While UK politicians have voted against a ‘no-deal’ Brexit, much uncertainty remains about the outcome with more parliamentary votes to come and the approval of the EU yet to be secured. Hogan Lovells’ Faye Jarvis explores the risks for UK trustees

Key points

  • UK trustees have a duty to review the effect of a ‘no-deal’ Brexit and should understand the impact on the sponsor’s business
  • EU data transfer and overseas payments are potential issues
  • Restrictions on insurers could affect cross-border payments
  • Trustees should discuss contingencies with non-EU managers and advisers if they have not already done so
  • Contingent asset claims in EU entities could be complex to enforce in practice

One of the biggest risks for pension schemes in a ‘no-deal’ Brexit scenario is an adverse impact on the employer covenant. The Pensions Regulator (TPR) recently issued a statement that “trustees should undertake a review of any actions or contingency plans in the context of ‘no deal’, if they have not already done so”.  

Adopting a ‘wait and see’ approach is no longer an option. If they have not already done so, trustees should engage with employers to understand what impact a no-deal Brexit could have on their business and what plans they have in place to mitigate these risks.


Trustees should actively consider whether any of their members’ data is transferred to countries in the EU and, if so, seek advice on whether any action needs to be taken to ensure data can continue to flow in the event of a no-deal Brexit.

Faye Jarvis

“Brexit may mean that any claim under a contingent asset agreement becomes more difficult to enforce”

Faye Jarvis, Hogan Lovells

In this scenario, cross-border transfers of data between the UK and EU will no longer automatically be permitted. The UK has confirmed that it would continue to allow personal data to be transferred to the EU, although this would be kept under review. This should make it possible to transfer data to a processor in the EU, provided there is a data processing agreement in place.

The position is more difficult where both parties are data controllers. The EU would need to grant the UK an “adequacy decision” in order to allow data controllers in the EU to transfer data to the UK, which is unlikely in a no-deal scenario and the EU won’t make a decision on this until after Brexit.

In these circumstances, further contractual arrangements would need to be put in place to ensure the flow of data across borders can continue.

Overseas payments

Another cross-border issue that should be on trustees’ radar is payments to pensioners living overseas. There are two possible areas of concern: payments to pensioners from an occupational pension scheme, and payments to pensioners from a buyout.

With regard to the former, in a no-deal Brexit it will still be possible for trustees to pay pensioners living in the EU by payment to an EU bank account.

EU Brexit meeting

However, these payments may take longer because, post-Brexit, the UK will not be subject to the Payment Services Directive, which requires that all intra-EU payments must be made no later than the next working day.  

After Brexit, it is possible that payment times might take longer for non-EU institutions. That said, there is no reason why UK and EU banks cannot continue on a ‘next-working-day’ basis. Fees could also rise for payments into the EU.

To mitigate potential administrative delays, trustees should keep a close watch and consider alerting overseas pensioners if there are going to be any significant changes to the date of receipt of pension payments.


Much has already been made of the fact that, post-Brexit, an insurer authorised in the UK may be prohibited from paying annuities to members living in the EU.

A UK insurer would also be prohibited from issuing individual policies to pensioners or deferred members located in the EU, which in theory could make things difficult for schemes looking to towards a buyout.

Insurers are already looking at how to address this issue and some EU countries may introduce legislation to allow payments to be made, at least in the short term – but there is no consistent approach.

Trustees considering a buy-in or buyout, and with members who are resident in EU countries, should discuss this with their insurer to understand how they will manage this issue.

Cross-border providers

Investment advisers and managers, both in the UK and in the EU, are similarly grappling with how a no-deal Brexit will impact on their ability to provide services to their UK pension scheme clients.

Dominic Raab, Michel Barnier

(L-R) Dominic Raab, UK minister for exiting the EU, and Michel Barnier, the EU’s chief negotiator, at a press conference last year

A number of steps are being taken by both the UK and individual jurisdictions in the EU to try and minimise any possible disruption. For example, the UK government has announced that it intends to help EU firms continue to do business with UK clients, at least for a transitional period, by giving them temporary permissions and, more recently, the Financial Conduct Authority has signed a “multilateral MoU” with regulators in the remaining 27 EU member states to facilitate co-operation and information-sharing across areas of financial services including the asset management industry.  However, uncertainty still remains.

While a no-deal Brexit should not prevent trustees using EU structures – for example a fund domiciled in an EU member state, such as an Irish UCITS fund – in a no-deal scenario, a trustee’s UK investment advisers and managers may be more restricted in terms of the activities they can carry out in the EU.

The position may also be different in different jurisdictions, as although EU countries are passing legislation to allow UK financial services companies to continue to carry on their activities in a no deal Brexit, they are not doing so on the same terms. At this stage, trustees should speak to their investment advisers and managers to understand any potential impact.  

On a slightly separate note, it is unclear whether some pension schemes may have to start clearing derivative transactions and so this is another area that trustees will need to monitor with their investment advisers.

Contingent assets

Finally, if we do end up with no-deal Brexit, trustees with contingent assets from a European entity may want to take advice on how easy it will be to enforce a claim against that asset.

While a no-deal Brexit should not automatically result in any contingent assets terminating, it may mean that any claim under the contingent asset agreement becomes more difficult to enforce – particularly if there is a dispute and the parties cannot agree which courts should hear the matter.

The UK has recently signed up to the Hague Convention on Choice of Law Agreements to ensure that clauses in new agreements granting the English courts exclusive jurisdiction over any dispute continue to be recognised. However, it is less clear what the position will be for existing agreements in the event of a no-deal Brexit.

With two weeks to go until the UK’s scheduled departure from the EU and the threat of a no-deal Brexit still looming (albeit reduced), there are several issues of varying complexity and significance for trustees to be aware of and actively engage with.

The best advice at this stage may well be to seek advice on how to mitigate against any complications arising from the EU and the UK failing to ratify an exit deal.   

Faye Jarvis is a partner at Hogan Lovells