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With the UK set to leave the EU on 31 January 2020, many of our clients are asking how their UK State Pension will be impacted.
Historically, once the State Pension is in payment, it has increased by the triple lock system for those residing in the EEA or Switzerland, or a country with a reciprocal social security agreement with the UK.
Examples of countries with reciprocal social security agreements are the USA and the Philippines, meaning that retirees in these countries will receive inflationary increases. However, residents of Australia, Canada and New Zealand do not receive an uplift.
The annual increase to the State Pension with the triple lock system will be the higher of 2.5%, inflation measured by the Consumer Price Index (CPI) or annual earnings growth. Annual earnings growth was by far the highest in the last annual review, so the State Pension was increased by 3.9% for those who benefit from annual increases.
Read more: What is the Pension Commencement Lump Sum?
Read more: Are UK pensions indexed with inflation?
In an announcement earlier this month, the Government confirmed that UK nationals who are living in an EEA State or Switzerland on 31 December 2020 will continue to have their State Pension uprated each year for as long as they live there. However, the Government has not promised any increases for UK nationals who move to an EEA State or Switzerland from 1 January 2021, as this will depend on the outcome of the negotiations with the EU. Although there is an exception to this, which is for UK or Irish nationals who move to Ireland.
From April 2020 the maximum New State Pension will rise by almost 4%, to £175 per week or £9,100 per annum. A total of 35 years of qualifying National Insurance contributions are needed to obtain the full UK State Pension.
If you are living outside the UK and are interested in reviewing your State Pension benefits, please do not hesitate to get in touch.