Those who are moving to the EU in 2022 could receive a lower state pension than expected due to Brexit. Will these changes affect you and how much could your pension be reduced by?
Who will this affect?
If you are planning to move to a European country from 1 January 2022, you could receive a lower pension than expected due to Brexit.
These post-Brexit changes could impact anyone who has spent time in Australia, Canada or New Zealand during their working lives and who wish to move to a European country next year.
To claim your state pension in the UK, you need to make at least 10 years’ worth of national insurance contributions, or 35 years to claim the full amount. The UK currently has reciprocal arrangements with many countries, which mean that national insurance contributions made in another country can count towards your national insurance record back home.
How are the rules changing?
However, from 1 January 2022, UK nationals who move to an EU country may no longer be able to count periods of working abroad towards their national insurance record, meaning that their pension could be affected.
In particular, this is likely to affect those who have previously spent time in Canada, Australia or New Zealand.
“These post-Brexit changes will only affect those who move to the EU from 1 January 2022. If you already live in an EU country or move there before this date, your state pension entitlement will not be impacted.” Charles Purdy, CEO of Smart Currency Exchange
For example, maybe you are retiring and moving to Spain in 2022. You have accumulated the 35 years of national insurance contributions required to claim your full state pension. However, 15 years of your national insurance record has come from stints working in Canada. Therefore, your state pension entitlement will be significantly lower once you move to Spain, as you only have 20 years’ worth of eligible national insurance contributions.
It’s important to note that this will only affect those who move from 1 January 2022 – if you already live in an EU country, your state pension entitlement will not be impacted, even if you haven’t started claiming it yet.
Also, annual pension increases are here to stay. Brexit doesn’t change the fact that those living in EU countries can enjoy the same annual increases as those still living in the UK.
Protect your pension from currency fluctuations
If you are receiving income from a different currency, such as a UK-based pension or investment income, you’ll want to ensure that you never have to be concerned about the value of these payments due to fluctuating exchange rates.
We can put solutions in place to ensure that you don’t lose money on your pension payments. For more information about this, simply give us a call on +44 (0)20 7898 0541 or fill in this short form.