Brexit’s social security impact on international Swiss and UK workers

Every European Union (“EU”) member state has its own social security system. The same applies to Switzerland. The EU rules coordinate the national social security systems within the EU to ensure that people moving to another EU country or living in one EU country and working in another EU country do not lose their social security coverage (for example pension rights). Furthermore, under these coordination rules a person must only pay social security contributions in one country. As a general rule, the laws of the country where the person actually works (as an employee or self-employed) apply and contributions must be paid there. This is irrespective of where the person lives or where their employer is based. There is, however, an exception for workers that have been posted abroad for generally less than 2 years. Such workers may remain insured and pay contributions in the country from which they are posted. For people working simultaneously in more than one country, specific rules determine which country's laws apply and where they should pay social security contributions.

Switzerland has concluded a Bilateral Agreement on the Free Movement of Persons (“FMOPA”) with the European Union which coordinates the Swiss and the EU social security systems. After Brexit, the FMOPA and the EC Regulations No. 883/2004 and No. 987/2009 on the coordination of social security systems will no longer apply between Switzerland and the United Kingdom (“UK”). Therefore, the UK becomes a “third country” in terms of its relationship with Switzerland and UK nationals consequently become “third-country nationals”.

In order to safeguard the entitlements of those people who exercised their right to free movement under the FMOPA before Brexit, the UK and Switzerland negotiated an agreement on citizens' rights (“new FMOPA”). The aim of new FMOPA 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. These entitlements include – inter alia – the periods relevant for the calculation of benefits. For example, if a Swiss citizen worked for 10 years in the UK before Brexit, this period should be taken into account when his/her pension rights are calculated by the competent authorities in Switzerland where he/she retires.

Switzerland approved new FMOPA on 19 December 2018. It will apply when the FMOPA is no longer applicable between Switzerland and the UK, i.e. after the withdrawal of the UK from the EU or as from the end of the transition period. The relevant date depends on whether or not the UK and the EU can agree on a Withdrawal Agreement with a transition period.

New FMOPA only protects existing rights under the FMOPA and does not apply to persons who move between Switzerland and the UK after the withdrawal of the UK from the EU or the end of the transition period. The future coordination of social security between Switzerland and the UK is not yet clear. If no new rules can be agreed, the bilateral social security agreement of 1968, which was suspended by the entry into force of the FMOPA, will apply again. Although the old agreement is not an equivalent substitute and only applies to pension insurance, it at least allocates the right to levy contributions and the duty to grant benefits. Additionally, it guarantees the export of pensions.

Therefore, if persons are contemplating an international relocation from Switzerland to the UK or vice versa, such a relocation should take place before Brexit in order to benefit from the new FMOPA.