Pension entitlements of expatriates:
frozen pensions|
Notes from
|
Annotated for information
SOCIAL POLICY SECTION
Pension entitlements of expatriates:
frozen pensions
| Date: 16 January 2001 | L:\sps\note\socsec\frozen pensions.doc |
UK pensioners living abroad in certain countries have their state retirement pension "frozen", that is, pension is paid at the same rate as it was when they first became entitled, or the date they left the UK if they were already pensioners then.(1)
This rule has applied since 1975.
The previous Government set out the background to this situation in a Memorandum submitted to the Social Security Committee. (2) (1996) The general position is that where a person is not 'ordinarily resident' in the UK there is no entitlement to an annual increase in Retirement Pension. The pension is frozen at the rate current on the date the person left the UK or when they became entitled if they were living abroad at the time. Increases are, however, payable to UK pensioners living in European Economic Area (EEA) countries (3) (ie European Union members together with Norway, Iceland and Liechtenstein) or in countries where there is a reciprocal agreement which provides for an increase to be paid.
Countries where annual increases are paid under reciprocal social security agreements in addition to those which are current EEA members are as follows: (4)
| Barbados | Bermuda | Bermuda | Gibraltar | Guernsey |
| Isle of Man | Israel | Jamaica | Jersey | Malta |
| Mauritius | Philippines | Switzerland | Turkey | USA |
| Yugoslavia (including former republics) | ||||
About 839,000 UK state pensions are paid to pensioners who live abroad. 460,100 of these are not uprated.(5) These are mainly paid to pensioners living in Canada, Australia,(6) New Zealand and South Africa. It would cost some £300 million a year to unfreeze them (ie to bring them up to the rate which would be paid if the pensioners were in the UK).(7)
The Government has argued that the present policy of not awarding increases has been followed by successive governments for the last 30 years. According to the then Social Security Minister (Lord Henley) in 1989: "The logic is that our social security system has been designed to provide for people in this country and that annual upratings ensure that people are protected against prices here."(8) Tory government in 1989.
But essentially the reason for not uprating retirement pension in these countries is one of cost and from public pronouncements there seems little prospect of change for the foreseeable future. In a debate on the topic, the then junior Social Security Minister William Hague stated:(9) Tory government in 1994.
This was reiterated in the Memorandum to the Committee cited above:
5. In the 1995/6 tax year, UK pensions amounting to almost £1 billion were paid overseas. It would cost about an extra £255 million a year full to unfreeze the affected pensions - ie. to pay retrospective upratings but not arrears to cover upratings foregone in the past. ... Agreeing to incur additional expenditure on pensions paid overseas would be incompatible with the Government's policy of containing the long term cost of the social security system to ensure that it remains affordable
The concluding recommendation of the Select Committee was that "there should be a free vote at prime time to allow Members to express their opinion on the principle of whether the Government should pay upratings to some or all of those pensioners living in countries where upratings are not paid at present"
The response of the then Secretary of State for Social Security to the Committee report reiterated this line and was given in a PQ as follows:(10) Tory government in 1997.
Mr. Lilley: The Government welcome the Committee's report, which focused on the long-standing policy of uprating UK state retirement pensions when paid abroad in specific countries. The report is an important and useful study. The report contained one recommendation: "That there should be a free vote at prime time to allow Members to express their opinion on the principle of whether the Government should pay upratings to some or all of those pensioners living in countries where upratings are not paid at present".
Whipping arrangements are a matter for the business managers of all parties. The Government note that the House had the opportunity to debate the uprating of pensions paid abroad during the passage of the Pensions Bill in July 1995. Over 200 hon. Members voted on amendments aimed at providing uprating increases, which were heavily defeated. The Committee's report rightly recognises that priorities for public expenditure will inevitably be taken into account in considering the issue. Almost £1 billion a year is paid to UK pensioners abroad. It would cost another £250 million a year to bring frozen pensions up to the rate that would be paid if the pensioner were in the UK.
No debate of the report took place.
The present Government has confirmed there is unlikely to be a change in policy in respect of these overseas pensioners:
Mr. Rooker: Some 470,000 people overseas are in receipt of a UK State Retirement Pension which has been frozen. The Department's records are unable to differentiate between a British citizen and a pensioner from another country who, through having worked and paid National Insurance in this country, is entitled to a UK State Retirement Pension. Therefore the Department can provide only the total figure.
The total annual cost of uprating all frozen UK pensions paid overseas to the rate paid to pensioners resident in the UK would be some £300 million a year.
Our priority is to concentrate any resources that may become available on pensioners resident in the UK. We have done much already for them but, as my right hon. Friend the Chancellor of the Exchequer announced in the Budget, we plan to do more. That is why we have no plans to unfreeze.(11) Labour government in 2000.
Pat Strickland
Social Policy Section