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UK bank accounts after Brexit

By Occitanie
This article is published on: 20th November 2020

Welcome to the seventh edition of our newsletter ‘Spectrum in Occitanie, Finance in Focus’, brought to you by Sue Regan, Rob Hesketh, Derek Winsland and Philip Oxley your Spectrum team of advisers in the Occitanie.

As we are approaching the end of 2020, to say that it has been an unusual year would be a gross understatement. Countries across the globe continue to adjust to life with Covid-19 and with the ongoing and ever-changing restrictions that the predicted second wave has brought with it. As this goes to ‘press’ we now find ourselves once again in a national lockdown in France.

Although it had taken a back seat since the virus outbreak, Brexit is once again at the forefront of the minds of UK expats living in the EU. Will there be a trade deal? Are we heading for a cliff-edge ‘No Deal’? It is almost unbelievable that we are still at this point in the deliberations with only eight weeks of the transition period to go.

UK Banks closed

UK Banks accounts after BREXIT
As the deadline approaches one issue that we are frequently being asked about lately by concerned clients, is that some UK banks have been writing to their customers resident in the EU putting them on notice that their UK bank accounts and credit cards will be closed either at the end of the year or, in some cases even earlier, as a result of Brexit.

Although some banks have already contacted some customers, it is apparent that only some types of account are affected and only in some EU countries. The two main banking institutions that have taken such action so far are Barclays and the Lloyds Banking Group, which includes Lloyds Bank, Halifax and Bank of Scotland. Many other banks have stated that they ‘currently have no plans to close customer accounts, but they are monitoring the situation’. Given that this could potentially affect all of us with ties to the UK banking system, we thought this would be a good topic to focus on this month.
So why are some banks closing UK expats’ accounts?

UK banks and other financial firms are currently allowed to trade as part of the European Economic Area (EEA), as all member countries use the same regulatory framework. This arrangement is known as ‘passporting’, and it is why Brits who have moved abroad have been able to use credit cards and banking services from UK-based banks, even though they’re no longer living in the country. However, once the Brexit transition period ends on 31 December, this passporting arrangement will no longer be in place – that is, unless a specific agreement to carry it on is reached as part of a Brexit deal. With no such deal confirmed, UK banks would have to attempt to negotiate and fulfil the stipulations from every EEA country’s regulator. All of them work differently and a continuation of providing services to UK expats will be more feasible for some banks than others.

The impact on each customer will vary depending on how their bank or financial institution currently operates, the product or service being provided, and the legal and regulatory framework in the country in which they are resident. In effect, this means that the situation is different for each financial service offered by each financial provider in each country; for some banks, offering certain products in certain countries simply won’t work. So, certain services and accounts may be withdrawn in some EU countries but not in others.

We understand that many banks are still trying to figure out a way of working in different EU countries after the Brexit transition period, while also waiting to see if a deal can be agreed between the UK and the EU. The Bank of England and the Financial Conduct Authority (FCA) have written to banks informing them that, if they do decide to close customer accounts, they must have plans in place to service their Europe-based customers properly through the process, taking into account how their actions might impact on customer’s individual circumstances and the alternative products available to them.

What should you do?
DON’T PANIC – there have been some dramatic headlines in the press about the issue, but it is important to stay calm. If you think you will be affected, you should not act in haste and repent at leisure. Give yourself time to work out what your options are.

CHECK THE FACTS CAREFULLY – whether or not you have had a warning letter from your bank, talk to them now and find out what they plan to do on Brexit day. If you still have a UK address, your account may not be closed.

CHECK YOUR SPECIFIC ACCOUNTS – you may find the types of savings products you hold are still permitted in France. Your bank should be able to advise you on this.

ARRANGE FOR PAYMENTS TO BE PAID DIRECTLY TO YOUR FRENCH BANK ACCOUNT – if you are in receipt of the UK State Pension, HMRC will pay this directly to your French account every month and, because of the volume of payments made, the exchange rate is extremely competitive. OK, so the GBP:EUR rate isn’t that great at the moment but at least you will be guaranteed continuity of income if you rely on this to fund your lifestyle in France. Some UK private pension providers will also pay pensions to foreign bank accounts, so it is worth speaking to your provider about this.

OPEN A NEW UK ACCOUNT – find a UK bank that is operating in France (such as HSBC and Santander) and check if you can meet their eligibility criteria for opening a new bank account and that the account will meet your needs. For example, does it require you to have a minimum income or deposit with them?

CONSIDER OPENING A STERLING OFFSHORE BANK ACCOUNT – we have a good connection with a very reputable bank, based in the Isle of Man, that offers accounts in a number of currencies including Sterling and Euros and which will accept regular payments in and direct debits out. If you would like details of the account, please contact your Spectrum adviser.

livret A

If you have savings on deposit in the UK that you use for your short-term liquidity or an ‘emergency fund’ and you have been told, or are concerned, that these accounts will be closed, there are a number of tax-free savings accounts available in France, which you should consider maximising, if you have not already done so, including the following:

THE ‘LIVRET A’ – which is currently paying a rate of interest of 0.5% per annum and is available to non-residents. The maximum permitted investment into this type of account is €22,950 per individual.

THE ‘LIVRET DÉVELOPPEMENT DURABLE (LDD)’ – this account is available to residents of France and the maximum investment permitted is €12,000 per individual. It is currently paying an interest rate of 0.5% per annum.

THE ‘LIVRET D’EPARGNE POPULAIRE (LEP)’ – this account is available to residents of France who are on low incomes. The maximum investment amount permitted is €7,700 per individual. The interest rate is currently 1% per annum. For example, in order to open a LEP account in 2020, your ‘revenu fiscal de référence’ in 2018 (as shown on your ‘avis d’imposition’ of 2019) must not have exceed €19,977 for a single person or €30,645 for a two-part household.

But it’s not just bank accounts that might be affected when passporting goes………….

Some UK financial services providers are informing their non-UK resident customers that they will not be able to provide them with advice on their existing UK based investments after 31 December and that ‘you should find a new adviser or cash in your investments’.

As a reminder to our readers, Spectrum in France is a registered French company, regulated in France, and we are not passported in from the UK, so as far as we are concerned, it’s business as usual.

For those of you who still have investments in the UK, whether they be stocks and shares ISAs, investment bonds, pension funds or other investment portfolios, now would be a good time to review these and discuss with your provider as to whether they will be able to continue advising you in a post-Brexit world. Even if your UK provider will be able to continue advising you, they may not be familiar with the French taxation framework and the investments you hold may not be tax efficient in France. We can advise you on investment products that are suitable and tax-efficient for living in France and provide you with ongoing advice to ensure that your financial plan remains on track as your situation and attitude to risk changes over time.

Please don’t forget that, although we may be restricted on where we can travel at the moment, we are here and have the technology to undertake your regular reviews and financial health checks remotely. If you would like a review of your situation, please do not hesitate to get in touch with your Spectrum adviser or via the contact link below.

We’d love to hear from you with any comments and/or questions, as well as suggestions as to future topics for discussion. Please feel free to pass this on to any friends or contacts who you think might find it interesting.

Article by Occitanie

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