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Expat pension increases guaranteed for three years

Emma Lunn
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Emma Lunn

The government will continue to “uprate” the UK State Pension paid to people living in the EU each year for the next three years.

Pensioners living abroad will benefit from having their pension uprated for the next three years in the event of a no-deal Brexit – but faced an uncertain future after that.

The UK basic and new State Pension is uprated by either 2.5 per cent, average wage growth or by prices growth as measured by the consumer price index (CPI) – whichever is highest – each year on a reciprocal basis under EU regulations.

The UK State Pension has already been uprated in the EU for the year April 2019 to March 2020. The government has now committed to uprating the UK State Pension paid to those living in the EU each year until March 2023, in the event that the UK leaves the EU without a deal.

Work and Pensions Secretary of State Amber Rudd said: “This government is working hard to prepare for leaving the EU on 31 October, whatever the circumstances. 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.”

However, campaigners are calling for an indefinite continuous uprating for the 222,000 Britons living in EU member states after Brexit. Since the referendum, British pensioners living abroad have already suffered from their pension being worth less because of the collapse in the value of sterling.

Under current rules, British pensioners in certain countries such as Australia, Canada and South Africa have their State Pension frozen each year, but British pensioners in the EU get annual increases in line with pensioners living in the UK.

The government said that during the three-year period the UK government plans to negotiate a new arrangement with the EU to ensure that uprating continues. However, in the absence of such an agreement there is no guarantee of annual increases. With pensioners being retired for potentially 20 to 30 years, the lack of annual inflation protection could make a very large difference to their standard of living.

Steve Webb, director of policy at Royal London, said the announcement was “deeply worrying”.

“This attempt to reassure British pensioners living in the EU will actually have the opposite effect. They have received repeated assurances that their pensions would be increased each year regardless of the outcome of the Brexit process,” said Webb, “Today’s announcement of a time-limited guarantee will be deeply worrying to British ex-pats 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 today’s statement offers no assurance to pensioners that annual increases will continue after that point.”