Thinking Ahead: Brexit –‘No Deal’ and Social security

Under a ‘No Deal’ scenario, EU social security law will cease to apply to the UK as of 30 March 2019.

The UK will lose access to the European Social Security Regulations unless it remains a member of the EEA or negotiates a bilateral deal with the EU similar to the Swiss model. Remaining a member of the EEA is currently unlikely as per the current stance of Theresa May.

A ‘No Deal’ Brexit scenario would have significant and far reaching consequences for the social security entitlement of EU citizens who have worked or lived in the UK, and British citizens who have worked or lived in another EU member state.

Key Points

One of the major principles of Social Security coordination set out in EU Regulation 883/2004, is to ensure people receive the full benefit of contributions they have made.

If Brexit ends in ‘No Deal’, EU workers in the UK and British workers in a EU member state could lose their existing Social Security protections under the current reciprocal agreements, essentially becoming third country nationals overnight not eligible to benefit from free movement.

The UK Social Security system is designed to exclude third country nationals from almost all social benefits until they become permanent residents or have spent a substantial time in the UK. Without the EU regulations there would be no principle of equal treatment for third country nationals nor the principle of export of benefits. This means that there can be no aggregation of contributions made in different countries to calculate a benefit entitlement in the home country. For example, EU and British workers who have worked in both the UK and other EU member states would be at risk of losing some or all of their pension entitlement.

If ‘No Deal’ becomes reality, the UK potentially could revert to existing bilateral agreements between the UK and other EU member states, signed before joining the EU. However there are only 19 agreements signed of the 28 member states, so for many countries, including Poland, there is no fall back option. Even where there is an agreement, the contents reflect a very different time in global mobility where assignments were the exception rather then the norm. Consequently, the totalisation provisions that exist are less comprehensive and there is no principle of aggregation of contributions made in multiple countries.

Mobile employees who go on various assignments in multiple countries, paying  into multiple systems during their career, will likely suffer an impact on their benefit entitlements which they would not have done under the existing regulations.

Until new agreements are negotiated or old ones are revised (most likely some time post Brexit), mobile employees could simply be at the mercy of the domestic rules of each country in which they work; facing potential dual liabilities and a fragmented contribution record.

How We Can Help

Companies need to actively prepare for the real possibility of ‘No Deal’ now, and what this could means from a cost, operational and risk perspective.

Fragomen can assist with preparing a robust framework for tracking employees impacted by Brexit, ensuring that individuals affected understand the potential issues in respect of their benefits entitlement.

Our global integrated processes reduce client exposure to risks and non-compliance in a post Brexit Europe. This ultimately maximises corporate saving and supports day one compliance from social security perspective

For any social security related questions, please email [email protected] or contact Siobhan Owers or Wim Cocquyt.