The government will only guarantee pension increases for the next three years if Britain leaves the EU without a deal
British retirees living in EU countries could lose their annual pension increase in the event of a no-deal Brexit.
The government says that it will only guarantee state pension increases for pensioners living in Europe until March 2023, if Britian leaves the EU without a deal, a move which pension experts have described as “deeply worrying”.
Under the present system called the state pension triple lock, the UK basic and new state pension increases by either 2.5%, average wage growth or by prices growth as measured by the consumer price index – whichever is highest - a process known as uprating.
The decision could pave the way for automatic increases for pensioners living in EU countries to be removed.
There are around 240,000 British pensioners living in EU countries who could be affected according to figures from the Office for National Statistics.
With retirement of many pensioners potentially lasting for between 20 to 30 years, the lack of annual inflation protection could make a significant difference to their standard of living, Royal London warns.
Steve Webb, director of policy at Royal London and a former pensions minister in the coalition government, says: “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. The 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.”
UK pensioners living in other countries – notably those in Australia, Canada, New Zealand and South Africa - currently have their state pension frozen at the rate when they left the UK.
The Department of Work and Pensions has previously estimated that it would cost £600 million a year to uprate frozen state pensions.
Tom Selby, senior analyst at AJ Bell, says that over a 20-year retirement someone could lose out on around £50,000 in retirement income if their state pension was frozen at 2019/20 levels.
He says: “A no-deal Brexit creates troubling financial uncertainty for UK expats who have pursued their dream by retiring to EU countries such as Spain or France.
“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.”
Work and Pensions Secretary, Amber Rudd, says: “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.”
Not Supporting UK Economy
Well non UK countries economies are gaining from UK pensions so anyone moving there should ask them to pay any increase, UK pensioners are spending their pensions in UK which supports our economy. Think before you jump ship as other countries are not as generous with benefits as stupid UK.
Thanks for the giggle. I bet you voted leave judging by your ill informed comment.
I paid into a pension scheme and I have the right to be paid out without any strings in the same way as any other contributors. Any increase should be inline with any other persons rights. I have rights too.
How I choose to spend it and where I spend it is my personal choice and not subject to government interference.
I kept my end of the bargain and I paid contributions. My workplace pension has no right to impose spending restrictions or limit any increases because of where I choose to live. So, why does a government? Live and let live but please do not try to impose political views on personal income.