Expats call for fairer pension payouts

Half of pensioners abroad have had their pension frozen. That’s not right, they say

Personal Finance Editor

Anger is growing among hundreds of thousands of British pensioners living abroad who are being denied their full state pension simply because of the country they live in.

Many have contacted us in recent weeks to complain about being treated like second-class citizens, only because of where they’ve chosen to live abroad. The problem is believed to affect around 565,000 UK pensioners who have had their pension frozen at the rate it was when they left the UK.

The state pension is guaranteed to rise each year, giving pensioners a small increase every 12 months. Of the 12 million people who receive the state pension, 1.2 million live abroad. It is among the latter group that a huge inequality has developed.

Those who have retired to the EU or more than 20 other countries – including the United States and Mauritius – see their state pension increased each year. But anyone who has moved to countries such as Australia, Canada, South Africa and a 100 more places has their pension frozen at the rate it was paid when they leave the country.

“A pensioner in one country is treated worse to one living in another country or in the UK,” points out Clive Walford who lives in Australia. “That clearly is discrimination.”

It means that 650,000 pensioners living abroad enjoy an increase in their retirement every year while 565,000 have to cope with what they were paid when they moved abroad.

For example, a man retiring at 65 in 1986 would have received a state pension of £38.70. If he had then moved to Canada he would still be getting the same £38.70. But if he had moved just across the border to the US he would today be getting £110.15, the same amount as UK-based pensioners get.

 “Pensioners have been fighting for many years to get the frozen pension policy revoked,” points out Mr Walford. “The courts have in some cases agreed that frozen pensions were immoral or dishonourable but have had to finally judge that they are not illegal.

“MPs and others have also condemned it as illogical and unacceptable. Lord Goddard QC even called the state pension system a virtual contract – you get out pro-rata what you paid in. Therefore frozen pensions break that virtual contract.”

His argument – along with half a million other pensioners – is simple. All 1.2 million expat pensioners paid into the system, but more than half are getting a lot more out. That is simply unfair.

There was hope this week that the Canadian Prime Minister, Stephen Harper, would  implore David Cameron to support the uprating of state pensions for the 1560,000 expat pensioners living in Canada when the two premiers met.

But the International Consortium of British Pensioners is increasing demands for parity for all. The Government says doing so would cost £650m which it can’t afford, but research shows that uprating pensions according to age tiers could be much more affordable. John Markham, of the Consortium said: “Age tiering is an affordable, workable and fair solution to this ongoing travesty.”

You can find out more about the situation at pensionjustice.org

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