Brexit negotiations must include state pension rights

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The outcome of Brexit negotiations could mean UK pensioners are left worse off in terms of state pension entitlement if they have failed to bank 10 'qualifying years' in the UK but have worked elsewhere in the EU, a paper has warned.

The House of Commons Library briefing paper Brexit and State Pensions said until the UK formally leaves the EU, the existing social security rules will continue to apply and entitlements will remain unchanged. However, the situation could be different after the UK exits.

Upon exiting the EU, the pension entitlements of UK citizens will be up for negotiation.

The International Consortium of British Pensioners said that free movement throughout the EU has meant a"significant number of people" have acquired state pension rights in more than one country, but if there was"nothing specifically in the Brexit negotiations to cover this, then it is a distinct possibility that the UK National Insurance (NI) contribution record will not be consolidated with the other periods worked in the EU".

Qualifying Earnings

Under the current rules, entitlement to UK state pension is based upon person's NI record.

For the new state pension, an individual needs 35 ‘qualifying years' of NI contributions or credits to qualify for the full amount of state pension - currently £159.55 per week. If a person has fewer than 35 qualifying years, they are entitled to a proportionate amount, providing they have at least 10 qualifying years.

According to the paper, as part of the EU the UK is part of a system that coordinates the social security entitlements of people moving within it. This allows a UK resident to continue to store qualifying years regardless of the country they are working in. The system works on a reciprocal nature, so long as the UK allows EU citizens the same rights and vice versa, the system can continue.

A person with seven years of UK NI contributions is not eligible for any new UK state pension, but under the current EU aggregation rules, if they have three years or more of qualifying employment elsewhere in the EU, this can be added to the years of UK employment, meaning they would have the minimum qualifying period of 10 years.

'Vital Difference'

On 26 June, the UK government published its offer for EU citizens in the UK and UK nationals in the EU. It said that the UK will continue to export and uprate the UK state pension within the EU and that the UK will continue to aggregate periods of relevant insurance, work or residence within the EU accrued prior to the UK's exit.

Aegon pensions director Steven Cameron said the paper highlighted the importance of Brexit negotiations on the state pension."Under Brexit this needs reviewing and for those affected, successfully agreeing to continue this ‘aggregation' approach could make a vital difference between receiving no UK state pension or receiving a pro rata amount."

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