Nearly half a million UK expats in the EU will see their state pensions continue to increase for the next three years in the event of a no-deal Brexit.
The Department for Work and Pensions (DWP) confirmed that the government will uprate the UK state pension paid to those living in the EU each year until March 2023.
As part of the ‘triple-lock’ agreement, the UK state pension is uprated by either 2.5%, average wage growth or the consumer price index (CPI) – whichever is highest.
Some of those living abroad will receive text messages to inform them of the March 2023 commitment.
The DWP has also established a call centre team based in Newcastle to answers any questions.
Despite, the UK government’s attempt to ease fears of a no-deal Brexit with this announcement, some members of the industry have been critical of the decision.
Steve Webb, director of policy at Royal London, said: “They [expats] have received repeated assurances that their pensions would be increased each year regardless of the outcome of the Brexit process.
“A time-limited guarantee will be deeply worrying to British expats living in the EU.
“If the UK leaves the EU on bad terms with the rest of the Europe, there is no guarantee that a new uprating arrangement will be reached, and [the 1 September] statement offers no assurance to pensioners that annual increases will continue after that point.”
Tom Selby, senior analyst at AJ Bell, added: “At the moment, the UK’s membership of the EU means people moving to Europe automatically benefit from state pension uprating in line with the hugely valuable triple-lock.
“While this isn’t cause for panic, those affected shouldn’t stick their heads in the sand either.
“Anyone who is currently retired on the continent, or is considering doing so in the coming years, should factor in the possible loss of state pension uprating into their income planning.”
The ‘triple-lock’ agreement applies to expat pensioners living in certain countries, such as the US, all EU countries, Barbados, Bermuda and Israel.
But pensioners living in countries such as Australia, Canada, New Zealand and South Africa have had their state pension frozen at the value it was in the year they left the UK.
If there is no agreement after March 2021, expats in EU could be in a similar situation.
UK expat pensions rose by 2.6% in 2019-20 in line with average earnings, according to the DWP.
For 2019/20, the full state pension is worth £168.60 a week or £8,767.20 ($10,600, €9,662) a year.
There is an small amount of certainty for expats with the definite three-year increase; however, there is no understanding of what happens after that period.
But the UK government is positive that it will be able to get an arrangement sorted before March 2023.
Amber Rudd, secretary of state at the DWP, said: “We will be fully ready for Brexit and are leaving in a way that protects the interests of citizens here and in EU member states.
“This guarantee will provide reassurance to the hundreds of thousands of people living in the EU who receive a UK state pension that their pensions will continue to rise significantly each year, however we leave.
“During this three-year period, the UK government plans to negotiate a new arrangement with the EU to ensure that uprating continues.”
Pawn in the negotiations
Jon Greer, head of retirement policy at Quilter, said: “The government is hoping it can negotiate a new arrangement to ensure this policy continues, but this is subject to reciprocal agreements which do not appear to be guaranteed and may result in state pensions being used as a pawn in wider negotiations.
“The government needs to ensure expats are well informed about this decision, but at this point no one ultimately knows whether current uprating will be maintained indefinitely into the future.
“Expats should follow this closely so that they can appropriately adapt their financial plans and give them enough time to prepare for new rules around their income growing.”