Article 50 green light raises fresh questions over state pension benefits

16 March 2017
  • Parliament backing of Brexit bill gives PM the green light to trigger Article 50

  • Brexit Secretary David Davis says clarifying the status of EU nationals living in the UK a priority for the Government

  • Government will seek assurances UK nationals living in EU countries are treated equally

  • Inflation protection on state pension potentially worth £50,000 at stake

Tom Selby, senior analyst at AJ Bell, comments: “It has been a nervous wait for EU nationals living in the UK and UK citizens living in the EU, but once Article 50 has been triggered Brexit Secretary David Davis has said providing certainty for these people will be the first priority for Brexit negotiators.

“As with most things Brexit, however, there is a hugely complex set of issues that need to be picked through. This is not just about whether Europeans living and working in the UK should be allowed to remain, although that is clearly a significant concern for many of those affected.

“The UK Government also needs to agree ‘reciprocity’ or ‘bilateral’ deals if UK nationals living in the EU are to continue to have access to the same social security and pension rights as they have at the moment. For those who have retired to the EU, or who are considering retiring to the continent, one of the main concerns will be that if no deal is struck their state pension could be frozen.

“Based on a 65 year old with state pension worth £155 a week, the inflation protection provided by the UK’s ‘triple-lock’ could be worth £50,000. Even if, as expected, the triple-lock is eventually downgraded to a ‘double lock’ – increasing in line with the highest of earnings or prices - it could still be worth tens of thousands of pounds over the course of someone’s retirement.


What is reciprocity? – reciprocal arrangements between the UK and foreign nations existed long before the EU referendum. They are essentially a bilateral deal between nations to provide a similar level of benefits to those available from the person’s home nation.

Why is this an issue now? – clearly the Brexit vote has thrown the futures of EU nationals living in the UK into doubt. It has equally cast uncertainty over the futures of UK nationals living in the EU. However, before committing to maintaining the status quo for EU nationals living in the UK, the Government wants assurances UK citizens in the EU will get equal treatment.

While fairness and welfare are clearly issues here, so is cost. When it comes to the state pension, for example, the Government estimates uprating frozen pensions for UK nationals in existing countries without reciprocal arrangements – such as Canada and Australia - would cost around £500m a year at a time when Government finances are stretched.

When it comes to Brexit and the state pension, cost will inevitably be a factor. The Government will also want to be sure that if it is increasing the incomes of UK nationals living and spending their money in other countries, those countries are doing the same for EU nationals living here.

Will an agreement be reached on state pensions? – the simple answer is we don’t know. While indications from Government suggest a rapid deal will be agreed to ensure EU nationals living and working here can remain, there has been precious little debate about the issue of state pension increases.

For UK citizens who have retired to the EU, the best case scenario would be for a reciprocal arrangement to be agreed with the entire continent – replicating what is in place at the moment. If this cannot be achieved, there will likely be protracted negotiations with individual member states which may or may not lead to deals being struck.

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