This Commons Library briefing looks at EU law providing for the co-ordination of State Pension entitlement and the possible impact of BrexitJump to full report >>
Entitlement to the UK State Pension is based on an UK individual’s National Insurance record. For the new State Pension introduced on 6 April 2016, an individual needs 35 ‘qualifying years’, of National Insurance contributions or credits (which are available for certain circumstances in which a person is not able to work) to qualify for the full amount (£155.65pw in 2015/16). If they have fewer than 35 qualifying years, they are eligible for a proportionate amount, provided they have at least ten qualifying years (Pensions Act 2014, Pt 1).
As part of the EU, the UK is currently part of a system to co-ordinate the social security entitlements for people moving within the EU. The rules also apply to EEA countries and Switzerland. The aim of these provisions is not to harmonise social security systems, but to remove barriers to workers moving between Member States. They enable periods of insurance to be aggregated, so an individual who has worked in other Member States can make one application to the relevant agency in the country of residence - in the UK, the International Pension Centre. This agency then notifies details of the claim to all countries in which the person has been insured. Each Member State in which the person was insured then calculates its pro-rata contribution and puts that amount into payment. There is detailed guidance on this in volume 2 of DWP’s Decision Makers’ Guide.
The UK State Pension is payable overseas but is only uprated if the pensioner is in an EEA country or one with which the UK has a reciprocal agreement requiring uprating. This is discussed in Library Briefing Paper SN-01457 Frozen Overseas Pensions (May 2016). The details of what is required under reciprocal agreements between the UK and other countries outside the EEA vary. Information is in DWP Decision Makers Guide, Volume 2: international subjects (para 070310 ff).
As answers to PQs make clear, future arrangements will be a matter for negotiation:
Alison Thewlis: To ask the Secretary of State for Exiting the European Union, if he will make it his policy in negotiations to seek to retain European Economic Area (EEA) rules on state pensions paid to UK nationals living in EEA countries.
Robin Walker: The reciprocal entitlements that will apply following the UK’s exit are subject to the wider negotiation on our future relationship with the EU. We will approach the negotiations with the full intention of securing a deal that delivers the best possible outcome for the UK and its nationals (PQ 60094, 20 January 2017; PQ HL 4943 30 January 2017).
The potential impact on private pensions is discussed in CBP-07629 Brexit – implications for pensions (August 2016).
Commons Briefing papers CBP-7894
Author: Djuna Thurley