• David Livingstone

Expat Pension Investment Management Post-Brexit: Equivalence Agreements

For many expats living in the EU, Brexit poses a series of challenges and concerns. These include the legality of any expat pension investment management advice that they may receive post-Brexit. Currently, British expats can seek financial guidance on their pension investments from UK professionals but this could become illegal in a No Deal Brexit scenario.

In the event that Theresa May’s deal (the draft UK/EU Withdrawal Agreement) is able to secure a majority agreement in Parliament, there will be no immediate changes to expat pension investment rules as we’ll enter a formal transition period. During this time, the second phase of negotiations will begin, in which the UK and EU will hammer out the details and nature of their future trading relationship.

At this point, a decision could be made to introduce a grandfather provision to expat pension investment management. This would simply mean that the old rules continue to apply to pre-existing investment portfolios whilst any fresh ones are subject to the conditions of the new agreement. A time limit or other restrictions may be introduced in this instance.

However, as the situation currently stands just days out from the 29th March, this is not a likely prospect. No Deal Brexit still remains a possibility and such a scenario would not offer much protection for expat pension investment management based in the UK. As a result, the sector is keen for the UK and EU to agree to an equivalence agreement on the subject, hoping to ensure that at least some financial services will continue to flow freely between the two.

Protect your finances post-Brexit by talking to us today.

Expat Pension Investment Management And Equivalence Agreements

An equivalence agreement does exactly what it says on the tin. It signifies that each party recognises that the other’s’ financial standards and regulations are an equivalent level to their own. In the case of Brexit, an equivalence agreement could be used to give the UK and EU limited access to each other’s markets.

More restrictive than a full passporting arrangement, an equivalence agreement will only cover a few types of financial services and there is an ever-present risk of it being withdrawn by either party. For instance, if the EU believes that the UK has altered its high level of standards in a way that diverges from the EU’s, it can unilaterally withdraw the agreement. As a result, the UK will need to remain closely aligned with the EU even after it leaves the union.

There are a number of existing EU financial frameworks and equivalence agreements which could possibly be applied for the UK post-Brexit.

The Second Markets in Financial Instruments Directive (MiFID II)

Under the MiFID II, a non-EU bank would continue to be authorised to deliver a number of services in the EU. These services include the provision of investment advice. It would be the combined responsibility of ESMA, the European Commission and the EU Council to establish whether or not a sufficient level of equivalence has been met, taking into both political and policy considerations.

This form of equivalence agreement was first proposed several years ago, but has never yet been implemented. The UK could request that the EU activates MiFID II, but there is no guarantee that the process would happen swiftly.

The Alternative Investment Fund Managers Directive (AIFMD)

The AIFMD could provide UK investment managers, including those who deal with expat pensions, with cross border rights. Such rights would allow investment managers to both manage and market their services with the EU. Reliant on the creation of an equivalence agreement and authorisation from the relevant EU authorities, the AIFMD provides a framework for authorities to monitor the level of risk and bolster investor protection. The following schemes can be classified as Alternative Investment Funds:

  • Hedge funds

  • Private equity funds

  • Retail investment funds

  • Real estate funds

  • Investment companies

Essentially, an AIF is any type of investment fund that doesn’t fall under the UCITS Directive, an EU-wide framework for the management and sale of mutual funds.

Get in touch if you’re interested in discussing a QROPS or SIPPs expat pension in more detail, or if you’re seeking independent financial advice on your investment choices.

Please note that some of the information on this page is only applicable to UK residents.



Mathstone provides financial solutions globally, assisting expatriates worldwide with pension transfer advice (QROPS & SIPPS), capital lump sum investment, savings vehicles, managing existing portfolios, insurance cover, repatriation advice and wills.



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