Under threat of a total collapse of the banking system, the Cypriot government has agreed to institute a penalty of up to 9.9% on funds held in bank accounts on the island.
The details of the move are still being finalised but it is estimated that 59 000 members of the expatriate community stand to lose up to £170m.
Despite timing the announcement on the eve of a bank holiday there are growing fears amongst expats that an eventual run on the banks may be inevitable. James O’Connor, an expat retiree living in Limassol, told Expat & Offshore, “We are all extremely worried. I put my retirement nest egg in a Cypriot bank account and thought it would be safe as it’s in the EU.
“It is a scandal that my money is going to be taken from me through no fault of my own.”
Expat & Offshore has consistently warned about this very possibility. Expats are always advised to hold funds in a safe jurisdiction such as the Isle of Man where a low proliferation of lending banks mean that assets are extremely safe.
There is now major concern that the contagion will threaten the millions of expat retirees in the similarly exposed economies of Spain, Portugal and Italy.
The wealth management community is stressing that now more than ever it is vitally important to seek professional expat focussed financial advice when planning for retirement or transferring a UK pension offshore through a Qualifying Recognised Overseas Pension Schemes (QROPS).