State Pension  

Govt's state pension guarantees post-Brexit

Govt's state pension guarantees post-Brexit

The government has confirmed that state pension rules will not change post-Brexit and pensioners living in the European Union will continue to receive their payments from January.

According to guidance from the government the UK state pension will continue to be paid to those living anywhere in the EU, EEA or Switzerland, even if they have moved there after 2020.

From January 2021, the state pension will also rise each year in the EU in line with the rate paid in the UK.

The government also confirmed that relevant social security contributions made in EU countries will count towards the qualifying conditions for a UK state pension.

For those with annuities and personal pensions, their UK provider should have made plans to ensure payments can still be made following the UK leaving the EU.

In addition, current UK law allows for workplace pensions to be paid overseas and the government does not expect this to change post-Brexit.

Last month (November 26), the government confirmed state pensions will rise by 2.5 per cent. The new rates will come into effect on April 12, 2021 and apply to the 2021/22 tax year.

The full rate of the new state pension will now be £179.60 per week. 

The standard minimum guarantee in pension credit will also increase by the same cash amount, rising by 1.9 per cent.

There have been concerns that the government would look to scrap its triple lock promise in response to the coronavirus pandemic and concerns that it would become unaffordable.

Under current rules, the state pension is increased by the highest of earnings growth, price inflation or 2.5 per cent a year.

The Office for Budget Responsibility previously predicted average earnings will fall by 7 per cent this year amid the coronavirus crisis - this is largely due to the fact a sizeable chunk of the workforce has been receiving 80 per cent of its pay through the furlough scheme.

Next year, as the country is expected to recover and the furlough scheme ends, the OBR said earnings could see an 18 per cent increase.

But if average earnings growth increased by this much, the current rules governing the triple lock mean the state pension would have to mirror this.

This has caused industry experts to argue the triple lock in its current form will “have to go” next year to avoid raising the state pension by a fifth.

But scrapping the triple lock altogether would break one of the key election pledges made by the Conservative party in December 2019.

amy.austin@ft.com

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