British Expats Demand Fairer State Pensions Payments

Where in the world you live affects your state pension

Hundreds of thousands of British retirees living overseas have once again asked the UK government to reconsider the pension policies that prevent that from accessing a full state pension based on the location in which they live.

It is estimated that over 560,000 British pensioners had their pension frozen when they first left the UK to live overseas. While those living in the UK, the EU or more than 20 other countries benefit from inflation-based annual increases in their state pensions payments, those who live in alternative destinations, such as Australia, Canada, South Africa and 100 other locations, do not receive such increases and draw their pension at the same rate that was on offer when they first left the UK.

Many of the affected expats argue that the rules are unfair and that they should not be denied the same pension payment increases on the basis of where in the world they are based. For example, an individual who retired at the age of 65 in 1986 on a pension of £38.70, would still receive £38.70 if he or she lived in Australia. However, if he or she had relocated to the US, he or she would now receive £110.15, a difference of £71.45.

The reason behind the discrepancies in pension payments is due to the fact that the UK government has reciprocal agreements in place with many countries, and expats living in these countries benefit from annual increases in their state pensions. However, those that live outside the reciprocal-agreement countries are not offered the same pension increases and are not likely to do so since the UK government has not signed any new agreements since 1981.

In response to the impacted expats’ calls for fairer state pensions, Steve Webb, the pensions minister, told a committee of MPs last week that he would not be reconsidering the policy on freezing state pension payments. This comes after 2012 estimations indicated that it would cost the UK government £655m to uprate frozen pensions.

However, in an article published in the Financial Times last week, a representative from the International Consortium of British Pensioners (ICBP) revealed that the group believe that a cost-effective solution is possible if age tiering is introduced: “Age tiering is an affordable, workable and fair solution to this ongoing travesty,” said John Markham, UK director of parliamentary affairs with the ICBP.

“Our new research shows that a cost-effective solution is achievable.”