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British MPs rally support from Canada and Australia to end 'disgrace' and 'shame' of frozen expat pensions

This Is Money logo This Is Money 16/12/2020 Tanya Jefferies for Thisismoney.co.uk
a view of a city: MailOnline logo © Provided by This Is Money MailOnline logo

A cross-party group of MPs has mobilised support from Canada and Australia in efforts to 'unfreeze' expats' state pensions.

A new report includes contributions from both countries, detailing their efforts to pressure the UK Government to pay all pensioners living abroad the same annual payout hikes as other retirees.

Canada, which is home to 150,000 elderly British expats, has recently asked the UK to negotiate a reciprocal social security agreement covering the uprating of pensions.

a large clock tower towering over the city of london: MPs rally overseas support: All-Party Parliamentary Group on Frozen British Pensions details hardships faced by expats struggling on incomes that fail to keep up with the cost of living © Provided by This Is Money MPs rally overseas support: All-Party Parliamentary Group on Frozen British Pensions details hardships faced by expats struggling on incomes that fail to keep up with the cost of living

Australia says it has made a series of representations to the UK Government in recent years, including at ministerial level, asking it to give the 230,000 retired Britons living there annual increases in their state pension.

There are an estimated 510,000 retirees around the world whose state pensions are currently frozen at whatever amount it was set at when they moved abroad.

That means some expats who retired when the basic rate was £67.50 a week in 2000 still get that, rather than the £134.25 a week now received by others who retired that year. 

However, it was announced this year that British expats in the European Union will continue to get annual increases in the state pension, plus healthcare rights, as long as they moved there before the end of 2020.

Why are state pensions frozen for some expats? 

Whether an expat's pension is frozen or not depends entirely on where you move to, because the Government has struck individual deals with some countries but left around 150 others out in the cold.

This has created an historical anomaly, which originated some 70 years ago, where people retiring to Canada, Australia, India, Africa and many parts of the Caribbean lose out on state pension increases, while those living in EU countries, the US, Jamaica, Israel and the Philippines get their full whack.

The Government has not struck any new deals for many decades. It says it would cost £3billion over five years to change course on its policy  - see its statement below.  

Read more here about the frozen state pension trap, and see the full list of countries affected below. 

But those moving to EU countries from the start of 2021 might see pension payments frozen unless a post-Brexit deal is struck.

The above also covers those living in Switzerland, and countries which are in the European Economic Area but not the EU - Iceland, Liechtenstein and Norway.

The new report just released by the All-Party Parliamentary Group on Frozen British Pensions details the hardships faced by expats struggling on incomes that fail to keep up with the cost of living.

It says the frozen pension policy is 'illogical, unfair and causes significant distress', with one out of two of the more than half a million UK pensioners affected receiving a state pension of £65 a week or less.

Expats often face tough decisions about whether they can afford to remain abroad, especially if they emigrated in order to live near relatives in their later years and have no family support in the UK.

The MPs expressed concern in particular about the impact of frozen pensions on UK veterans, former public servants and members of the Windrush generation who have returned to their country of birth.

The Canadian High Commissioner to the UK, Janice Charette, said: 'The non-indexation of UK pensions paid to persons residing in Canada is an issue which impacts thousands of pensioners living in Canada, and the Government of Canada continues to support their campaign for a change of policy.'

In its contribution to the report, the country said: 'Canada remains prepared to engage with UK officials on this issue.

'Over the years, the Government of Canada has raised, and has sought to address, this issue with the UK, including by proposing the two countries negotiate a comprehensive social security agreement that would provide for the indexation of UK pensions.

"The Government continues to believe that priority should be given to those living in Great Britain when it comes to expenditure on pensioner benefits"
Guy Opperman, Pensions Minister - see his statement below

'To date, UK officials have not engaged on this issue. As it has done in the past, the Government of Canada will continue to raise this issue with the UK through various channels, where appropriate.'

The High Commissioner of Australia to the UK, George Brandis, said the issue was a matter of considerable importance to his government.

The country's submission to the report said: 'The Australian Government’s view is that all UK pensioners have paid contributions under the same rules and should be paid their UK pensions under equal conditions, no matter where they live.

'Australia has raised the non-indexation of UK pensions in Australia with the UK on multiple occasions over many years on behalf of Australian residents receiving a UK pension.

'Australia previously had a Social Security Agreement with the UK and made a number of requests to renegotiate this agreement to include indexation provisions. In 2001, Australia terminated the agreement due to the UK’s ongoing refusal of these requests.

'A new agreement is not required for the UK to index pensions paid to people in Australia.'

"Denying over half a million UK pensioners the pension they deserve and paid for is an outrage and simply unacceptable and this report makes clear that it has rightly become an international embarrassment"
John Duffy, chairman of the International Consortium of British Pensioners

Both Canada and Australia increase their state pensions for their expats regardless of country of residence, and provide financial support to eligible Britons living in their countries too.

The cross-party group of MPs notes that the UK is the only country in the Organisation for Economic Co-operation and Development, or OECD - a group of 37 wealthy democratic nations - to pay their pensioners differently based on where they live.

MPs also contacted New Zealand, which has nearly 63,000 expats who draw a UK as well as a local pension.

New Zealand said it has not made representations to the UK on the issue. It tops up or reduces the pensions of any Britons in its country who are eligible for support, so that they end up receiving the same standard state pension overall as New Zealanders.

Sir Roger Gale MP, chairman of the All-Party Parliamentary Group on Frozen British Pensions, said: 'Successive governments of differing political persuasions have sheltered behind the assertion that "we can only uprate pensions for UK citizens living overseas in countries with which we have a reciprocal agreement".

'That is quite simply factually and morally wrong”

'I regard it as a disgrace and a matter of national shame that the UK has for so long denied to elderly citizens, very many of whom have proudly served our country in the armed forces or the civil service, the funds that they need to live on in old age and, sadly, sometimes in ill-health.

'It is past time for this injustice to be addressed and the wrong of decades righted.'

a view of a city: Retiring overseas: 'All UK pensioners have paid contributions under the same rules and should be paid their UK pensions under equal conditions, no matter where they live,' says Australia © Provided by This Is Money Retiring overseas: 'All UK pensioners have paid contributions under the same rules and should be paid their UK pensions under equal conditions, no matter where they live,' says Australia

John Duffy, chairman of the International Consortium of British Pensioners, which campaigns on the issue, said: 'This report must serve as a wake-up call to the UK Government that their callous and immoral frozen pensions policy is not supported by the very allies that will be integral to their ambitions for a Global Britain.

'Denying over half a million UK pensioners the pension they deserve and paid for is an outrage and simply unacceptable and this report makes clear that it has rightly become an international embarrassment.

“It is time to end the disgrace of frozen pensions and end it now.” 

a view of a city: Support for UK expats: Canada wants to strike an agreement with the UK that includes annual state pension increases © Provided by This Is Money Support for UK expats: Canada wants to strike an agreement with the UK that includes annual state pension increases

What does the Government say about frozen pensions?

'This policy is both longstanding and well-established,' says Pensions Minister Guy Opperman, in a letter to the chairman of the chairman of the APPG on Frozen British Pensions, Sir Roger Gale MP.

'It has been supported by successive post-war Governments and has been debated and approved repeatedly by successive Governments and Parliaments, of all political persuasions.

'The Government understands that people move abroad for many reasons and that this can have an impact on their finances. However, information is provided in leaflets and on www.gov.uk that the UK state pension is not up-rated overseas except where there is a legal requirement to do so.

'The Government continues to believe that priority should be given to those living in Great Britain when it comes to expenditure on pensioner benefits. As such, the Government has no plans to alter its policy regarding the payment of the UK state pension overseas.'

A DWP spokesperson said: 'The Government continues to uprate state pensions overseas where there is a legal requirement to do so – for example in countries where there is a reciprocal agreement that allows for uprating.' 

Will you get state pension rises if you retire abroad? 

map: Where are state pensions frozen? Whether an expat's pension is frozen or not depends entirely on where they move (Source: International Consortium of British Pensioners) © Provided by This Is Money Where are state pensions frozen? Whether an expat's pension is frozen or not depends entirely on where they move (Source: International Consortium of British Pensioners) table: Source: International Consortium of British Pensioners © Provided by This Is Money Source: International Consortium of British Pensioners
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