State pension UK: Why Brexit deal outcome ‘will make huge difference’ to some Britons | Personal Finance | Finance


A last-minute Brexit trade deal was announced on Christmas Eve, days before the Brexit transition period ended. Following the UK’s exit from the EU, some may wonder what it all means for pensioners who hope to one day live in Europe.

The government states: “You will not get yearly increases if you live outside these countries.

“Your pension will go up to the current rate if you return to live in the UK.”

Ahead of the trade deal being reached, there was uncertainty about whether the UK state pension would continue to increase in the EEA and Switzerland as it does in the UK post-Brexit.

Those who were already living in the EU before December 31 2020 had been reassured that they would receive the same uprating to UK state pensions as paid to those living in the UK.

Currently, this triple lock mechanism is based on whichever is which is the highest out of earnings growth, price inflation or 2.5 percent each year.

Had no deal been struck, this might not have been the case for people who moved abroad and retired in the EU in the future, Mr Cameron commented.

This loss of inflation protection on a full state pension could have cost overseas pensioners around £138,700.


On New Year’s Eve – the same day the Brexit transition period would end – the UK Government updated its guidance to confirm the the uprated rates would continue to apply to those moving to the EEA or Switzerland in the future.

“While Brexit removes the automatic right to work or live in the EU, the last minute Brexit deal has delivered some very welcome news for anyone who does retire in another EU country,” Mr Cameron commented.

“Under pre-Brexit arrangements, UK citizens who moved to the EEA or Switzerland and who claimed their UK state pension overseas received the same yearly increases as those still in the UK.

“In recent years, upratings have been in line with the ‘triple lock’, or the highest of UK earnings growth, price inflation or 2.5 percent.

“While those who were already living in the EEA or Switzerland before December 31 2020 had been assured that this would continue to apply to them, it was only on New Year’s Eve that the UK Government confirmed the same increases would apply to those who in future move to and retire in the EEA or Switzerland.

“Few people might have appreciated just how much was at stake here.

“This April, the state pension will increase by 2.5 percent from £175.20 to £179.60 a week. While £4.40 extra a week may not look huge, losing all future increases really adds up.

“With many people living 20 or more years after state pension age, any form of inflation proofing is highly valuable, with the triple lock particularly so. An inflation linked state pension of £175.20 a week is worth around £327,000 whereas one that doesn’t increase is worth around £188,300 which is £138,700 less.”

Mr Cameron also addressed what having a Brexit deal means for those working in the EEA or Switzerland.

He explained those in this situation would continue to be able to count future social security contributions paid in overseas countries towards meeting “qualifying conditions” for the UK state pension.

Individuals with fewer than 10 years of National Insurance credits receive no UK state pension and to receive the full UK state pension, you need 35 years of credits – although there are reasons why the amount a person can get are different.

“For those some way off state pension age living abroad, there was also welcome news that they will continue to receive ‘credits’ towards their UK state pension under ‘social security co-ordination’,” said Mr Cameron.

“Individuals need 35 years of credits to qualify for the full UK state pension while those with under 10 years receive no UK state pension.

“While the treatment of state pensions was clearly not top of the agenda in last minute Brexit negotiations, the outcome will make a huge difference to those planning to move abroad in future for their retirement years.

“Fortunately, those planning to retire to the Costas won’t find Brexit has, in state pension terms, ‘cost a’ fortune.”

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