If the UK votes to leave the European Union in next month's referendum, it could have unexpected consequences for almost half a million British pensioners who have chosen to retire in Europe. They are set to lose out on annual increases to their pensions, potentially costing each of them up to £50,000 over their lifetime, according to estimates from stockbroker AJ Bell.
Under the current system, anyone who retires to a country within the EU has their state pension up rated by the same "triple lock" that applies to pensioners in the UK. This guarantee, which was introduced by the coalition government in 2010, increases the state pension every year by the higher of inflation, average earnings, or a minimum of 2.5%.
However, the same terms do not automatically apply to British pensioners resident outside the EU, and if Britain votes to exit the EU, the special treatment of those resident in Europe is likely to change.
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In order to keep the current system, the UK would probably have to enter negotiations to hash out "reciprocal" agreements with individual EU countries. If they can't come to an arrangement, people retiring to these countries could see their state pension payments frozen, meaning that they will continue to be paid at the same rate as when they first became entitled to the payments, or the date that they left the UK if already retired.
The UK hasn't managed to strike a similar deal with a non-EU country since 1981, notes AJ Bell, primarily because of the substantial costs involved for the government. MPs have admitted that the lack of clarity around the issue is troubling, which was debated in the House of Commons on Wednesday. However, at present the government is not budging from its line that a general policy of up rating pensions for UK citizens living abroad would be too costly, and says that it prefers to spend its budget on pensioners living inside the UK.
The number of whistleblowers warning about UK companies failing to comply with pension law soared by nearly a third in the past year, with more than 2,500 reports made to the Pensions Regulator, according to figures compiled by law firm Clyde & Co. The regulator launched more than 8,800 enforcement actions in the same period, four times the total in the preceding year.
The figures highlight how many small businesses have struggled to meet legal requirements introduced in 2012 automatically to enrol eligible employees into pension schemes. Firms could face fines of up to £10,000 a day if they fail to enrol all employees on time.
