Tuesday, 20 October 2015


When the state pension rises in April by £3.35 a week to £119.30 more than half a million state pensioners who paid for their pension for all or most of their working lives will get no increase. 

They live in more than 150 countries around the world where the UK pension is paid but is frozen - it never increases with inflation.

Unequal abroad
UK pensioners living abroad fall into two groups.
  • About 660,000 UK pensioners who live in the EU or one of 20 or so other countries get their UK pension increased each year as it is back home.
  • Ex-pats living in the other 156 sovereign states of the world do not get this rise. Their state pension is frozen at the rate it was first paid abroad. So 560,000 UK pensioners who live in these countries are locked out from any rise even though they have paid their taxes here, often for all their working life.
Nine out of ten of these ‘frozen’ pensioners live in four countries - Australia, Canada, New Zealand, and South Africa. People in their nineties may be living on a UK basic state pension first paid to them abroad in 1985 which is just £21.50 a week instead of the £115.95 which would they would get in 2015/16 if they lived in the UK. In 2013 the record was said to be held by Annie Carr, aged 100, who got a pension of just £6.12 a week, first paid to her in 1970 when she moved to be with her daughter in Australia.

But another 55,000 live in more than 100 countries around the world. 

John Markham, the Director of UK Parliamentary Affairs for the International Consortium of British Pensioners, is trying to gather support among people in the UK aged 45 to 65 who may plan to retire to a frozen country without realising it. 

"A lot of people of that age consider emigrating and they don't know their pension will be frozen. Also true of a lot of ethnic minorities. People from India and Bangladesh, for example, simply don't know that if they return to their birth countries their UK pension will be frozen." 

The reasons for this odd division between frozen countries and the rest are historical. After World War II the UK entered into agreements with a number of countries where it had interests or a special relationship to pay full pensions to UK citizens living there. Joining the EU added more countries to the list as no discrimination is allowed against citizens of member state and EU enlargement has brought more in.

Border anomalies
The result is that UK pensioners living in the USA get their pensions uprated each year as if they were back home. Across the border in Canada they are frozen. In the Philippines UK pensions are raised each year with inflation. In nearby Australia they are not. Other anomalous pairs of neighbours where UK ex-pats live include Barbados, uprated; Trinidad frozen. France uprated; Andorra frozen. Israel, uprated; Lebanon, frozen. Mauritius uprated, Madagascar frozen.

The latest estimate for paying all ex-pats the same pension as they would get in the UK this year is £655 million. 

John Markham recognises that cost is a key issue.
"We want to discuss an age-tiered solution. This year index the pensions of the over 85s. Next year, 80-85s. Then those 75 to 80. And so on. That would cost around £100m in the first year, a figure they could slip through without anyone noticing. An alternative suggestion is just to do it for new retirees from, say, next year. That would cost nothing. Once it is done for one group it's a foot in the door and harder to defend doing for others."

He also says that every UK pensioner who chooses to live abroad saves the country a lot of money by not relying on the state support they would get at home.  - they don't use the NHS or care services. The campaign puts that figure at £7,700 per year in health care, age related benefits and miscellaneous pension credits for each 'frozen pensioner' a total of £3 billion a year. 

The Campaign believes that unfreezing pensions would encourage more people to retire overseas, potentially saving UK taxpayers more money over future years.
Government view
Many politicians have taken up the cause of frozen pensions over their years in opposition. But once in Government they look at that cost and decide they prefer to uphold the status quo. As a result governments of all colours have ignored parliamentary motions and whipped their MPs to win every vote in Parliament. 

In 2014 Parliament passed the Pensions Act which introduced the new State Pension. It also set in legislative stone the discrimination between frozen and uprated countries.

A DWP spokeswoman told me "People who are considering emigrating abroad should always consider the impact the move could have on their future State Pension entitlement.”
Court action
Governments have also defended the current rules in court. A key legal challenge was brought by a campaigner living in South Africa, Annette Carson. Her case was finally rejected in 2005 by the House of Lords. 

Twelve years ago the ex-pat campaigners began a parallel case in the European Court of Human Rights to try to find some fresh lever to move the Government. Thirteen pensioners argued that under the European Convention of Human Rights the UK government had to protect their property and was prohibited from discrimination. The state pension was property, paid for by National Insurance contributions. So by paying increases in some countries but not others the UK Government was discriminating against their enjoyment of their property according to where they chose to live.

It was a clever argument but in March 2010 the Grand Chamber of the European Court of Human Rights rejected it by 11 votes to 6, ruling that freezing the state pensions paid to people in 150 overseas countries was not a violation of their human rights because the circumstances of people were different depending where they lived and therefore discrimination in their treatment did not breach the convention.

Countries where the UK state pension is uprated 
Only in the 51 countries listed here does the UK state pension rise each year as it does in the UK.

Alderney, Austria, Barbados, Belgium, Bermuda, Bosnia Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Falkland Islands (frozen but Falklands Legislative Assembly tops up to UK level), Finland, France, Germany, Gibraltar, Greece, Guernsey (includes Herm, Jethou, Lihou), Hungary, Iceland, Ireland, Isle of Man, Israel, Italy, Jamaica, Jersey, Kosovo, Latvia, Liechtenstein, Lithuania, Luxembourg, Macedonia, Malta, Mauritius, Montenegro, Netherlands, Norway, Philippines, Poland, Portugal, Romania, Sark (includes Brecqhou), Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turkey, United States of America.

Background with links to official documents up to the start of 2014 are contained in this House of Commons Library note

The Pension Justice website contains a lot of useful information and case studies. The campaign also has a Facebook page and is on twitter @pensionjustice
21 November 2015
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