State Pension UK: Brexit deal secures increases – Britons will not miss out on £140,000
State pension: Expert discusses possible 'significant increase'
State pension payments are overseen by the Department for Work and Pensions (DWP), which is responsible for ensuring pensioners receive the correct amount to which they are entitled. At present, the full state pension sum stands at £175.20 per week but is dependent on National Insurance contributions made throughout a person’s lifetime. It is, however, important to note the government states a person may receive less if they were contracted out before April 6, 2016.
But the last minute deal secured by Prime Minister Boris Johnson, has meant state pension rights have been secured going forward.
Many expat pensioners feared losing inflation increases to their state pension sum, which could have had an extreme impact.
In fact, research undertaken by pension provider Aegon, showed such a move could have lost overseas pensioners nearly £140,000.
Steven Cameron, Pensions Director at Aegon, commented on the matter.
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He said: “While Brexit removes the automatic right to work or live in the EU, the last minute Brexit deal has delivered some very welcome news for anyone who does retire in another EU country.
“Under pre-Brexit arrangements, UK citizens who moved to the EEA or Switzerland and who claimed their UK state pension overseas received the same yearly increases as those in the UK.
“In recent years, upratings have been in line with the Triple Lock, the highest of UK earnings growth, price inflation or 2.5 percent.
“While those who were already living in the EEA or Switzerland before 31 December 2020 had been assured that this would continue to apply to them, it was only on New Year’s Eve that the UK Government confirmed the same increases would apply to those who in future move to and retire in the EEA or Switzerland.”
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The importance of the state pension cannot be denied for people who have chosen to retire abroad.
This is because the sum of money overseen by the government often provides significant financial assistance, particularly to those who have no alternative source of income.
Indeed, the state pension often helps Britons to be able to budget in later life – not only for retirement goals, but also for the day-to-day cost of living.
Mr Cameron continued, providing further insight into the figures which will affect state pensioners moving overseas.
He said: “Few people might have appreciated just how much was at stake here.
“This April, the state pension will increase by 2.5 percent from £175.20 to £179.60 a week. While £4.40 extra a week may not look huge, losing all future increases really adds up.
“With many people living 20 or more years after state pension age, any form of inflation proofing is highly valuable, with the triple lock particularly so.
“An inflation linked state pension of £175.20 a week is worth around £327,000 whereas one that doesn’t increase is worth around £188,300 which is £138,700 less.”
But there was also good news announced which is likely to please even those who are some way off state pension age and living abroad.
This is because these individuals will continue to receive important credits towards their UK state pension under what is known as ‘social security co-ordination’.
People will need 35 years of these credits in order to qualify to receive the full state pension sum.
However, it is worth noting those with under 10 years of credits will not be entitled to receive any UK state pension sum.
Mr Cameron concluded: “While the treatment of state pensions was clearly not top of the agenda in last minute Brexit negotiations, the outcome will make a huge difference to those planning to move abroad in future for their retirement years.”
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