BREXIT - QUESTIONS FOR EXPATS

The following article was taken from In-Cyprus.com published on 28 February 2016

By Frances Miller

If Britain votes to leave the EU on June 23 it could leave British expats in Cyprus with frozen state pensions and uncertain access to healthcare, although much will depend on what the government could negotiate as it leaves.

The first scenario is that the UK negotiates a ‘Norway-style’ deal in which it is a member of the European Economic Area (EEA) but not the EU.

This will secure free movement of goods, services, persons and capital, meaning you would be free to continue working or setting up a business in Cyprus.

However, the provisions on healthcare would have to be negotiated.

“Each of the three countries (Iceland, Liechtenstein, Norway) have negotiated their own agreements with the EU”, said the Norwegian Directorate for Health in response to questions.

“This means that Britain “will go through the same process of negotiations if they decide to leave the EU and remain in the EEA”, it added.

Frozen pensions

While private pensions would be legally unaffected “What may change is the flexibility available regarding income options and the tax treatment of the pensions,” says Andrew Lumley-Holmes, Private Wealth Manager at Finsbury Group, although he adds the double taxation agreement between the two countries may mean it doesn’t change.

More at risk is state pensions.  Glen Richards, Managing Partner at financial advisers Pembridge International, says that people working and contributing to a country’s state pension scheme would “most likely” count towards an eventual UK pension entitlement.

However, all this is dependent on the precise wording of the UK’s EEA-‘stay in’ agreement, he says.

“Whilst I think it unlikely such terms would be detrimental, there would probably not be much goodwill towards the UK in the event of Brexit, so I would caution against making too many assumptions.”

No EEA

The worst-case scenario for pensions is if Britain decides against EEA membership, perhaps because it comes with a lot of rules and no say about making them.

“I think it likely they would be frozen at current levels until the UK negotiated a bilateral (reciprocal) agreement with each individual country,” said Richards, noting that expat pensions in Canada and New Zealand are frozen at the rate at which they start.

In a non-EEA scenario, even freedom to work could become difficult. Before Cyprus joined the EU, a Briton wanting to work in Cyprus (outside the then offshore sector) had to go through many hurdles to prove that no one else in Cyprus could do the job.

Nowadays, they might have to prove that no one in an EEA of 500 million people could do the job – that is, unless the UK can successfully argue that, for those already here, the right to work is an ‘acquired right’.

Norway-EU relations

The Norwegian Labour and Welfare Administration and the Norwegian Directorate for Health kindly provided the following information.

The relationship between Norway and the EU is framed through the Agreement on the European Economic Area (EEA), which means that the EEA Agreement provides for the inclusion of EU legislation covering the “four freedoms” – the free movement of goods, services persons and capital – throughout the EEA states (EU member states and Iceland, Liechtenstein and Norway).

In addition, the agreement covers cooperation in other areas such as research and development, education, social policy, the environment, consumer protection, tourism and culture, collectively known as ‘flanking and horizontal’.

The agreement guarantees equal rights and obligations within the internal market for citizens and economic operators in the EEA.

When asked about healthcare and pensions, our sources said that each of the three countries have negotiated their own agreements with the EU.