Brexit – Implications on the social security relationship between the UK and Switzerland

Today, the social security rights of EU/Swiss nationals are covered by the EU regulations (EC) No 883/2004 and (EC) No 987/2009. If the UK proceeds with the exit from the EU, i.e. Brexit, the current regulations between Switzerland and the UK would cease as part of the process. Authors: Lukas Naef, Marlene Kobierski, Tamara Soldati

 

Social security authorities in both Switzerland and the UK, have therefore agreed to protect the existing rights of Swiss and British nationals, should Brexit become a reality on 29 March 2019.

As part of the “Mind the Gap-Strategy”, Switzerland has concluded an agreement with the UK, which guarantees the existing rights of Swiss and British citizens after Brexit. This agreement only protects existing rights or rights acquired prior to Brexit. In other words, it only protects Swiss and British nationals that are already in a cross-border situation today.

New Agreement between Switzerland and the UK

Switzerland and the UK have negotiated a new agreement with respect to the rights of citizens from both locations. The agreement covers, among other legal areas, the protection of acquired rights in the field of social security. The Swiss government approved this agreement on 19 December 2018.

The agreement on citizens’ rights will not enter into force as long as the UK remains part of the EU and the Free Movement of Persons Agreement (FMOPA) is still applicable for UK nationals.

The aim of the agreement on citizens’ rights in the field of social security is to avoid as far as possible changes for persons currently covered by the FMOPA and to protect the rights acquired under the FMOPA.

The aim of the agreement on citizens’ rights is to ensure that the rights acquired under current agreements will be protected. Therefore regulations (EC) No 883/2004 and (EC) No 987/2009 shall continue to apply for:

• Swiss nationals residing and working in the United Kingdom on the entering into force of the agreement on citizens’ rights
• British nationals who live and work in Switzerland on the entering into force of the agreement on citizens’ rights
• Swiss nationals residing in Switzerland and working in the United Kingdom on the entering into force of the agreement on citizens’ rights
• British nationals residing in the United Kingdom and working in Switzerland on the entering into force of the agreement on citizens’ rights

For these persons, nothing changes as long as they are in a cross-border situation, i.e. as long as there is a connection to both states with regard to the nationality, activity or residence. For example A1 will remain applicable and the social security liability therefore would not change. The European health insurance card (EHIC) remains valid. Family benefits will continue to be paid. In case of reaching retirement age after the entering into force of the agreement on citizens’ rights, the individual is still entitled to a pension in accordance with national legislation. Insurance periods completed in the other country are taken into account for the fulfilment of the minimum insurance period and the pension continues to be paid without restriction even in case of residence to the other country. In this case, health insurance cover is also guaranteed by one of the two states.

Regulations (EC) No 883/2004 and No 987/2009 continue to apply to certain persons who are not or no longer in a cross-border situation if they have the right to work or reside in the other State. These are, for example, Swiss nationals who go on working in the United Kingdom at the end of their posting or those who give up their employment in the United Kingdom and continue to reside there.

Deal or No-Deal Brexit – impacts on the application of the new agreement

On 12 March 2019 the UK parliament refused once again a Brexit deal. Whether or not UK and the EU will agree on a transitional period during which FMOPA shall still be applicable is not clear. The transitional period of the deal refused on 12 March 2019 would last until 31 December 2020.

Deal or No-Deal Brexit with regard to transitional period for the application of FMOPA would lead to the following consequences:

• In case UK and the EU approve the withdrawal agreement without transitional period, the FMOPA would no longer be applicable as of 30 March 2019. The entry into force of the new agreement on citizens’ rights would kick in and protect the rights granted under the Regulations (EC) No 883/2004 and No 987/2009 of the Swiss and UK nationals in a cross-border situation. Swiss or UK individuals not yet in a cross-border situation as of 30 March 2019 will not be covered by the Regulations (EC) No 883/2004 and No 987/2009
• If UK and the EU agree on a transitional period, the FMOPA would still be applicable until the end of the transitional period (for example until 31 December 2020). During the transitional period, Swiss and UK nationals are still entitled to newly establish rights and protection under the Regulations (EC) No 883/2004 and No 987/2009. Only after the elapsing of the transitional period and the final withdrawal of the UK as EU member, the new agreement on citizens’ rights would kick in and protect the rights granted to the Swiss and UK nationals in a cross-border situation before and during the transitional period

Quo vadis? Where are you going?

The end of the application of current Regulations (EC) No 883/2004 and (EC) No 987/2009 between Switzerland and the UK has further consequences for the application of the national social security legislation. At this future point, the UK would be considered a non-EU state, with a potential framework, for exit (Deal Brexit) or not (No-Deal Brexit).

As a result, the future coordination of social security between Switzerland and the UK is not yet clear. As soon as the FMOPA is no longer applicable between Switzerland and the UK, the 1968 bilateral social security agreement suspended by the entry into force of the FMOPA, will apply again, especially to individuals that are not protected by the new agreement on citizens’ rights. Although the 1968 agreement is not an equivalent substitute to the current EU regulations, it covers several UK-Swiss cross-border situations for social security purposes.

With regard to the post-Brexit situation, many questions will need to be analyzed on a case by case basis, for example:

• Is an assignment under a Certificate of Coverage (CoC) based on the 1968 social security agreement possible?
• Is a voluntary insurance in the 1^st pillar possible?
• Does the individual have a liability under two different schemes?
• Which regulations apply regarding health insurance and accident insurance?
• Does the individual have an entitlement to family allowances?
• What happens with saving contributions in the individual’s pension scheme?
• Is the individual entitled to unemployment insurance benefits?
• Etc.

We recommend a review of your Swiss/UK cross-border population. There are implications that might affect both, the employer and the individual employee from a number of perspectives. We suggest an upfront analysis to clarify the position of any cases or groups where there could be issues. Once identified, a pro-active approach can be taken with employees to address the matter and any assorted queries.

Related to the topic, we would like to make you aware of our Client webcast “Brexit and the implications for Swiss businesses” on 21 March 2019, 11:30-13:00 CET. Further information and registration is available at this link.