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Cyprus bailout expat state pension payments frozen UK government

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Payments stopped: Greg Clark MP.

State pension payments for UK expats living in Cyprus have been temporarily suspended so that they won't be subjected to the island's proposed levy on savings.

Treasury financial secretary Greg Clark told the House of Commons that payments will be stopped until after the Cypriot Government has agreed or rejected the 10billion euro bailout package from the EU and International Monetary Fund (IMF).

The package comes with the caveat that some 5.8billion euros is raised with a one-off tax on savings, with those with less than 100,000 euros deposited paying 6.75 per cent and those with more than 100,000 euros paying 9.9 per cent.

The move from the UK Government is designed to stop state pension payments falling into expat accounts in Cyprus and being hit with the savings tax.

There are currently 18,133 UK pensioners resident in Cyprus, but about a third of these already use a UK bank account for their payments.

The freeze will mean a delay of at least a few days for those whose payments were due.

Expats receiving a state pension can nominate a different account so that the missed payment can still be paid, provided that account is based outside Cyprus.

  More... I have savings with the Bank of Cyprus UK, is my money safe? How to save safely with banks and building societies British taxpayers to bail out victims of outrageous raid on Cyprus accounts

Mr Clark said: 'There are several thousand UK pensioners resident in Cyprus. Today is a bank holiday in Cyprus and to ensure that any payments made by HMG to banks in Cyprus get to the intended recipient, all future pension payments made by HMG to British citizens in Cyprus administered are temporarily on hold until at least tomorrow.

'Any UK pensioners in Cyprus can be assured that their future pension payments are being held safely and a normal payments service will resume as soon as the situation in Cyprus has become clear.

'However, recipients of these payments are able to switch the bank account into which payments are made with immediate effect by contacting the International Pensions Centre.'

The Government has said that the 3,000 serving military personnel in Cyprus would be compensated to ensure they do not suffer 'unreasonable losses' should they be hit with the tax, as will the 250 civil service staff based there.

However, Mr Clark stopped short of saying they would receive full compensation despite Chancellor George Osborne suggesting this would be the case yesterday morning.

The island's banks will remain closed until Thursday, as yesterday's bank holiday has been extended by two days, the nation's central bank said. The Cypriot government wants time to amend the deal reached over the weekend, which will raid ordinary people's savings to partly fund a bailout package.

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