As part of the Brexit negotiations, what happens to rules around pensions / financial services which have been set at EU level?

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As part of the Brexit negotiations, what happens to rules around pensions / financial services which have been set at EU level? 

Much of the financial services rules and regulations currently applicable in the United Kingdom (UK) comes from European Union (EU) laws. Sometimes these apply automatically as a result of our EU membership. In other areas, the EU sets rules which member countries then need to build into domestic laws and regulations. In either case, at the point we leave the EU any existing EU laws and regulations relating to financial services will continue to apply. This will also be the case for any future EU regulation that comes into effect while the UK is a member of the EU, and during the proposed transition period to 31 December 2020.  

For the future, the UK Government and financial regulators have said they’ll continue to apply EU rules unless they consciously decide to set different UK rules. 

In some cases, when the UK has implemented EU regulations, it’s actually gone further, suggesting it supports these rules, so they may be unlikely to revoke them. It may also be important when agreeing on future trading agreements to demonstrate that the UK financial services industry operates to equivalent standards to those applying in the EU.

Legislative change

Legislative measures currently under development at EU level which are due to be implemented before 31 December 2020 include:

  • Packaged Retail and Insurance based Investment Products (PRIIPs).The rules relating to investment products, excluding shares and bonds held directly, came into force at the end of 2017. A review of whether these rules should be extended to pensions will take place in 2018.
  • The new EU General Data Protection Regulations (GDPR).  The key changes are the ‘right to be forgotten’, more explicit permissions required from customers to allow providers to mail them and the right to ‘data portability.
  • The Insurance Distribution Directive extends the scope of the Insurance Mediation Directive, bringing in the distribution of insurance products, including by insurers directly where no intermediation occurs. There are requirements covering product governance, conflicts of interest, inducements, providing certain documents in a durable medium and a 15 hour yearly CPD requirement for staff involved in sales and distribution.
  • The EU 4th Money Laundering Directive will introduce additional anti-money laundering requirements including risk assessing customers at individual level.
  • The Whistle-blower Directive proposed by the EU will address the fragmentation of protection for whistleblowers across the EU and protect them against retaliation for reporting breaches in specific EU policy areas, such as financial services and protection of privacy and personal data.
  • The Shareholder Rights Directive II will improve corporate governance in companies whose securities are traded on the EU’s regulated markets, to strengthen the position of shareholders and to ensure that decisions are made for the long-term stability of a company.

This is based on our understanding of current legislation and UK Government plans, which may change.