One of the biggest worries for UK retirees living in the European Union was that Brexit could have meant a stop to the yearly increase in their state pension.
But the last-minute deal has now secured pension uprating for British expats living in the 27 member states and Switzerland, avoiding missing out on nearly £140,000 ($188,784, €155,026) over the life of the pension, research by Aegon found.
This means that Brits looking to spend their retirement in the EEA or Switzerland will be able to go ahead with their move without any financial impact on their retirement.
UK state pension increases are currently calculated according to the ‘triple lock’ – meaning that the yearly uprating will follow earnings growth, price inflation or 2.5% – whichever is highest.
Aegon had warned that a no-deal scenario could see retirees miss on £138,700, as they would lose the current inflation protection.
‘Huge difference’
Steven Cameron, pensions director at Aegon, said: “Few people might have appreciated just how much was at stake here. This April, the state pension will increase by 2.5% 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.
“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.@
He joked: “Fortunately, those planning to retire to the Costas won’t find Brexit has, in state pension terms, ‘cost a’ fortune.”
But the deal will do little to help Brits who chose to retire outside of the EEA and Switzerland who do not receive the same treatment, as their pensions were ‘frozen’ at the rate available at the time they left the UK.
Recently, International Adviser reported that the Australian and Canadian governments called on the UK to scrap the ‘frozen pensions’ policy and allow Brits to receive yearly increases like their UK and EU counterparts.
