4] Eligible jobholders or non-eligible jobholders who opt in. 

[5] See section 253 Pensions Act 2004.

[6] See sections 253 and 254 Pensions Act 2004.