Why the most vulnerable Brits in Germany could be hit hardest by UK bank account closures

In the wake of news that some UK banks are closing accounts for their British customers living abroad, we spoke to international money management specialist Jason Porter about the likely impact on Brits living in Germany and the rest of the EU.

Why the most vulnerable Brits in Germany could be hit hardest by UK bank account closures
Cash machines in Berlin. Photo: DPA

As the British government has failed to secure access to the EU banking scheme – known as passporting – after Brexit, UK banks are faced with complicated processes to gain financial licences with each of the EU's 27 member states.

And it seems that for some this is just not worth the effort – leading to British people living around Europe getting letters saying their accounts would be closed or their credit cards withdrawn.

It's important to stress that this is not all British banks, and not all types of account are affected. The situation is different in each country, and we don't know the full extent of what will happen yet.

But for those people who do face losing their accounts, the consequences could be serious.

READ ALSO: How post-Brexit bank changes could affect Brits in Germany

Jason Porter, a specialist in international tax and money management at BlevinsFranks Financial management, explains why.

What do Brits living in the EU need UK bank accounts for?

For many people, they just keep a UK account from habit or convenience, maybe to use as spending money when they come back to visit the UK. And for those people it is really just a bit of inconvenience to change over any direct debits to their main account in the country where they live.

But for others it could have more serious consequences if they are using their UK account for regular income – in particular for pensions to be paid into or income from UK rental property.

What's the problem with pensions?

State pensions can be paid overseas, so you can get your pension paid directly into your European account in euros, but not all private pensions have the capability to do this. It's mainly the smaller pension funds, I'd say 90 percent of private pensions can pay to overseas, but not all can so if you don't have a UK account this could be a problem.

And what about income from rental properties?

If your rent money cannot be paid into a UK account then you have two options – have the money paid into your European account and pay international transfer costs each month – these are a lot less than they used to be as everything becomes computerised, but would still add up over time. Or you could hire a UK management agent who would collect and transfer the money for you – but they will charge you a fee to do this, often 10 percent or more of your monthly rental income.

Some people just keep a UK property or properties as an investment, but for others rental income from a UK property can form the bulk of their income.

So what are your options?

Most British people living in the EU will already have a bank account in the country where they live so you need to transfer all the payments, direct debits etc that you can to this account. 

It's important to point out that this is happening quickly – account closures are likely to take place in November and some people get just a couple of weeks notice. You need to go back through your bank statements for the last few months and make a note of all payments so you can transfer them to your EU account and avoid missing payments and getting hit with charges when your UK account closes.

READ ALSO: The complete guide to opening a bank account in Germany

For those who cannot use their European account for everything there are international accounts and 'expat' accounts, but these often require a minimum deposit level. Similarly there are 'international' credit cards to replace something like a Barclaycard, but again these are often limited to high net worth accounts.

One option that could be worth exploring is Isle of Man accounts – these are sterling accounts but often operate in Europe so already have the European licences that they need.

READ ALSO: Tell us: Brits in Germany – have you been affected by the closure of a UK account?

Is this happening just because of Brexit?

Partially. The specific issue with European banking licences is because of Brexit, but many British banks had been withdrawing from Europe and selling their European operations.

If, for example, Barclays had a presence in France it would be able to carry on offering accounts to British people in Spain without needing to get extra licences, because it had an EU base that it could have passported from. But as many banks have withdrawn from the European markets they no longer have these options.

Who do you think will be the hardest-hit by this?

Unfortunately I think it will be the people who don't have a high net worth, aren't very financially savvy and maybe don't speak the language of the country they live in very well who will be impacted by this.

People with a high net worth will be able to find international accounts or expat accounts and those who are financially savvy and fluent in the local language should be able to open sterling accounts with their local banks.

Unfortunately for pensioners and those on low incomes this could be more difficult and those who are already on the margins for having sufficient resources to gain residency status in certain countries could be hard hit for, for example, having to pay extra bank charges or management fees on rental income that could bring them below the income threshold they need to gain residency status.

Jason Porter is Business Development Director of Blevins Franks Financial Management Ltd.

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‘It’s their loss’: Italian universities left off UK special study visa list

The UK is missing out by barring highly skilled Italian graduates from accessing a new work visa, Italy's universities minister said on Wednesday.

'It's their loss': Italian universities left off UK special study visa list

Universities and Research Minister Cristina Messa said she was disappointed by the UK’s decision not to allow any graduates of Italian universities access to its ‘High Potential Individual’ work permit.

“They’re losing a big slice of good graduates, who would provide as many high skills…it’s their loss,” Messa said in an interview with news agency Ansa, adding that Italy would petition the UK government to alter its list to include Italian institutions.

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“It’s a system that Britain obviously as a sovereign state can choose to implement, but we as a government can ask (them) to revise the university rankings,” she said.

The High Potential Individual visa, which launches on May 30th, is designed to bring highly skilled workers from the world’s top universities to the UK in order to compensate for its Brexit-induced labour shortage.

Successful applicants do not require a job offer to be allowed into the country but can apply for one after arriving, meaning potential employers won’t have to pay sponsorship fees.

Students sit on the steps of Roma Tre University in Rome.

Students sit on the steps of Roma Tre University in Rome. Photo by TIZIANA FABI / AFP.

The visa is valid for two years for those with bachelor’s and master’s degrees and three years for PhD holders, with the possibility of moving into “other long-term employment routes” that will allow the individual to remain in the country long-term.

READ ALSO: Eight things you should know if you’re planning to study in Italy

Italy isn’t the only European country to have been snubbed by the list, which features a total of 37 global universities for the 2021 graduation year (the scheme is open to students who have graduated in the past five years, with a different list for each graduation year since 2016).

The Swiss Federal Institute of Technology, EPFL Switzerland, Paris Sciences et Lettres, the University of Munich, and Sweden’s Karolinska Institute are the sole European inclusions in the document, which mainly privileges US universities.

Produced by the UK’s Education Ministry, the list is reportedly based on three global rankings: Times Higher Education World University Rankings, the Quacquarelli Symonds World University Rankings, and The Academic Ranking of World Universities.

Messa said she will request that the UK consider using ‘more up-to-date indicators’, without specifying which alternative system she had in mind.