All Europe was holding breath until the very last days of 2020: will there be a deal for Christmas? A no-deal would have meant not only major disruption in trade and supply, but a catastrophe for many expats who rely on Social Security agreements for their (current and future) pension and their healthcare.

After years of exhaustive back-and-forth negotiations between the UK and the European Union, a global deal was eventually agreed on the 24th of December 2020. This 1500 page agreement covers the future relationship between the UK and the EU in term of goods (trade), fishery, transport, capital movements, energy, but also including dispute settlement, exchange of information and fair cooperation. A specific protocol is attached concerning the social security coordination. It covers sickness benefits and maternity, and a large part is dedicated to the old-age and retirments benefits.

How does pension work in the European Union

European rules provide coordination between the different social security organisation for European pension rights. You can benefit from this coordination if you are a citizen of the European Economic Area (EEA: European Union + Norway, Iceland, Liechtenstein and Switzerland). The age when you can claim your pension depends of the country where you live and which will be in charge of settling the pension. The different period of time you have worked in different EU Member States will be added to calculate the total period you ave worked, but each institution where you contributed will calculate the amount to be paid according to:

1. its legislation (national pension)
2. by adding together all working periods in all the state members, and calculating proportionally with the time spent in the state.

You can refer to our Expat FAQ for more details.

The rule applies to the period worked in the United Kingdom until 31 December 2020.

How pension is calculated after Brexit

Until the end of last year, your period worked in Europe are taken into account for the UK pension, and vice and versa. But what happens since January 1st 2021? A short response is: the same rules apply. The pension calculation of a person who has worked in different countries within the EU will be made taking into account the contributions paid to the pension fund in the country of residence, as well as the duration and amount of contributions paid in the other countries where the pensioner has worked. In other words, all the periods of work in any EU country are taken into account.

Here is an excerpt from the Agreement regarding pensions:

Unless otherwise provided for in this Protocol, the competent institution of a State shall, to the extent necessary, take into account periods of insurance, employment, self-employment or residence completed under the legislation of any other State as though they were periods completed under the legislation which it applies, where its legislation makes conditional upon the completion of periods of insurance, employment, self-employment or residence:

• the acquisition, retention, duration or recovery of the right to benefits;
• the coverage by legislation;
• the access to or the exemption from compulsory, optional continued or voluntary insurance

Therefore, the new type of pension calculation is similar to the way it was before Brexit, meaning that the different period of contributions in the UK as well as in the EU will be used when calculating the final pension.

As a transitional measure in relation to the situation that existed before the entry into force of this Agreement, the following rules as regards the applicable legislation shall apply between the Member States:

• a person who pursues an activity as an employed person in a State for an employer which normally carries out its activities there and who is sent by that employer to another State to 1169 perform work on that employer's behalf shall continue to be subject to the legislation of the first State, provided that:
• the duration of such work does not exceed 24 months
• that person is not sent to replace another detached worker.
• a person who normally pursues an activity as a self-employed person in a State who goes to pursue a similar activity in another State shall continue to be subject to the legislation of the first State, provided that the anticipated duration of such activity does not exceed 24 months.

UK-France example

France is in the EU while UK is not anymore. Both countries have presented the key points of the pension settlement:

• According to the UK Government website, UK nationals moving to the EU, EEA or Switzerland, can carry on receiving UK State pension, which will be increased each year in the EU in line with the rate paid in the UK. Social security contributions made in EU countries are also counted to meet the qualifying conditions for a UK state pension. The rules for the state pension apply to everyone regardless of nationality. People who decide to continue working after they have reached state pension age will no longer have to pay National Insurance. Irish citizens living in the UK will be also able to claim or continue to receive the UK benefits and will also continue to receive any Irish benefits they are entitled to.
• On the French Government website (similar rules apply to all State Members of the EU), the post Brexit regulations regarding pensions are pretty much the same: for French citizens who moved back to the United Kingdom before 31st of December 2020, the pension entitlement will be calculated on the basis of the same rules as it applied before, pursuant to the withdrawal agreement. The social security coordination rules under EU regulations will remain applicable by France and the United Kingdom irrespective of the pension settlement date. The provisions of the EU-UK Trade and Cooperation Agreement, which apply from 1 January 2021, allow for periods of employment in France and the UK to count toward both French and UK pension entitlements. In the case where the situation of the citizen remains the same, health insurance coverage and the insurance conditions will not change.

EU rules on coordination of social security systems continue to apply after 31st of December 2020. The rules will be maintained, meaning that – if someone is receiving a pension from one State and reside in the territory of another State – their health insurance will be covered by the State that pays the pension. Thus, the healthcare costs in France will continue to be covered by the French social security system on behalf of the United Kingdom.

Key points of the agreement on pension

The principle of added contribution periods when granting pension rights is the same in all EU. However, if some employees have paid their contributions in two countries in the same time, they will benefit from the capitalization of the contributions when the pension calculations will be made.

These are the key points presented in the Agreement:

• Individuals who move between the UK and the EU in the future will have their social security position in respect of certain important benefits protected.
• Individuals will be able to have access to a range of social security benefits, including reciprocal healthcare cover and an uprated state pension.
• Cross-border workers and their employers are only liable to pay social security contributions in one state at a time. Generally, this will be in the country where work is undertaken, irrespective of whether the worker resides within the EU or the UK, and indeed whether the employer is based in the EU or the UK.
• UK workers who are sent by their employer to work temporarily in an EU Member State which has agreed to apply the "detached worker" rules will remain liable to only pay social security contributions in the UK for the period of work in that EU Member State. Similarly, if an EU worker is sent by their employer to work temporarily in the UK from a Member State which has agreed to apply the "detached worker" rules, they will remain liable to only pay contributions in that EU Member State.
• The UK and EU Member States will be able to take into account relevant contributions paid into each other’s social security systems, or relevant periods of work or residence, by individuals for determining entitlement to a state pension and to a range of benefits. This will provide a good level of protection for people working in the UK and EU Member States. The Protocol also provides for the uprating of the UK State Pension paid to pensioners who retire to the EU.
• On healthcare, individuals of the UK and EU will be entitled to reciprocal healthcare cover. This includes certain categories of cross-border workers and state pensioners who retire to the UK or to the EU.
• The Protocol will ensure necessary healthcare provisions – akin to those provided by the European Health Insurance Card (EHIC) scheme – continue. This means individuals who are temporarily staying in another country, will have their necessary healthcare needs met for the period of their stay.
• The Protocol also protects the ability of individuals to seek authorisation to receive planned medical treatment in the UK or the EU, funded by their responsible State.

Expats could face difficulties to receive their money as banks shut their account

Following Brexit, some banks decided to close the bank accounts of UK nationals and this could create issues for UK pensioners living in other countries.

According to Which?, UK banks are closing bank accounts of British expats currently living in EU countries. They say: "At least 13,000 Lloyds Banking Group [including Bank of Scotland, Halifax and Lloyds Bank] retail and business customers have already received letters to say their bank and credit card accounts will be terminated". Similarly, Nationwide has closed accounts of 5,000 customers living in the Netherlands and Italy at the end of 2020.

EU banks benefit from a "passporting" arrangement. It means that banks can operate and provide services to customers in all the states of the EU. However, no deal has been reached on financial services and Brexit means that British banks may loose their right to provide services across the EU (and extended to the EEA). The impact on Brits abroad will depend on the operating model of their bank or provider, as some of them are still able to provide services: for example, HSBC has got an operation hub in Paris and therefore a licence to operate within the EU. For other financial institutions they need to negotiate specific agreements between countries to operate, which might take time.

Without UK-based services, expats will need to open accounts locally and if they receive a UK pension, they might face additional fees to receive the money. Alternative online services such as Transferwise or Revolut (which is headquartered in London but can still operate both in the UK and in the EU thanks to a European entity in Poland) could also be alternative solutions.

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