DWP announces plans to change pension calculation rules

The planned change in pension policy comes in response to the UK's departure from the EU

The Department for Work and Pensions (DWP) has announced plans to change the calculation of pensions. It will affect those who relocate in the future with the approach set to come into effect from January 2022.

The DWP outlined its plan in guidance published last month but it's now subject to approval by Parliament.

The department hopes to change the rules on how the State Pension is calculated in certain circumstances.

It applies to those who move to live in the European Union (EU), the European Economic Area (EEA) or Switzerland and who had previously lived in Australia (before 1 March, 2001), Canada or New Zealand.

The planned change in pension policy comes in response to the UK's departure from the EU after Brexit.

The DWP said: The change will affect you whether or not you have claimed your UK State Pension yet.

It further explained that anyone affected will have their pension calculated - or recalculated if already in receipt of such payments - using only their UK National Insurance record, if the policy is approved.

The change to pension calculations won't affect those currently living in the UK - whatever their nationality.

And additionally, any UK national, EU or EEA citizen or Swiss national who are living in the EU, the EEA or Switzerland by December 31, 2021, won't be affected by the planned change either.

The DWP noted: As long as you continue to live in the same country, you will still be able to count time living in Australia (before 1 March 2001), Canada or New Zealand to calculate your UK State Pension.

It added: If you live in an EU or EEA country or Switzerland, your UK State Pension will continue to be increased each year in line with the rate paid in the UK.