Discriminatory expat state pensions

by Alexander Beard, on Jul 27, 2015 10:08:03 AM

1Retiring abroad is a common desire for many in the UK. For those that move to the sunny Mediterranean countries of the EC their UK state pension is preserved and increased each year. If you move to the United States, it is preserved and again increases each year in line with state pensions paid in the UK. This is not the case for every destination however, and the International Consortium of British Pensioners (ICBP) has said the UK is the only country in the Organisation for Economic Development and Co-operation (OECD) that does not ‘up-rate’ their state pension for all pensioners regardless of where they live.

For those who retire to live in Commonwealth countries such as popular destinations Australia, New Zealand and Canada, the state pension is frozen at the level it was on the day they permanently left the UK. Long-retired expat residents dependent upon the UK state pension income, can find themselves year-on-year becoming more and more disadvantaged. This is to the extent that some elderly people are being forced to return to the UK as life abroad becomes unaffordable.

In 2014, it was estimated that around 1.2 million pensioners lived abroad, accounting for 10% of total pensioners, but 46% of them have had their pension frozen. This means they are not entitled to annual increases in the state pension, known as up-rating, and are only entitled to the sum they were originally given at retirement, which means some are living on as little as £6 a week.

The government has been criticised for ignoring the plight of hundreds of thousands of pensioners living abroad who have had their state pension frozen, despite reforms to make pensions fairer in the UK. There has been a long campaign for this inequality to be addressed, supported by MPs of all parties. They point out that many have moved to be near relatives and had paid into the state pension for years. They could now be receiving a pension that can be as little as 25% of the figure they would have received if they had stayed in the UK.