Cyprus pensions: UK ministers freeze expat pensions
Several thousand British ex-pats with Cypriot bank accounts have had their pension payments frozen to ensure they receive them ahead of a proposed bank deposit tax, Treasury minister Greg Clark said yesterday.
Mr Clark told MPs the government was putting pension payments on hold until “at least tomorrow” to “ensure that any payments made by Her Majesty’s Government to banks in Cyprus get to the intended recipient”.
• Cyprus bank crisis: British troops’ savings fear
His statement came as the Cypriot government postponed a vote on the unprecedented one-off bank deposit tax, part of a wider bailout package, until today.
Cypriot banks will remain closed until Thursday, as Monday’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.
Unlike the previous rescues for Greece, Portugal, Ireland and Spanish banks, the proposed Cypriot bailout is the first one that dips into individual savers’ bank accounts to finance a bailout.
In exchange for 10 billion euro (£8.6bn) in rescue money, the government proposed a one-off tax of 6.75 per cent on all bank deposits under 100,000 euro (£86,490) and 9.9 per cent over that amount.
The bailout package, which has still to be finalised, involves the International Monetary Fund, European Central Bank and European Union.
But after prompting an outcry from depositors, the Cypriot government is now looking at changing the terms of the deal so small savers lose less, while big depositors pay more.
One proposal is to make the tax more progressive, with a per cent levy on deposits below 100,000 euro, rising to 15 per cent for those above 500,000 euro (£428,505).
Mr Clark reiterated the UK government’s commitment to compensate around 3,000 armed forces members stationed in Cyprus for “reasonable losses” incurred from the situation.
He said several thousand UK pensioners in Cyprus would have their payments temporarily frozen, adding that it was possible to change the designated bank account to receive payments online.
“Any UK pensioners in Cyprus can be assured that their future pension payments are being held safely and a normal payment service will resume as soon as the situation in Cyprus becomes clear,” he said.
“However, recipients of these payments are able of course to switch the bank account to which payments are made with immediate effect.”
Mr Clark urged anyone wishing to do so to contact the International Pension Centre online. Labour’s shadow Treasury minister Chris Leslie said developments in Cyprus were troubling and risked further undermining confidence in Europe’s shaky banking system.
He said: “The terms of this bailout are extremely concerning and the market reaction today may only be the beginning of the fallout flowing as a result.
“While it is, of course, important their banks are put on a secure footing, it is extremely dangerous for wider economic confidence if the fundamental trust of retail depositors is undermined in this way.
“This was a very risky decision and we would expect the British Government to caution against such a sequestering of the funds of ordinary bank customers.”
Mr Leslie acknowledged that, as a non-eurozone member, Britain did not have a direct role in decisions made by the countries inside the group.
But he urged the minister to lobby for countries outside the eurozone to be allowed to observe and contribute to discussions.
He said: “Surely one of the lessons from recent history is that rock-solid guarantees for depositors are a prerequisite for stability and recovery.
“It is never a good message to send to the public in any country they would have been better off keeping their life savings under a mattress than in a bank.”
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