Brexit FAQ

Expat Briefing Editorial Team, 01 July, 2016

From pensions to healthcare and rights to work, the 2m British expats living in the European Union are understandably worried about the consequences of a Brexit, as are the 2.7m European expats residing in the UK. Here, we attempt to address these concerns in our Brexit FAQ.

What Has Happened?

June 23, 2016, must be considered one of the most momentous days in the modern history of both the United Kingdom and the Europe Union as a whole, for it was the day that 52 percent of those who participated in the UK's "in-out" EU referendum voted for "Brexit" – in other words, for the UK to terminate its membership of the EU.

What Happens Next?

In short, nobody knows, since the prospect of such a large economy leaving the EU is unprecedented. What we do know is that at some point, the UK Government must trigger Article 50 of the Lisbon Treaty, which will set the ball rolling on Great Britain's exit negotiations. Once triggered, a deadline of two years is set to complete the negotiations, although this can be extended provided that the other EU member states agree.

However, the UK is in a state of political limbo at the time of writing. "Bremainer" Prime Minister David Cameron, having announced his resignation the morning after the referendum, has made it clear that Article 50 must be triggered by his successor, who must also decide what the UK's negotiating priorities are. Yet it could take a number of weeks before the Conservative Party leadership issue is settled, and until a new Prime Minister is installed, there is no plan for negotiating the UK's way out of the EU.

Indeed, some are questioning the very legitimacy of the referendum result, given that it is not legally binding on the Government or the EU, and that only a slender majority of voters chose Brexit – a development which has the potential to bring profound constitutional, legal and economic changes to the UK.

Despite all these uncertainties, it is fairly safe to say that until the Brexit settlement is signed – if such a settlement is reached and approved – the UK is still an EU member state. So the status of those British citizens living and working in other member states as well as EU citizens in the UK will remain unchanged for the foreseeable future. However, with the expat community anxious about what all this will mean for them – anecdotal evidence suggests that large numbers of British expats are enquiring about obtaining passports from other EU nations in order to guarantee their current rights – we attempt to address some of their main concerns here.

What Will Be The Impact On Pensions?

Huge numbers of Britons have taken advantage of freedom of movement to spend their retirement in warmer climes, in particular Spain, Portugal, France, Italy, Cyprus and Greece. Thus, Brexit could have a major impact their ability to claim state and private pensions.

As we observed in our recent feature on pension entitlement for UK expats in the EU, under existing rules, an expat reaching retirement will make a claim for a state pension in the country where he or she is living.  There is no transfer of pension rights as such: rather, each member state where the expat has worked or lived up to that point provides a pro-rata contribution based on agree formulae. However, EU withdrawal would see the end of long-standing provisions in EU law (also applying to the wider European Economic Area and Switzerland) to "coordinate" social security schemes. Without alternative arrangements in place, there is a great deal of uncertainty over pension rights for UK nationals who had spent periods living and working abroad.

In the event of its withdrawal from the EU, the UK could instead seek to negotiate bilateral reciprocal social security agreements with individual member states; indeed, the UK already has a number of such agreements with non-EEA states, and agreements with certain EEA states which pre-date the UK's entry into the then European Community. These might cover matters such as reciprocal recognition of periods of insurance and residence for benefits purposes, exportability of benefits, continued annual uprating of benefits for people living abroad, and aggregation/apportionment for contributory benefits and retirement pensions. The worry is, however, that these bilateral arrangements could be more limited in scope than the EU coordination rules, as they tend to be with non-EEA countries. And the UK hasn't negotiated an arrangement like this since 1981.

What's more, under existing rules, state pensions claimed by UK expats in the EU are subject to the "triple lock." This inflation-proofs state pensions by requiring that they rise annually either by the higher of the rate of wage inflation, the retail price index, or 2.5 percent. The retention of the triple lock is by no means guaranteed in the event of a Brexit, so this could have financial implications for many British expats. As if the tanking value of sterling isn't worry enough!

Will Expats Have Access To Healthcare?

The European Health Insurance Card (EHIC) certifies that the holder has the right to receive emergency healthcare during a temporary stay in any EU country as well as Switzerland, Liechtenstein, Norway and Iceland. This right is guaranteed to all persons who are covered by the public healthcare system of these countries. The EHIC holder has the right to receive necessary treatment in the host member state's public healthcare system on the same terms and at the same cost as nationals of the state concerned. Under this system, the bill for treatment is picked up by the health authority in the individual's member state of origin.

As with all other issues connected with the UK's future relationship with the EU, nobody knows for sure whether the rights provided under the EHIC system will be withdrawn for British citizens in the event of a Brexit. It could be that the UK enters into reciprocal health agreements with EU countries to maintain current access to healthcare services, or certain member states may decide to retain the status quo in the knowledge that thousands of their own citizens may require medical treatment in the UK. We just don't know, but, as stressed above, nothing changes for the time being.

Will Rights To Live And Work In Other EU Member States Be Withdrawn?

Again, it is difficult to say at this juncture, because it all hinges on whether the UK remains part of the European single market and signed up for freedom of movement.

This of course is a huge issue for the millions of EU expats in the UK, who may at some point in the future be required to apply for a visa to legally remain in the country. However, judging by the comments of politicians and experts in this area, it seems highly unlikely that long-term EU expats in the UK would be required to leave the UK. Likewise, it is extremely unlikely that UK expats in the EU will be sent home, firstly because no country wants to be seen expelling people, and secondly because many expats will have "acquired rights" under international law which are immutable in the event of a treaty change. It is more likely though, that restrictions would be applied on the numbers of EU migrants seeking to enter the UK after Brexit if Britain leaves the single market.

One possibility though is that Britons may have to apply for the EU Blue Card in order continue working, or take up employment in the EU if the UK completes a Brexit. This is the visa scheme in place to allow non-EEA/EU citizens to work in the EU, and is broadly equivalent to the United States Green Card scheme.

It is a sign of how worried UK expats are about losing their rights to live and work across the EU that substantial numbers are reported to be enquiring about obtaining citizenship in the countries in which they reside, or acquiring a passport from another EU member state – the Irish Government for example has advised people to hold off applying for Irish passports until Britain's EU status becomes clearer after its passport office was inundated with enquires.

For those with a lot of cash to spare, however, a handful of EU member states offer fast-track citizenship or long-term residency in return for substantial investments in property or other government-approved schemes. These include Cyprus, Malta, Greece and Spain.

Will Britons Be Able To Study In The EU? And What About EU Students In The UK?

The Brexit vote has caused huge controversy in the education sector, which has strong links with the EU through such schemes as Erasmus. This EU student exchange program, in place since the late 1980s, has provided funding to more than 200,000 British students to study at higher education institutions in the EU, and over 4,000 students are involved in it at any one time. However, its status is obviously highly uncertain as a result of the Brexit vote as far as EU students in the UK and vice versa are concerned.

The bottom line seems to be that if the UK was outside of the EU, then students from EU member states would be treated as "international" students, and their fees would rise substantially. This would probably discourage many EU students from studying in the UK. In turn, there are probably going to be fewer opportunities for British students to study in Europe. With UK universities also facing the loss of valuable EU research funding, the British education sector as a whole is generally up in arms at the referendum result. However, just like with all the other issues raised here, it is impossible to predict what the outcomes will be for expats, whether they are EU citizens working or studying in the UK, or Britons who have made a new life for themselves in another EU country. Despite the unpredictability of it all, it is probably safe to say that expats' lives won't be made immeasurably more miserable as a result of Brexit. But they are unlikely to become more comfortable either. In the meantime, expats face an anxious wait for answers.

Tags: agreements | Pensions | Europe | inflation | Expats | Pensions | retirement | Insurance | pensions | investment | Cyprus | France | Greece | Spain | Switzerland | Portugal | United Kingdom | law | public health | education | social security |


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