State Pension  

Govt has 'no plans' to address expats' frozen pensions

Govt has 'no plans' to address expats' frozen pensions

The government has no plans to allow policy increases for expats with 'frozen' pensions, saying it would cost more than £500m per year to be corrected.

In a written answer to Parliament, Guy Opperman, minister for pensions and financial inclusion, stated this was the cost the government would have to pay if all pensions in payment overseas were increased to current UK levels.

This figure would increase further in future years, he added.

Currently the majority of pensioners living in the UK have their state pension increased according to the triple-lock principle, by a minimum of 2.5 per cent, the rate of inflation, or average earnings growth, whichever is the highest.

But the same applies only to ex-pat pensioners living in certain countries, such as the US, all European Union countries, Barbados, Bermuda and Israel.

Pensioners living in countries such as Australia, Canada, New Zealand and South Africa have had their state pension frozen.

According to the all-party parliamentary group on frozen British pensions, 550,000 British pensioners, equating to 4 per cent of all recipients of the state pension and half the pensioners living overseas, are currently adversely affected by the government’s frozen pension policy.

Mr Opperman stated: "The policy on up-rating state pensions overseas is a long-standing one.

"It has been the policy of successive post-war governments for around 70 years - UK state pensions are payable worldwide and are uprated abroad where there is a legal requirement to do so, for example in the European Economic Area (EEA) and in countries with which we have a reciprocal agreement that provides for up-rating.

"We have no plans to change this policy."

According to research from campaign group the International Consortium of British Pensioners (ICBP), which polled 1,000 UK adults in April, three quarters of savers (76 per cent) are unaware that if they leave the UK after retirement, their state pension could be frozen at the rate its at when they move.

The survey also found 88 per cent of respondents agree the government should increase the state pension each year to keep in line with the cost of living.

According to Martin Bamford, chartered financial planner and managing director of Informed Choice, it’s unlikely the government will ever change this policy.

He said: "Despite being a relatively modest cost in the scheme of things, uprating state pensions for more expats is just one of many competing demands on the public purse, including 1950s born women screaming for compensation.

"It will be interesting to see whether this issue is included within Brexit negotiations, allowing EU-based UK citizens to continue to receive the benefit."

Analysis by pension provider Aviva has shown about 900,000 British citizens living in the European Union are facing pension uncertainty, since receiving the state pension in other countries is part of existing treaties.

maria.espadinha@ft.com