Overseas pensions racket uncovered: Relatives take state cash after death of expatriates. Chris Blackhurst reports

A MASSIVE racket has been uncovered in which relatives and friends draw the state pensions of dead British expatriates.

A study by the DSS's Overseas Benefits Directorate could not trace 1,566 out of a sample of 7,700 claimants on the Indian sub-continent. They were sent 'life certificates' asking them to testify that they were still alive - 20 per cent failed to respond.

Since pounds 800m of public money goes abroad to 680,000 claimants annually in this way, the findings have forced officials to consider adopting the practice of other countries and require pensioners to prove they are still alive.

US expatriates who claim US state pensions must complete certificates at intervals ranging from once every three months to once ever three years - depending on their age or risk of changing circumstances - before they can receive the money. In France, it is the responsibility of the banks, who are paid a fee by the government, to ensure the claimants still qualify.

In a report released today, the National Audit Office, the public spending watchdog, recommended the DSS take firm measures to combat the fraud. At present, benefits recipients are required to inform the Benefits Agency of changes in their circumstances which affect their entitlement. 'The risks of recipients not reporting such changes is greater when they live abroad,' the NAO says.

Life certificates were used by the old DHSS until 1985. Since then, two targeted exercises, the one in the Indian sub-continent last year and an earlier one in New Zealand and the Indian sub-continent of claimants over 80 have forced the Government to think again.

A social security official has also been seconded to the British High Commission in Dhaka for a one-year trial period to help process claims. In addition, the DSS is exploring ways of co-operating with other countries' benefits agencies.