Nicky Morgan MP, the chair of the Treasury Committee, is urging the government to act soon to clarify the postion on cross-border pensions and insurance contracts post-Brexit amid fears of chaos.

He concern follows fears raised by the ABI about pension paid to British nationals living in the EU post-Brexit. There are fears that without an EU-UK agreement in place pensions may have to be suspended.

Ms Morgan has written to Chancellor Philip Hammond about the treatment of cross-border pensions and insurance contracts written prior to Brexit to ascertain what will happen to the them post-Brexit. She fears that UK providers may not be able to ‘legally’ continue to pay pensions to British expats living in the EU post Brexit.

She said: “The possibility that UK providers may not be legally able to pay out pensions or insurance contracts to citizens in the EU – including UK expats – is a stark example of the consequences of a “cliff edge” Brexit. The ABI is right to raise this concern with the Treasury Committee and Government.

“Both the UK and the EU have a strong mutual interest in resolving this problem, in line with their shared objective of a smooth and orderly Brexit. It is therefore surprising that there have been no position papers from the Commission or the Government proposing how it might be addressed. I have written to the Chancellor to get further clarity on the Government’s thinking.

“The Committee will no doubt want to examine the scale of the problem with the regulators, and may take evidence from the insurance industry.”

Her letter makes reference to the ABI’s briefing - ‘Brexit and Insurance Contracts: Why preserving customers’ rights after 2019 requires urgent action.’

In the briefing document, the ABI says that insurers and long term savings providers must be authorised in an EU country in order to sell a contract to an EU customer, continue to pay claims, and accept premiums on existing contracts. In the absence of any action or agreement, on Brexit day, ‘passporting’ will end and insurers will lose the legal authorisation to service these contracts, she warns. They must break the contract or break the law.

Hargreaves Lansdown says that UK expats face losing their pension payments unless a post-Brexit deal is found.

Tom McPhail, head of policy at HL, said: “Given the extent to which European regulation and legislation already sets the agenda for domestic UK regulation of financial services, it shouldn't be too challenging to reach an accommodation whereby business can continue as usual. Nevertheless the ABI is right to highlight the risks of not making sure a solution is identified and implemented in a timely manner.”