UK expat pensioners living in the EU will continue to have their state pensions uprated and will therefore avoid having their state pensions frozen, according to the latest UK government legislation.
Earlier this week the EU withdrawal Bill narrowly passed through its first Commons vote, with pensions one of the key considerations for the 1.2m Brits in the EU and the 3m Europeans living in the UK.
The Bill highlights that the UK and EU have agreed that the UK will continue paying and uprating state pensions to UK citizens living in EU countries after Brexit – and vice versa.
Following this week’s vote, the Pensions and Lifetime Savings Association (PLSA) has compiled a briefing on how Brexit might impact on the state pension for those UK citizens who are based in the EU.
As reported, for more than half a million UK citizens living in some part of the world, including Canada and Australia, their state pension becomes or has become frozen once they are resident outside of the UK, an issue that campaigners have been rallying the UK government to rectify, to ensure parity with those that live in the UK.
The UK government, forced by a cross-party group of MPs, led by Labour leader Jeremy Corbyn, has had a motion passed that recommends the controversial frozen pension rule to be overturned. But due to the snap general election in June, the matter was shelved.
But as James Walsh, policy lead: Engagement, EU and Regulation at PLSA explains, the passing of the Bill shows that for EU pensioners at least, an agreement on export of state pensions is ready to be formally rubber stamped.
“The UK and EU have agreed that the UK will continue paying and uprating state pensions to UK citizens living in EU countries after Brexit – and vice versa,” said Walsh. “This means, for example, that British pensioners living in Spain will continue to get the same annual inflation increases they would have got in the UK. The same will apply to Spanish pensioners resident in Britain.
European Economic Area
“Those yet to retire will also benefit from this continuation of the current arrangements. As at present, this arrangement will cover all EU countries plus those of the European Economic Area (EEA – Norway, Iceland and Lichtenstein) and Switzerland.
Walsh has used the August edition of the ‘Joint technical note on the comparison of EU-UK positions on citizens’ rights’, published jointly by the UK and EU, as source for his information. The agreement was reached some weeks ago and, as the July edition of the same bulletin also shows this as one of the Brexit issues that has been settled.
“One area in which progress was made between the July and August updates is on whether national insurance contributions made while working abroad count towards state pension entitlement,” added Walsh. “Policy-makers call this ‘aggregation’ of periods of work and national insurance.
“The latest update shows that the UK and EU have now agreed to maintain the current arrangement. So a UK citizen who spent some years working in Germany will still have those years count towards their state pension entitlement; the current arrangements for sharing the costs between the various governments will continue.
“This arrangement applies to people who are already taking their state pension and will also apply for those who are yet to retire.”
The full Brexit deal will, of course have to be approved by the UK Parliament, by EU national governments and by the European Parliament, but, as Walsh points, it is “highly unlikely” that these issues over pensions will be a sticking point.
The fact they have been agreed so early in the process indicates they are seen as “uncontroversial” which will come as a relief to pensioners across the EU.
“Of course, it is possible that the whole Brexit deal might founder because of failure to agree on more difficult issues. However, even if the UK leaves the EU in March 2019 with no deal, the EU regulations in this area would have been copied into UK law under the European Union (Withdrawal) Bill now before Parliament – assuming this passes into law.
“So the state pension arrangements would continue unless the government decides otherwise.
Although this part of the Brexit negotiations is about state pensions, the PLSA is keen to ensure that the deal must protect workplace pensions as well, as these form a key element of many people’s incomes in retirement.
“It is crucial that the final agreement does not leave UK pension schemes exposed to any future EU rules on the valuation and funding of pension schemes, as these would make it far more difficult to run schemes and would probably lead to lower pensions,” added Walsh.