House of Commons Library

Brexit and state pensions

Published Wednesday, July 18, 2018

This Commons Library briefing looks at EU law providing for the co-ordination of State Pension entitlement and the possible impact of Brexit

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Entitlement to the UK State Pension is based on an UK individual’s National Insurance record. 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. For more detail, see Library Briefing Paper SN-01457 Frozen Overseas Pensions (May 2016) and DWP Decision Makers Guide, Volume 2: international subjects (para 070310 ff).

The arrangements to apply in future have been part of the negotiations under Article 50 on the UK’s withdrawal from the EU. A joint report on progress published on 8 December 2017 said that, with the caveat that “nothing is agreed until everything is agreed”, the Withdrawal Agreement would include a commitment to social security co-ordination:

28. Social security coordination rules set out in Regulations (EC) No 883/2004 and (EC) No 987/2009 will apply. Social security coordination rules will cover Union citizens who on the specified date are or have been subject to UK legislation and UK nationals who are or have been subject to the legislation of an EU27 Member State, and EU27 and UK nationals within the scope of the Withdrawal Agreement by virtue of residence. Those rules will also apply, for the purposes of aggregation of periods of social security insurance, to Union and UK citizens having worked or resided in the UK or in an EU27 Member State in the past.

The July 2018 White Paper said the UK would seek reciprocal arrangements, which “could cover provisions for the uprating of State Pensions, including export rules and aggregation principles for people who have contributed into multiple countries’ systems.” It would also ensure workers only “pay social security contributions in one state at a time” (para 89).

Guidance for individuals is on Gov.UK – UK leaving the EU: what you need to know.

 The potential impact on private pensions is discussed in CBP-07629 Brexit – implications for private pensions (March 2017).

 

Commons Briefing papers CBP-7894

Author: Djuna Thurley

Topic: Pensions

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