11th May 2016
Britons retiring to Europe could see their state pensions curtailed by as much £50,000 if the UK votes to leave the EU next month.
Under existing rules, anyone who retires to a country within the European Economic Area (EEA) has their pension uprated by the ‘triple-lock’, meaning it rises by the highest of earnings, prices or 2.5% each year.
However, in the event of a Brexit the UK might have to negotiate ‘reciprocal’ arrangements with individual EU countries to maintain the status quo. Where no such arrangement is agreed, people retiring to those countries could see their state pension payments frozen.
Based on an individual aged 65 in receipt of the £155.65 flat-rate state pension, the loss of uprating would cost around £50,000 over 20 years.
There are currently 472,000 UK citizens retired in the EU who receive uprated pensions who could also be affected by a Brexit vote according to a recent parliamentary research paper.
AJ Bell senior analyst Tom Selby says: “Brexit would throw the position of expat pensioners, or those who wish to retire to Europe, into doubt.
“Currently UK citizens who retire within the European Economic Area have their state pension payments uprated by at least 2.5% every year. This could be worth tens of thousands of pounds over the course of an individual’s retirement.
“While some believe the Government will be able to negotiate protections for expat pensioners in the event of a Brexit, it is worth noting the UK has not arranged a similar deal with a non-EU country since 1981, primarily due to the costs involved.”