Interactive Investor

Future British expats to get state pension boost

6th January 2021 13:03

Rebecca O'Connor from interactive investor

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Relief as Brexit deal means some overseas pensioners will get £140,000 extra.

Aspiring expats hoping to get the UK state pension when they move abroad can breathe a sigh of relief following the government’s last minute Brexit deal.

According to Aegon, the pensions firm, the deal struck at the end of last year means that those planning to live abroad when they retire no longer risk losing some of the value of their pension to inflation. Aegon said this “could have cost overseas pensioners nearly £140,000”.

While those who already live abroad were told they would get the same uprating to their UK state pensions as those living in the UK, the same reassurance had not been granted to those planning a move.

However, that changed when the government updated its guidance to apply to those moving abroad in future on New Year’s Eve.

The uprating to the state pension under the ‘triple lock’ of guaranteed rises is a valuable benefit to current and future recipients of the state pension.

This means state pensions rise by the highest of UK earnings growth, price inflation or 2.5%.

The newly drafted terms also confirmed that those working in the European Economic Area (EEA) or Switzerland can also continue to count future social security contributions paid while overseas towards the ‘qualifying conditions’ for the UK state pension.

To receive the full state pension, a worker needs 35 qualifying years of credits, with at least 10 years’ credits required to get anything. 

Steven Cameron, pensions director at Aegon, says: “While Brexit removes the automatic right to work or live in the EU, the last-minute Brexit deal has delivered some very welcome news for anyone who does retire in another EU country.”

Under pre-Brexit arrangements, UK citizens who moved to the EEA or Switzerland and who claimed their UK state pension overseas received the same yearly increases as those still in the UK.

In recent years, upratings have been in line with the ‘triple lock’.

While those who were already living in the EEA or Switzerland before 31 December 2020 had been assured that this would continue to apply to them, it was only on New Year’s Eve that the UK government confirmed the same increases would apply.

Cameron says: “Few people might have appreciated just how much was at stake here. This April, the state pension will increase by 2.5% from £175.20  to £179.60 a week. While £4.40 extra a week may not look huge, losing all future increases really adds up.”

 

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