Retirees are the biggest group of expats living in France and there are scare stories in the media about expat pensioners in Europe being left “impoverished” by Brexit and “obliged to return home”. This is alarmist. There is unlikely to be any impact on pension payments as a direct result of Brexit: UK pension rules are governed solely by UK, not Europe.
True, expats who rely on a pension paid in sterling suffer a blow whenever the pound is in crisis but most are already used to exchange rate fluctuations and have also enjoyed a strong pound over the past couple of years. And while some predict that the pound could fall again over the coming weeks and months, both the Bank of England and the European Central Bank have promised to step in and stabilise the market if necessary. Nevertheless, if you haven’t already done so, it makes sense to talk to a currency broker to arrange a forward contract which allows you to set the exchange rate you receive. Exchange fluctuations apart, the only way your income could be affected by Brexit per se is if the French authorities raise taxes on UK pensions.
Of greater concern is whether a future UK government ditches the ‘triple-lock’ agreement in a bid to boost treasury coffers. Currently, anyone who retires to a country within the European Economic Area sees their UK pension rise in line with inflation, earnings or by 2.5% – whichever is the higher. This is because the principle of the single market is applied. Pensioners living in, for example, Canada or Australia, do not enjoy this right and their pensions are frozen.
It will now be up to the government to decide whether British pensioners in Europe should continue to enjoy triple lock protection (which protects other social security payments as well as pensions) if we leave the single market, in which case this will need to form part of Brexit negotiations. The triple lock is a reciprocal agreement between Britain and the EU but the government could find itself having to negotiate with individual EU countries in order to maintain the status quo.
Although the government has not negotiated pension protection agreements with a non-EU country since the early eighties, it will nevertheless need to weigh the cost of funding protected pensions to expats in the EU versus the cost of reducing their income and forcing them to return to the UK. To be blunt, the majority of EU citizens living in the UK (including more French than there are British in France) are young, in employment and contributing to the Exchequer while the majority of expats in Europe are retired and likely to need state support, particularly the NHS.
In other words, it is in Britain’s interest to top up expat pensions so that retirees can continue enjoying retirement abroad.
The International Consortium of British Pensioners (ICBP) fights for justice for British pensioners living abroad who have had their pensions frozen.