As the EU Withdrawal Bill wins its first Commons 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:
James Walsh, Policy Lead: Engagement, EU and Regulation explains:
Agreement on export of state pensions
“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. 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.
“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.
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“The source for this information is 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. The agreement was reached some weeks ago, as the July edition of the same bulletin also shows this as one of the Brexit issues that has been settled. “
New agreement on ‘aggregation’
“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. 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.“
How likely is this to happen?
“Although the whole Brexit deal will have to be approved by the UK Parliament, by EU national governments and by the European Parliament, it is highly unlikely that these issues 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.“
Protecting workplace pensions as well
“These issues about state pensions underline the importance of securing agreement and minimising any potential disruption from the UK’s departure from the EU.
“Although this part of the Brexit negotiations is about state pensions, 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.“