Scandal of overseas pensioners who never get a rise
Union Matters January 22 2018Frozen income brings untold hardship Almost 550,000 people are frozen out of the current state pension system and are getting a duff deal during their retirement.
These are people who have worked hard, paid their taxes and National Insurance contributions throughout their working lives. They have built up their entitlement, earned the right through hard work to get the same deal on their state pension as the 11 million others who receive it.
Because they have chosen to spend their retirement outside of the UK they don’t get annual increases to their pension income.
The amount they receive stays at the same level throughout their lives, meaning they miss out on tens of thousands of pounds worth of income throughout their retirement.
It devastates lives leaving thousands unable to make ends meet and stops families from being together, creating loneliness and isolation.
You might think it’s their choice to move abroad. But that’s not the point as these are people who have earned their state pension, not people asking for handouts.
Qualification for the state pension is based on National Insurance contributions made, not place of residence, and these are compulsory contributions. Therefore, everyone who has made the required NI contributions should surely be entitled to receive the same pension, even if they move overseas.
There are many reasons people end up living outside the UK in later life. Very few move because they are rich and can afford to swan around in the sunshine, not relying on their state pension income.
Some end up overseas through work commitments in later life. They may have been working for a UK firm and based abroad, but still paying into our tax system, while others want to be nearer their family and grandchildren.
Then you have to consider how much these people save our economy in health bills and other social care costs – an estimated £1,500 per year for every pensioner who moves abroad. That means that frozen pensioners are currently saving the UK £810million a year.
You could argue we should be encouraging people to ship out as we desperately need relief for our groaning NHS system and to ease the ageing care crisis!
It’s not all pensioners who live overseas that are affected by the issue of frozen pensions. Currently 1.2 million people living outside the UK receive a state pension. More than half get exactly the same deal as those living here with yearly increases that keep up with inflation.
These include those who live in the European Economic Area, which includes Iceland, Liechtenstein, Norway and the United States. However, those who live in around 90 countries – including many in the Commonwealth – are excluded. Examples include Australia, Canada, New Zealand India and Pakistan.
The reason only some countries have agreements is historical and arbitrary. When UK state pensions were first payable abroad in the late 1940s, the UK began negotiating reciprocal agreements on a country by country basis.
In the 1980s, we stopped signing new agreements and the situation has remained unchanged from that point.
The whole purpose of the state pension is to guarantee a minimum basic income for all pensioners. Critical to this is that the pension keeps pace with inflation.
That’s why it is up-rated annually, currently by the triple lock formula of a minimum 2.5%.
The International Consortium of British Pensioners is campaigning for the pension rights of all overseas state pensioners.
It believes the government should honour its commitment to British people who have contributed to the system equally during their working lives by giving them the full and up-rated pension they have paid for.
Frozen pensions are a quiet injustice and a national shame – and must be stopped.
The Chair of The International Consortium of British Pensioners, says: “This discriminatory policy has a real impact on families. Many of our nation’s pensioners who have retired abroad – often to join their families – have a declining income
“With their pensions frozen they are struggling to afford basic living costs. These ‘frozen pensioners’ are now facing undue hardships and in some cases dire poverty, due to arbitrary and needless discrimination from the British Government.”
How much would it cost to stop frozen pensions?
The International Consortium of British Pensioners say the cost of giving all frozen pensioners their full UK pension would be £580million in the first year – 0.66% of the current state pension bill.
In subsequent years it would cost £45m, a lot less than the £810m a year frozen pensions save the UK by living overseas. It reckons this could be met by the current annual surplus in the National Insurance Fund.
How much are people missing out on?
A 75-year-old who retired in April 2006 will be stuck on £84.25p a week and miss out on £10,219 in state pension income over their retirement.
An 80-year-old who retired in April 2001 will be stuck on £72.50p a week and miss out on state pension income. An 85-year-old who retired in April 1996 will be stuck on £61.15p a week and miss out on £28,525 in state pension income.
Brian Lee