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18 May 2016

Brexit would leave expat pensioners thousands of pounds worse off

British citizens who choose to retire in Europe could see their state pensions be reduced by £50,000 over the next two decades if next month´s referendum results in the UK leaving Europe, the Telegraph reports.

Current rules means that anyone retiring within the EEA - including EU countries as well as Iceland and Norway - will see their pension increase every 12 months according to the ‘triple-lock´ system. The effect of this is that pensions rise by either wage or price inflation, whichever is higher, with a minimum of 2.5%.

But should the referendum lead to a Brexit decision, the UK may have to reach an agreement about reciprocal agreements with EU countries if British expats are to continue receiving their annual state pension increase.

In the event that a decision could not be reached through negotiation, or if the terms of the agreement changed, annual increases could be scrapped for British expats, and their pension payments frozen.

Investment company AJ Bell has calculated that for a 65-year-old expat receiving the flat-rate state pension of £155.65, a loss of annual pension hikes would see them miss out on around £50,000 over the course of 20 years. And with life expectancies increasing all the time, some people may be living out their retirement for even longer than this.

A senior analyst for AJ Bell, Tom Selby, warned that a “Brexit would throw the position of expat pensioners, or those who wish to retire in Europe, into doubt.”

Commenting on the possibility of negotiations between the government and the EU, he added: “it is worth noting that the UK has not arranged a similar deal with a non-EU country since 1982, primarily because of the costs involved.”

This outcome would of course be particularly frustrating for the hundreds of thousands of British expats who have been living abroad for over 15 years, who won´t even have the chance to vote in the referendum themselves.

One such pensioner, 83-year-old Brian Cave - a retired teacher now living in France - explained that, “If the Government started freezing the pension, if our health support ceased, even I would have to very seriously consider downsizing massively and moving back.”

Copyright M2 Bespoke 2016

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