House of Commons Library

Brexit and state pensions

Published Wednesday, December 5, 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.

The draft Withdrawal Agreement published on 14 November 2018 states that EU Regulations on social security co-ordination will continue to apply across the UK at the end of the implementation period for individuals in scope of the Withdrawal Agreement. This will ensure that citizens who have moved between the UK and EU before the end of the implementation period are not disadvantaged in terms of access to State Pensions (and other forms of social security The agreement will require Member States to take into account contributions paid into their respective social security systems by individuals within scope of the agreement - meaning that workers only pay into one social security system at a time - and the right to aggregate contributions paid and periods of insured residence completed for the purposes of meeting different states’ benefit entitlement conditions continues. This includes contributions made in the UK and EU before and after the implementation period, and the rules will also protect the rights that flow from such contributions (para 37-42 of the UK Government’s explainer for the agreement).

Information for individuals is on Gov.UK - see, for example, UK nationals in the EU:essential information. The European Commission has produced a Q&A on the rights of EU 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 the UK leaving the EU without agreement (a scenario the Government says remains unlikely), the social security co-ordination provisions would cease to apply, leaving individuals who were or had been in a ‘cross-border’ situation covered by the national legislation of the state in question and any existing bilateral treaty between the UK and the Member State in question. Bilateral social security treaties have not been concluded with all Member States and those that exist are far more limited in scope than the EU co-ordination rules and may well be outdated - see CBP-8397 What if there’s no Brexit deal? October 2018 (section 9.4 and 9.5).

 

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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