UK government under pressure over expat pensions

The UK government is coming under increased pressure to update its present policy of freezing state retirement pensions for expats who live in 120 world countries.

With the exception of European Union countries and the US, popular retirement destinations including Australia, Canada, New Zealand and Thailand have one major disadvantage – UK state pensions are frozen at the point of departure. The anomaly occurs because countries outside the EU, not including the USA, do not have reciprocal pension agreements with the UK.

Out of a total of 1.18 million UK pensioners living overseas, over half a million do not receive the average 2.5 per cent annual increase determined by the UK’s budget. With interest on savings dropping to an all-time low, a good number of those caught in the pensions trap are being forced to draw on their capital, leaving less for medical and other emergencies.

The Australian government is lobbying for a policy change, as regional governments such as Canberra are picking up an AU$100 million tab in benefits for Brits struggling to live on £30 a week or - in the case of 100 year-old Annie Carr - £6 a week. Annie’s pension was frozen in the 1970s when she left the UK for Australia.

According to John Markham, head of the International Consortium of British Pensioners, those affected paid compulsory National Insurance throughout their working lives and are now being cheated out of what is rightfully theirs. The UK government is sticking to its guns on the ground of ‘unaffordable costs in today’s economy, although arguments state that taxpayers could benefit as linked pensions would persuade more pensioners to emigrate, easing the strain on the NHS and social services.

Opposition party members are asking questions in Parliament, condemning Pensions Minister Stave Webb for his negative stance. A White Paper on pension reforms will be published next month, but is not expected to address the issue.