What does leaving the EU mean for pensions?

This briefing is largely based on the briefing by the House of Commons Library ‘EU referendum: impact of an EU exit in key UK policy areas’. The opinions and judgements it contains are theirs. We expect to review and add to these articles periodically as events develop.

The impact of leaving the EU on both state and workplace pensions depends on the future relationship which the UK negotiates with the EU.

Currently, member countries are mainly responsible for the design of pension schemes, but the EU does have a regulatory framework on pensions.

This covers four significant points: cross border co-ordination of social security ; setting up an internal market for company pension schemes; minimum guarantees in case of the insolvency of the sponsoring employer; and anti-discrimination rules.

State pensions

The aim of EU rules on transferring state pensions is to remove barriers to workers moving between member countries, rather than to create an EU social security system. For example, they allow people to claim state pensions built up in different countries in one application.

People can also claim their UK pension while living abroad. The Department for Work and Pensions pays pensions to almost half a million people living in EEA countries. Most of these people were in the Republic of Ireland (28%), Spain (23%) and France (13%).

In its comprehensive review of the relationship between the UK and EU, the government commented that this is of “significant benefit to UK citizens, particularly retirees, who are living in other Member States”.   

European Economic Area countries and Switzerland are also included in the rules on social security. If the UK negotiated a deal with the EU which was similar to the EEA countries then these rules might still apply once we leave the EU. If not, the UK could try to negotiate deals with individual EU/EEA member countries.  

Workplace pension schemes

UK workplace pension schemes tend to operate on a national basis, rather than looking to provide pensions to workers in other member countries. But they do want access to the investment opportunities and service providers being in the EU and single market can provide, according to the Pension and Lifetime Savings Association.

Workplace pension schemes are also affected by EU laws. There is a direct impact from pensions-specific EU legislation, regulations from the European Insurance and Occupational Pensions Authority, and EU employment law.

The Eu also indirectly affects workplace pension schemes we well, as the costs and opportunities of complying with EU rules about investment markets are passed to pension fund clients by asset managers, brokers and banks.

Workplace pension providers acknowledge that the single market could play a part in facilitating access to investment opportunities and services, according to the government’s Balance of Competences Review. But they also argued for a strong national role in occupational pensions, given the very different traditions of provision across member countries.