State PensionJan 30 2019

Altmann warns of Brexit risks for expat pensioners

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Altmann warns of Brexit risks for expat pensioners

Former pensions minister Baroness Ros Altmann has warned of the risks to British expats in a no-deal Brexit, as state pensions will only be uprated if host countries reciprocate.

Baroness Altmann warned those who retired to live abroad were especially at risk of Brexit because so few of their host countries' pensioners lived in the UK.

Evidence cited by the Commons Brexit select committee showed there were 190,000 pensioners living in Spain, France and Ireland, but just 5,500 pensioners from the entire EEA living in the UK.

Historically, the UK government has only agreed to pay pension increases on a reciprocal basis, which means that other EU countries would have to commit to paying for British pensioners' increases while the UK uprates the pensions of their citizens here.

Baroness Altmann said expats living in Spain could be particularly vulnerable, as there were 70,000 British people receiving the state pension in Spain, but only 62 Spanish pensioners in the UK.

She said: "Such imbalances clearly put any reciprocal arrangements at risk and leave British pensioners exposed to significant losses, which were never explained by the Leave campaigns or party manifestos."

Currently, existing EU treaties support the accumulation and receipt of the British state pension for British citizens living elsewhere in the EU.

This means contributions towards another EU country's state pension system during the individual's working life can be used to enhance the saver's entitlement to a British state pension.

At the moment an EU citizen only needs to make one state pension claim at retirement, regardless of their working history within the EU.

A British citizen in receipt of a British state pension elsewhere in the EU will also see their pension payments increase in line with recipients who are resident in the UK – currently governed by the triple lock.

Under the current triple lock system, the state pension increases each year in line with whichever is the highest: consumer price inflation (CPI), average earnings growth or 2.5 per cent.

Next April, the state pension will rise in line with the 2.6 per cent earnings growth figure from July 2018, by £4.25 a week to £168.60.

Baroness Altmann warned this uprating may be withheld from pensioners who retired to EU countries under a no deal Brexit.

She said: "Even with the Prime Minister's Withdrawal Agreement and Political Declaration, the risk of frozen pensions remains, because no future relationship is agreed.

"The likelihood of other countries making demands in exchange for reciprocal uprating clearly puts pensioners at risk."

However, guidance issued in December stated that the government is committed to uprate the state pension across the EU in 2019/20.

"We would wish to continue uprating pensions beyond that but would take decisions in light of whether, as we would hope and expect, reciprocal arrangements with the EU are in place," it said.

The Prime Minister is due to renegotiate a deal with the EU after her previous one was rejected by a landslide earlier this month.

Yesterday, MPs voted to reject proposals that would have sought an extension to the Article 50 process if a deal on the terms of the UK’s exit from the EU has not been ratified before the March 29 Brexit day.

maria.espadinha@ft.com