|
A Repugnant Pensions Policy |
Principle
That State retirement pensions must be strictly proportionate to contributions (factors like domicile being irrelevant).
This principle was unequivocally expressed by the Secretary of State for Social Services (Sir) Norman Fowler in his 1985 Green Paper:
- in return for
contributions, benefits would be given as of right |
Practice
While 96% of
pensioners living in the United Kingdom, plus a further
2% in 33 countries, mainly in the European Union and the
U.S.A., are paid in accordance with this principle, the
remaining 2%, almost entirely in Commonwealth countries, are
subject to discrimination, their pensions frozen at the
rate which applied either when they first qualified for a
pension or when they emigrated. |
History
The Beveridge Report of 1942 is the foundation document of the modern Social Security system in Britain. The system proposed by William Beveridge relies entirely on the contributory system, although there was a 20-year transition system for people who were already too old to contribute for a full working lifetime. Among many references to contributions, this one is typical:
All contributions will be paid into a single Social Insurance Fund and all benefits and other insurance payments will be paid from the fund. |
Contributions specifically for pensions had already been made mandatory for employees prior to the Second World War, but it was in the "Welfare State" fervour of the immediate post-war years that the injustice was perpetrated. In the mass of social security legislation, probably too much too quickly, emphasis was on establishing the basics, leaving the finer detail to be resolved later - like overseas pensioner rights to annual cost-of-living uprating. Perhaps in an excess of caution, the legislation was drafted to exclude the few pensioners resident overseas at that time. No-one foresaw the Government-encouraged mass emigrations of young people a generation later, and the consequent desire of many parents to follow, on their retirement.
After spending their working lives in Britain contributing to a pension fund, those parents believed - and had a right to believe - that they had secured independence in their declining years. Successive governments ignored "in the interest of economy" the rising chorus of protest, but yielded to pressure from the European Union and to the administrative convenience of reciprocal agreements with the United States and others. Now the absurd position has been reached where almost half of all overseas pensioners are uprated, while the remainder suffer discrimination, with the exception of Armed Services and Public Sector retirees (including MPs) who receive annual indexation on their service pensions irrespective of domicile.
When the Social Security Agreement between Britain and Australia was set up in 1954, the exchange rate was fixed at £100 sterling = £125 Australian, the rate it had been for many years. The Australian pension was subject to a means test on a pound for pound basis, so it was a simple administrative step for Australia to pay the difference between the Australian pension and the British pension, without any adjustments to be made to the British pension in the future. (Remembering that computers had hardly been invented at that time, this could have been a good way of running the system.)
But times have changed and the system has not changed with the times. The Australian pension is now subject to a more lenient means test, we have computers, exchange rates are no longer fixed, and pensions in Britain are increased regularly each year.
In paying the annual increases only to resident pensioners, pensioners in Europe or the USA, and a few other countries, the British Government has betrayed the principles of the Beveridge Report, and must stand condemned. |
The Law
Opinions by QC's retained by BAPA indicted Government policy as inequitable but not illegal. Without the funds for a court challenge on the grounds of a breach of natural justice, BAPA prefers to entreat Parliament to repeal its earlier patent injustice. Ministers concede an Uprating Order in the House would abolish the discrimination.
Ethics
The European Union issued a directive, proscribing pensioner discrimination, which the UK Government accepted without demur. No private insurance company would dare use domicile to determine differential superannuation rates. The 1995 Pensions Act requires employers to include pensions uprating in all company schemes. Because of the Government's callous policy, many UK pensioners, fearful of becoming a financial burden on their children, are deterred from emigrating to join their families in a "frozen " country.
Funding
The Government constantly asserts the country cannot afford equal pensions worldwide, though the £300 million it would cost is less than 1% of the pensions budget. When in 1990/91 the National Insurance Fund had accumulated reserves of £12 billion, the Government sought a perceived electoral advantage first by significantly reducing contributions, then by diverting the reserves into a new personal pension scheme from which those whose contributions had created the surplus could not benefit. This was both inept and a breach of its fiduciary responsibility as the administrator of what was in effect a state superannuation fund. That balance belonged to contributors over previous decades, guaranteeing their future pensions.
Having expropriated the reserves, the Government primly argues that current pensions must be paid out of current contributions and the uprating cannot be financed from economies in tightly administered social security budgets. But fraud is rampant; the Public Accounts Committee assessed fraud in Income Support at £1.4 billion, and the Social Security Committee estimated Housing Fraud at £2 billion. Better housekeeping would ensure availability of more than adequate funds. And deliberately ignored is the amount - far exceeding the uprating cost - saved by not having to pay Welfare, Health and Social Security to pensioners resident overseas.
BAPA has never sought additional funds. The essence of its claim is equality of treatment. Whatever funds are available for pensions must be shared among all pensioners pro rata to contributions.
Australia
Government spokesmen advise pensioners protesting at discrimination to apply for the higher Australian pension, while blandly conceding that not every applicant will satisfy the means test. This is cynical and improper, first in seeking to make Australian taxpayers responsible for what is clearly a British obligation, then by ignoring 60,000 British residents in Australia whose generally quite modest resources, accumulated over a lifetime of thrift, exclude them under a means test which has never been part of the UK system.
This situation can only get worse as the years pass, and more and more Australian residents are required to contribute to superannuation so as to become self-funded retirees.
Summary
Those suffering this selective and quite unwarranted discrimination have served their country well as taxpayers, electors, savers, and contributors to a pension fund to finance their retirement. They are penalised for obeying an irresistible longing to spend their declining years with their children now raising families in the former Dominions, once viewed by British Governments as the natural destination of our young emigrants. Many of these pensioners will have served their country in the war; some will have played their part in Operation Overlord and are among those to whom Her Majesty the Queen said in her speech at the Normandy commemoration:
"You
deserve the nation's thanks. |
The pensioner victims of this unworthy discrimination entreat Parliament to re-assert traditional British standards of fair play and equity by enacting appropriate legislation.