Expat Brit pensioners could be £50k worse off in event of Brexit

Brits who retire in another EU country receive the same incremental pension increases as they would if they remained in the UK. A post-Brexit landscape could look very different, however.

The current “triple-lock” pension agreement whereby British pensioners who have retired abroad in the EU see their pensions increase along with annual inflation could be a thing of the past if the UK exits the European Union, experts have warned…

If the UK public votes to leave the EU on June 23, then Britain would have to negotiate new agreements with those countries in Europe that are currently home to British retirees.

Currently, an EU-wide policy sees Brits receive incremental increases in their state pension, rising by whichever is higher – wage or price inflation – each year, subject to a minimum of 2.5 per cent.

However, if no such new agreements could be reached then pensioners in places such as Spain, France and Italy would face the same situation as those who have retired to Canada, Australia and New Zealand, whereby the state pension payment eligible in the year they left the country is frozen at that rate for the duration of their time overseas.

Hence, a recently retired Brit who moves to a post-Brexit EU country could feasibly be £50,000 out of pocket over 20 years, according to calculations published by investment shop AJ Bell. A typical 65 year-old retiring today would be eligible for £155.65 per week, but the loss of annual increases over a 20-year duration would seriously mount up, AJ Bell found.

“Brexit would throw the position of expat pensioners, or those who wish to retire to Europe, into doubt,” said AJ Bell senior analyst Tom Selby. “While some believe the government will be able to negotiate protections for expat pensioners in the event of a Brexit, it is worth noting that the UK has not arranged a similar deal with a non-EU country since 1982, primarily because of the costs involved.”

So while non-expat pensioners may see this rule as another EU-led cost to taxpayers, those Brits who directly benefit from the agreement would be well-advised to vote ‘remain’ to ensure that it is safeguarded.

The minister for pensions, Baroness Ros Altmann, said in February that clarification on this matter was required “as part of the process of negotiating the UK’s exit if there is a vote to leave”.

If on June 24 the nation wakes to find that the UK will be leaving the EU, there is a two-year window within which EU treaties will still apply, meaning that there could be a great deal of legal and political wrangling ahead. However, Parliamentary under-secretary of state for justice, Shailesh Vara, recently stated that the Conservative government currently has no plans to change the present policy, which applies to pensioners living outside the EU, whereby pension payment rates are frozen.

“Brexit would be a leap in the dark for millions of pensioners who have worked hard all their lives and deserve security in retirement,” added the Baroness. “Under the current system, British pensioners in both the UK and Europe enjoy the certainty of a basic state pension income protected through the triple-lock.”

The deadline for registering for a postal vote in the forthcoming election has now passed, but Brits who have lived overseas for less than 15 years can still register for a proxy vote at their most recent electoral office.