International Consortium of British Pensioners
24 June 2011
State Pension Reform Consultation Team
Pension Analysis and Incomes Division
London SW1H 9NA
Subject: Response to ‘A State Pension for the 21st Century.’
This response is made by the International Consortium of British Pensioners (ICBP) on behalf of the members of its five Partner Organisations in Australia, Canada and South Africa and the almost 550,000 British pensioners in more than 120 countries around the world whose Basic State Pension (BSP) is frozen solely because of where they have chosen to live in retirement. We would like to respond on three specific issues as follows:
1. The Minister’s emphasis on Fairness.
2. Making workers feel confident that it is worth saving for the future.
3. The principle of Cost Neutrality.
Issue 1: Fairness
· Over twelve and a half million people receive the basic state pension. ALL of them contributed similarly to that pension through their compulsory National Insurance Contributions (NICs).
· The amount of pension they initially receive is directly proportional to the number of years they paid those Contributions.
· Of those 12 million plus pensioners, more than one million now live outside the UK – Overseas.
· Half of that one million plus receive the same annual uprating as the pensioners who still live in the UK, just as though they had never left. They live in places like the EU, the USA, the Philippines, Israel, Bosnia, etc.
· The other half million plus, over 95% of whom live in Commonwealth countries like Australia, Canada, South Africa, New Zealand, etc, do not receive any increases – EVER! Their pensions are permanently frozen at the level at which they first received them in their country of residence, solely because of where they have chosen to live in retirement.
There is NO fairness in such a policy! No pension scheme should penalize some of its beneficiaries because of where they choose to live, especially when the number of years of contributions to the scheme directly determines the amount of pension they will receive. Consequently, over half a million pensioners have made first class contributions to a second class pension; that is morally wrong!
The reason the Government continues to provide for not changing its policy is that pensions are uprated to overseas pensioners only when there is a legal requirement to do so, as with those living in the EU, or when there is a reciprocal agreement in place with a particular country; it goes on to say it has no plans to expand the reciprocal agreements to more countries. How can a Government that stresses the need for fairness for all, and that expresses its concern for the well being and dignity of the elderly, penalize half a million of its pensioners just because of where they choose to live in retirement?
Numerous Ministers of the Crown have made a mockery of this policy by admitting in Parliament, both in the House and in Committee, that there is no legal requirement for a reciprocal agreement to be in place before extending parity to all pensioners if the Government had the will to do so. The most recent statement was made by the Hon James Purnell MP on 25th January 2007 during Committee debate on the 2007 Pensions Bill; in addressing the issue of pension parity he stated, “Of course it is not legally necessary to have a reciprocal agreement in place before making such payments. Any Government could do this unilaterally.”
Finally, during their time in opposition, many members of the current UK Government, including the Minister himself, have repeatedly stated that the freezing of pensions is immoral and unfair.
Issue 2: Making workers feel confident that it is worth saving for the future
Figures from chart 1 of the Green Paper indicate a significant increase in the
number of pensioners over the future years. The impact of the Baby Boomer bubble
is already beginning to be felt. The 45-60 year old age group comprises many
individuals who work, travel or reside outside the UK; it’s a fact of life today
in what is often referred to as ‘The Global Village’. Many will give serious
consideration to emigrating upon retirement. This is clearly indicated in the
survey carried out by Opinium Research in February 2011; a copy of the report
has been passed to the Minister. The percentages of individuals vary
significantly dependent on whether their BSP will be uprated or not. Freedom of
choice and freedom of movement will have a significant impact on the willingness
of individuals to emigrate and most, if not all, will consider their BSP a
significant piece of their savings for retirement.
Issue 3: The principle of Cost Neutrality
Pension Parity can provide not only cost neutrality but in fact significant savings to the UK economy. Pensioners who live overseas, excluding those in the EU, already create an economic savings of more than £3 billion annually. The main source of those savings is from lack of demand on the NHS, no added benefits, no social costs, etc.
A recent study by Oxford Economics (March 2011) considered data from the recent survey by Opinium Research, referred to above, on the intentions of individuals to emigrate after retirement; these data indicate that removal of the pension freezing policy would significantly increase the numbers wishing to emigrate and thus produce a corresponding additional increase in net savings to the UK economy of some £33 billion over the next 25 years with an NPV of some £1.1 Billion in year 15 and some £7.2 Billion in year 25. The Minister has been provided a copy of that report.
An additional benefit, not included in that £33 billion above, is that emigrants also relieve pressure on the shortage of hospital beds, facilities for the elderly and the shortage of affordable housing units.
Finally, this response would not be complete if reference were not made to the issue of Britain’s image and relationship with other (mainly Commonwealth) countries around the world. Just two examples are provided as follows:
At a recent conference, when introducing the author of this response, a prominent leader of a pensioner organisation made these remarks which are paraphrased here. He referred to the pride and the welcome that the British public displayed to soldiers, sailors and airmen of the Commonwealth nations (at that time of the Empire) when they marched through the streets on arrival on these shores to help Britain in her time of need. He referred to the times that Britain encouraged its citizens to migrate to those same countries after the Second World War; and to those war brides who followed their particular returning heroes back to their homelands, many of whom will be back this year in the newest Cunard liner on a visit of nostalgia. And finally, to Britain’s reward to those who risked their lives to preserve the democracy that Britain treasures and so readily gave to its Empire Nations – a frozen pension to some and not to others – just because they had the audacity to decide where they wanted to live when they retired. Is this an example of Britain’s fairness, dignity and concern for the elderly?
The second example is that the Commonwealth countries have accepted the principle that once someone has earned a pension, particularly when it has a contributory element, it’s theirs to keep, no matter where they decide to live in their retirement years, and it is uprated annually. For example, the Canadian Government annually uprates the CPP (Canadian Pension Plan (equivalent to BSP) to its citizens resident in the UK and elsewhere throughout the world.
This response is respectfully submitted for your careful consideration.
A.B. W. (Tony) Bockman
International Consortium of British Pensioners