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Cross-border schemes: guidance in the event of a no-deal Brexit

Guidance

Guidance for UK based cross-border pension schemes and UK employers who are currently contributing to a cross-border scheme based in the European Economic Area (EEA) in the event of a no-deal Brexit.

Issued: October 2019

Introduction

If the UK leaves the European Union (EU) without a Withdrawal Agreement (a no-deal Brexit), the legislation that currently governs cross-border occupational pension schemes in the UK will cease to apply from that day.

This will have an impact on all pension schemes (also known as Institutions for Occupational Retirement Provision or IORPs) currently authorised and approved for EEA cross-border activity. UK-based schemes will need to check whether EEA employers are still able to contribute to their scheme. UK employers using a scheme based in the EEA will need to check it complies with UK rules.

There are very few schemes that operate cross-border between the UK and another member state - around 40 in total.

If you currently run such a scheme, or are an employer paying into one of these schemes, this guidance sets out the steps you must take in the event of a no-deal Brexit.

We strongly encourage you to consider this guidance and put in place contingency plans so that you are ready to act if there is a no-deal Brexit.

You should also check the guidance produced by the other member state that your scheme is engaged with:

German schemes, employers or members

Irish schemes, employers or members

Belgian schemes, employers or members

Luxembourg schemes, employers or members

If you are not sure whether you are running an EEA cross-border pension scheme (or are an employer paying into one) you should check your records to see if you have been authorised by us. If you are still unsure you should contact us or the relevant regulatory body:

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

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

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

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
Email: brexit@cssf.lu

What a no-deal Brexit means for cross border pension schemes depends on a number of factors which are explored in this guidance. In some cases it will be possible to keep existing pension arrangements in place. In others, schemes and / or employers will need to make changes.

UK cross-border schemes may also have been contacted directly by us or the regulator from the relevant member state. This guidance is intended to complement and support that correspondence.

This guidance is not for employers or trustees considering new ‘cross-border’ arrangements after a no-deal Brexit. We expect that the UK government will issue policy about new cross-border arrangements in due course and encourage you to wait for this before making decisions about setting up new cross-border activity. If you have an urgent business requirement to set up new pension arrangements which would operate cross-border with EEA states, please contact us at customersupport@tpr.gov.uk.

If you think you are operating a UK-based cross-border pension scheme or are contributing to a UK or EEA cross-border scheme, but have not received an email or letter from us, your host or home state regulator or your scheme about what you need to do in the event of a no-deal Brexit, please get in touch at brexitxb@tpr.gov.uk.

UK-based cross-border schemes

If you are a trustee of a UK-based scheme that currently accepts contributions from EU-based employers

You might be able to keep your existing arrangements.

However, you should check the rules in the relevant member state to find out whether EU-based employers can continue to pay into your UK cross-border pension scheme.

Requirements will be different in different member states and may change over time.

For example, we understand that Belgian law does not currently allow third country pension schemes to manage pensions benefits on behalf of Belgian citizens (which will include the UK, post no-deal Brexit). Therefore, a UK scheme accepting contributions from a Belgian employer would need to change their arrangements in the event of a no-deal Brexit.

If the UK leaves the EU with no deal we expect all schemes to comply with this guidance as soon as is practical. 

See regulatory bodies contact details

If you are an employer based in an EU member state who currently makes contributions into a UK-based scheme

You might be able to keep paying into this pension.

However, you should assess whether you can continue to pay into your UK cross-border pension scheme as soon as possible:

  • Check with the regulatory body in your member state to find out if there are any restrictions around paying into a UK cross-border scheme.
  • For example, we understand that Belgian law does not currently allow third country pension schemes to manage pensions benefits on behalf of Belgian citizens (which will include the UK, post no-deal Brexit). This is different in different member states and may change over time.

If the UK does leave the EU with no deal, we expect all schemes to comply with this guidance as soon as is practical. 

See regulatory bodies contact details

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

All members of an eligible scheme that transfers to the PPF are eligible for PPF compensation regardless of nationality or residence.

The main change that will be made to PPF entry in the event of a no-deal Brexit is that EU insolvency proceedings in respect of a sponsoring employer will not automatically be recognised. Such an employer will instead need to trigger the requirement for a qualifying insolvency event in order to assume PPF protection.

UK employers contributing to pension schemes based in an EEA member state

You might be able to keep paying into this pension. You should immediately assess whether you can continue to pay into your cross-border pension scheme.

If you use your cross-border scheme as part of your automatic enrolment duties, you will also need to check that you can continue to use it for automatic enrolment.

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

To keep paying into your current pension scheme, it must:

  • be established under trust
  • have a trustee or a representative resident in the UK on its board

In addition, you should also check with the regulatory body in the relevant EEA state to find out if pension schemes in that country are able to accept contributions from a UK employer. This varies for each member state. You should therefore check the position directly with the relevant regulator.

See regulatory bodies contact details

If your scheme does not meet the criteria above, and/ or if the member state will not accept contributions from the UK, in the event of a no-deal Brexit, you will need to stop paying into that pension scheme and put in place alternative arrangements for your employees.

For example: schemes in some countries (eg Belgium) are not usually established under trust. Therefore, if you are paying into a pension scheme in Belgium you would need to make alternative arrangements.

Pension schemes in Ireland are usually trust-based. However, for you to continue paying into them the scheme will need to have or appoint a UK-based trustee or representative. If they do not do this, you would need to make alternative arrangements.

You should also check if the scheme is required to register 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.

If you stop contributions and the pension scheme is a qualifying scheme for automatic enrolment, immediate re-enrolment will be triggered for those workers. You must re-enrol those that meet the jobholder criteria into an alternative automatic enrolment scheme immediately from the day after active membership ceased. For more information on immediate re-enrolment see detailed guidance for employers 11 - automatic re-enrolment: putting workers back into scheme membership (PDF, 204KB , 28 pages).

If you as an employer continue to pay into a scheme that does not meet these criteria, or if you fail to re-enrol your jobholders when required, we may fine you.

Assessing whether you can continue to use your cross-border pension scheme for your automatic enrolment duties

This part of the guidance applies to you if:

  • you automatically enrol and / or re-enrol any eligible jobholders into your cross-border scheme, or enrol any jobholders who give you an opt-in notice in to it, and / or
  • your cross-border pension scheme is a qualifying scheme for automatic enrolment for any members who meet the jobholder criteria

Having assessed whether you can continue to pay into the pension scheme you should also check that you can continue to use it as you do now to fulfil your automatic enrolment duties.

To keep using the pension scheme for automatic enrolment, the scheme must be a pension scheme that is:

  • for the purpose of providing benefits in respect of workers employed by you, or other people, and
  • established by you, or a previous employer, for workers employed by you

To keep being used as a qualifying scheme for automatic enrolment, the pension scheme must continue to meet the non-UK qualifying criteria. These criteria will be unchanged in a no-deal scenario. If your scheme is a qualifying scheme for a worker or workers now it will continue to be for those workers under no-deal If you are unsure, you should check with the pension scheme.

To keep being used for the automatic enrolment or re-enrolment of eligible jobholders (or jobholders who give you an opt-in notice), the pension scheme must continue to meet the additional requirements to be an ‘automatic enrolment scheme’. Again, if you use your scheme currently as it meets these requirements now it will continue to be an automatic enrolment scheme under no-deal. If you are unsure, you should check with the pension scheme.

If the scheme cannot continue to be used for automatic enrolment, immediate re-enrolment will be triggered. You must re-enrol any of those workers who meet the jobholder criteria into an alternative automatic enrolment scheme immediately from the day after the scheme stopped being able to be used.

If you fail to re-enrol your jobholders when required, we may fine you.

Next steps

In a no-deal scenario we expect all employers to be compliant with this guidance as soon as is practical after exit day.

We would recommend that you check that your scheme continues to meet these requirements on a regular basis.

For trustees / administrators of schemes based in an EEA state, who have UK-based employers making pension contributions

If your home country accepts contributions from the UK, UK employers will be able to make contributions to your scheme so long as you already have, or will appoint, a trustee or a representative resident in the UK. If you meet these conditions, you should contact the relevant employer(s) and let them know that their existing pension arrangements can continue.

Who can be appointed as a ‘UK-based trustee or representative’?

If you are appointing a UK resident trustee, you should follow the relevant procedures in your member state and as set out in the trust deed, ensuring that the new trustee has the right skills and experience to be a trustee for your scheme, as you would for any other trustee.

The new trustee will also need to be resident in the UK. See guidance on statutory resident requirements.

If you do not wish to appoint a UK resident trustee you can appoint a UK resident representative instead. This individual should also meet the minimum requirements for trustees in your member state - eg if a trustee is not allowed to be a non-declared bankrupt, neither should your representative.

What should the pension scheme do once it has appointed a UK resident trustee or representative?

If your scheme is based in the Republic of Ireland, please write to:

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

For all other non-UK schemes, please write to us at:

The Pensions Regulator
Napier House
Trafalgar Place
Brighton
BN1 4DW
Email: brexitxb@tpr.gov.uk

Tell the employers who are based in the UK that you have appointed either a UK-resident trustee or representative. They could be fined if they keep paying into a scheme which does not meet this requirement, so it is important they have confirmation from you.

What does the UK-based trustee or representative need to do?

At this stage, the legislative requirement is simple: in the event of a no-deal Brexit, for an employer based in the UK to make contributions to a non-UK scheme (in respect of an employee, whether or not employed in the UK), the scheme must be established under trust and have either a trustee or representative who is resident in the UK on its board.

We may, in future, set out particular requirements for this trustee / representative to ensure the on-going security of UK employers or pension savers. Any such policy changes would be consulted on in the normal way.

In the meantime, the UK-based trustee / representative must help to run the pension scheme in line with the relevant member state’s legislation, as any other trustee of the scheme would.

If the trustee or representative is concerned that UK members’ benefits are under threat, or if UK employers are not being treated fairly, they should raise this as a matter of urgency with their trustee board or, where appropriate, with the relevant member state’s regulator (in the Republic of Ireland, where the majority of cross border schemes are, this is the Pensions Authority.

We also encourage the UK-based trustee / representative to consider and act in line with the principles of good trusteeship (as set out, for example, in the Pensions Authority’s Trustee Handbook).