House of Commons Library

Brexit and state pensions

Published Friday, February 1, 2019

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.

The Withdrawal Agreement

The draft Withdrawal Agreement (WA) published on 14 November 2018 states that EU Regulations on social security co-ordination will continue to apply after the end of the implementation period for individuals in scope of the WA. The intention is to ensure that citizens who have moved between the UK and EU before the end of the transition period are not disadvantaged in their access to pensions. The WA provides protections in other circumstances so that, for example, where a UK national has previously work and paid social security contributions in a Member State, rights flowing from those contributions, such as pensions are protected (see para 37-42 of the UK Government’s explainer for the agreement).

Information for individuals is on Gov.UK for example - UK nationals in the EU: essential information. The European Commission has produced a Q&A on the rights of EU and UK citizens as outlined in the Withdrawal Agreement (26 November 2018).

The Political Declaration setting out the framework for the future relationship between the EU and UK, states that social security co-ordination is to be considered in the light of future arrangements on the mobility of people.

In the event of ‘no deal’

The UK Government made an announcement on 6 December 2018 on citizens' rights in the event of the UK leaving the EU without a deal. It said it had taken steps to provide reassurance for EU Citizens in the UK and had asked the EU and Member States to reciprocate:

UK nationals who went to the EU and EU citizens who came to the UK before the UK’s exit from the EU did so on the basis that they would be able to settle permanently and build a life here, or in the EU. That is why the UK has taken steps to remove any ambiguity and provide complete reassurance for EU citizens in the UK. We ask that the EU and Member States do the same for our nationals.

We will continue to push the EU and Member States to secure these rights as soon as possible, which are in the mutual interest of all our citizens. Where it is in our control, the UK will also continue to preserve certain rights of UK nationals in the EU, for example by continuing to pay an uprated UK state pension to eligible UK nationals living in the EU. (DEXEU, Citizens’ Rights – EU citizens in the UK and UK nationals in the EU, 6 December 2018)

It was exploring options in relation to those areas that required reciprocity (like social security co-ordination) and would announce further details prior to exit (Ibid, para 28).

Regarding uprating, it said it was committed to uprating the UK State Pension for UK nationals in the UK in 2019 to 2020, and beyond that subject to reciprocity:

The UK leaving the EU will not affect entitlement to continue receiving the UK State Pension if you live in the EU, and we are committed to uprate across the EU in 2019 to 2020. We would wish to continue uprating pensions beyond that but would take decisions in light of whether, as we would hope and expect, reciprocal arrangements with the EU are in place. (Guidance - UK nationals in the EU: benefits and pensions in a ‘no deal’ scenario, 18 December 2018)

On 30 January 2019, the European Commission published final set of ‘no deal’ contingency proposals for social security co-ordination. Its aim was to ensure that, in the event of a “no deal” scenario, EU Member State authorities would continue to take into account periods of insurance, (self) employment or residence in the United Kingdom before withdrawal, when calculating social security benefits, such as pensions.

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

Commons Briefing papers CBP-7894

Author: Djuna Thurley

Topic: Pensions

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