New Style ESA and Pension from an EEA Country

My client is a German National with settled status. She is about to receive a German Pension (at 65) as this is accessible earlier than the UC State Pension (66 years old)

She has contributed 30 years towards her UK new state pension.

Will her entitlement to her German State Pension affect her entitlement to NS ESA?

I wasn’t sure whether this would simply be looked at as for occupational / private pensions for which a gross £85 / week is disregarded or ??

Any idea, suggestions, comments?

Thank you

Good question!

I agree that ESA is based on UK state pension age (as defined by Schedule 4 of the Pensions Act 1995), not whether the claimant is in receipt of a state pension (from some other state).

I’m not sure how the German state pension is treated for income purposes though… The ESA regs refer to a ‘pension payment’, which is defined in section 3(3) of the Welfare Reform Act 2007 as a personal, occupational or public service pension. The definitions for those are in section 1 of the Pensions Scheme Act 1993 but I don’t see which would apply to your client’s German state pension…

Surely it wouldn’t be ignored? I’ll keep digging and will watch this thread with interest…

Now looking at co-ordination rules… here’s hoping someone else brings an answer soon as these always make my head hurt…

I don’t think the German State Pension should affect the NS ESA award because, as you note Kelly, the interpretation section is very specific about what a pension payment is and that definition doesn’t seem to cover a State Pension.

There isn’t an analogy with the UK State Pension because that’s an either/or - you’re either able to claim NS ESA and you’re under SPA or you can’t because you are over SPA and you might also have a UK State Pension but you couldn’t be entitled to both as far as I can see.

The coordination rules and competent state would potentially affect a PIP claim now or an AA claim after reaching SPA. However, if the client was also entitled to a UK State Pension as well as the German SP, then that might not be a problem either.

Thank you Kellie and Paul,

I understand totally. I was also going that way.. competent state is for cash sickness benefits but defined as disability benefits and carer’s allowance (also included here).

She has contributed for her ESA (NI) and has settled status so the UK is her main state of residence.

I expect that the pension (amount paid) could be treated like any other occupational pension if it was over £85 gross a week.

Let see what will happen.

Have a good afternoon

Michele_J - 24 June 2024 03:30 PM

Thank you Kellie and Paul,

I understand totally. I was also going that way.. competent state is for cash sickness benefits but defined as disability benefits and carer’s allowance (also included here).

She has contributed for her ESA (NI) and has settled status so the UK is her main state of residence.

I expect that the pension (amount paid) could be treated like any other occupational pension if it was over £85 gross a week.

Let see what will happen.

Have a good afternoon

I don’t think the German State Pension does affect NS ESA.

“pension payment” means—
(a)
a periodical payment made in relation to a person under a personal pension scheme or, in connection with the coming to an end of an employment of his, under an occupational pension scheme or a public service pension scheme,

(c)
such other payments as may be prescribed;

No other payments are prescribed in regulations that i can see, so occupational, private and personal pensions would all definitely affect the ESA award but I can’t see how a State Pension is caught because it isn’t any of the above.

Hi Paul,

That is useful. It was a big question mark for me. Logically I would have expected EEA pensions (as people retire earlier) to still be counted s as ‘personal / occupational pension). It gets potentially complicated because this pension would be (in Germany) being considered as a “public service pension scheme”.  Will see what happens. As she has two pensions, one an occupational pension from the UK and this German pension, she only goes over the £85 gross a week if the German pension is taken into account. Otherwise she is under and so no impact on her ESA .

Thank you!

This article I found explains more about German State Pension.

Private German pension⁴
The third pillar of the German pension system (along with state pensions and company pensions) is private pensions.

If your client is claiming the Gesetzliche Rentenversicherung (as seems likely as the dates for retiring tally), then I think that shouldn’t affect the ESA award. If however she is claiming one of the other two types of pensions, then these could be caught by the provisions quoted above I believe as they would be occupational or personal, rather than State, pensions.

Without having taken even the shallowest dive into the German pension system, I think that the answer if either an employer-related scheme or a private pension was in issue would not depend on a general assessment of their nature but on the very particular terms of the relevant definitions in the new style ESA legislation. For the purposes of potential deductions from benefit for “pension payments” under ss 2 and 3(1)(a) of the WRA 2017, such payments have to be under either a personal pension scheme or an occupational pension scheme or a public service pension scheme (ignoring the reg 64 extension to permanent health insurance). Then s 3(4) gives those phrases the same meaning as in s 1(1) of the Pension Schemes Act 1993.

Under para (b) of the definition there of “occupational pension scheme” it is a condition that the scheme has its main administration in the UK or outside the EEA states. The EEA states include EU member states (though I haven’t tracked down the statutory reference for that), so that a scheme administered by a German employer would not come within the definition (unless there is something very peculiar lurking under the surface).

Under para (b) of the definition of “personal pension scheme” it is a condition that it is established by a person within s 154(1) of the Finance Act 2004. Under s.154(1)(b) the scheme must have been established by a person with permission under the Financial Services and Markets Act 2000 to establish a personal pension scheme or a stakeholder pension scheme in the UK. That seems to exclude schemes established outside the UK.

The definition of “public service pension scheme” applies only to certain sorts of occupational pension scheme, as defined above, established under an enactment or the Royal prerogative or Royal charter. So if schemes administered in Germany can’t be occupational pension schemes they can’t be public service pension schemes either. In addition, the further references to legislation and to approval by Ministers clearly restrict the meaning to schemes established in the UK.

The upshot seems to be that the rule on deductions for pension payments can’t apply to any form of German pension.

Thanks John, that’s very helpful.