The most commented on opinion column in the Irish Times last week was a piece headlined, 'No, the UK will not pay a united Ireland’s pensions' (10 February). Underneath this was a strapline which read, 'Pinning the Bill and the blame on the Brits stirs grievance in the North'. While we should never blame the columnist for the editor’s choice of eye-catching captions, these headlines did in fact represent the general drift of the article.
How could a discussion of responsibility for the pensions of northerners when Ireland is unified be accused of stirring grievance and Brit-bashing? It is true that the British state pension is low by international standards and pensioner poverty relatively high. It is also true that the nominal value of the British state pension is significantly below the Irish state pension, and that the average amount of state pension paid per beneficiary in the Republic is over a quarter more than in the UK (Eurostat, latest available figures). But these were not the issues under discussion.
The point of the article was to argue that the economic case for unity is built on a "bluff" and "fantasy" that Britain would be “paying another country’s benefits for half a century”, notably “the £2.5 billion state pension bill”. The final, emotive flourish was, “Republicans ask us to wade through blood, but will not ask us to open our wallets”.
There will be many financial issues to sort out in any unity scenario, social security being a major one as it accounts for 40 per cent of the north’s expenditure; and about 42 per cent of this social security expenditure goes on state retirement pensions (£3.3 billion in 2019/20). So how would this be dealt with?
The starting point is European law and any agreements that have been made because of Brexit. The Irish and British governments signed a bilateral Convention on Social Security in 2019 which came into effect on 31 December 2020. This more or less replicates the established European framework for determining pensions in cases where people are resident in a different country from the country (or countries) where they worked – or the situation where someone is resident in the country they worked in, but also had spells of employment elsewhere.
Social or national insurance is essentially a contract between the individual worker and the state: the worker contributes and becomes eligible for benefits, both short-term (e.g. for periods of unemployment) and long-term (e.g. retirement pensions, survivors’ benefits and invalidity pensions). It is ‘social’ because the ‘risks’ are shared.
Pensions is a non-issue. Pensioners in Ireland, France or Spain etc. who have paid enough UK NI contributions get their pension paid by Westminster.— Dr IF Gow (@ifgow) February 6, 2022
In a world of increasing labour mobility, the EU moved to advance principles for the co-ordination of social security contributions and benefits across member states. These principles are designed to ensure that workers don’t lose out by virtue of working in different jurisdictions over time. For instance, workers should have the same social rights as nationals of the member state they are working in and they must pay the social insurance contributions required by that state. Workers should only pay contributions in one state at a time, but their contributions in different states are to be aggregated when considering eligibility for benefits. Their accumulated contributions and rights to benefits are also ‘exportable’ to wherever the person resides.
The detailed rules on the co-ordination of social security were laid down from 2004 onwards and their operation is guided by the Administrative Commission for the Coordination of Social Security Systems which is made up of representatives from every member state. The UK retains observer-only status on the Commission but needs to be involved because of the ‘protected cohort’ of workers for whom social security co-ordination continues to apply as specified in the Withdrawal Agreement. This is the body that also looks after reciprocal arrangements under the European Health Insurance Card scheme and the financial reimbursements between states for any healthcare provided under the scheme.
There is no reason to believe that, in the event of Irish unity, Britain would stop paying these pensions or current pensions in the north (numbering 298,000 at the moment), and there is no case to be made for a new Irish state to assume financial responsibility for them.
The main difference introduced by the Irish/British 2019 Convention is that, in the case of disputes, arbitration is handled by the two parties and a third ‘neutral’ party. The European Court of Justice is not mentioned in the Convention.
It is important to stress that the “co-ordination of social security” only concerns insurance contributions and benefits. Means-tested provision such as Universal Credit or Pension Credit does not come into it.
CONTRIBUTIONS HAVE BEEN PAID IN
The British government currently pays state pensions to half a million people living in EU member states. The largest group of 133,000 (27 per cent of the total) are living in the Republic. Some (many?) of these will be Irish citizens who have spent most of their working lives in Britain.
The next largest group (106,000) are in Spain and 67,000 are in France. The pension entitlement of all of these people was determined by their history of insurance contributions paid under the British system over their working lives. There is no reason to believe that, in the event of Irish unity, Britain would stop paying these pensions or current pensions in the north (numbering 298,000 at the moment), and there is no case to be made for a new Irish state to assume financial responsibility for them.
My Polish friend has worked here for 35 years and paid NI contributions to the UK.— Morri (@SteMorry) February 10, 2022
If he moves back to Poland to retire he WILL receive a full UK state pension, but...
If he retires in Scotland after independence the UK will refuse to pay him one?
What about those retiring in the future? Their state pension would depend on their social insurance contributions in the new Irish state and their national insurance contributions under the British system prior to unification. Their state pension would therefore come from two sources as described in the procedure for calculating the pension under the EU system (and the Irish/British Convention) which states that responsibility for the pension “is distributed among the Member States concerned in relation to the length of insurance in each of these Member States”. The actual calculations are quite complicated but are designed to maximise the rights of the retiring worker.
BRITISH PAYING LESS OVER TIME
In practical terms, Britain would face a declining cost over time for pre-unity pensions of those in the north. It would also be paying less and less a share of the pensions of those retiring after unity, compared with a no unity scenario. It would be open to the new Irish state to supplement the relatively low British pension.
So contrary to the exaggerated rhetoric of the Irish Times article, there is a longstanding tried and tested procedure for apportioning responsibility for the payment of state pensions, or part pensions, between states in which workers have accumulated records of insurance contributions. This should be seen as reassuring and not misconstrued as a source of grievance.