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Why Pay Pensions to Expatriates? |
People sometimes ask us why British pensioners resident overseas should be paid any pensions at all. They argue that pensions are paid out of current taxation on UK residents, and it is wrong that those who have gone overseas should get any pension at all.
We say that the answer is quite simple. It is because they have paid for their pensions, just like everybody else.
Throughout their working lifetime in Britain, they paid their taxes and they paid their National Insurance Contributions just like everybody else. As well as the basic contribution for pensions, they paid for their additional pensions (graduated and SERPS) either to the state NIF or to a contracted out pension scheme. Many of them paid for private pensions from life insurance and other finance companies.
Some paid from age 16 to age 65 (or 60), and when they got their pension they decided to join their children who had emigrated many years before, and spend their retirement with their grandchildren. Our question is: "Why should they not be paid their pensions?" Nobody would deny them their private pensions, nobody would deny them their contracted out pensions, so why should they be denied their state pensions from the NIF?
Some people emigrated during their working lifetime. They paid their taxes and their National Insurance Contributions just like everybody else, but emigrated in their late twenties or later. These people have not earned a full state pension from the NIF, and they don't get a full state pension from the NIF. They get what they've paid for - not a penny more.
British pensioners resident overseas are subject to a kind of lottery. If they have chosen to emigrate to one of the favoured countries, their pensions will be indexed each year in line with the pensions paid to UK residents. But if they have chosen badly, their pensions will be "frozen" at the time when it is first paid in their new country. If their first payment is £67.50, then it will always be £67.50, even 20 years later; it will not keep pace with world-wide inflation.
Suppose that a Jamaican migrates to Britain in his late teens, or is born in the UK of Jamaican parents. He pays his contributions and he pays his taxes, and he retires with a full and well earned pension. Then he decides to retire to Kingston, the capital of Jamaica.
His state pension is fully indexed.
At the same time another pensioner who has also paid taxes and contributions, retires with a full and well earned pension. He decides to retire to South Australia, because his son emigrated in his thirties and raised his children there. He also retires to Kingston - Kingston South Australia.
His state pension is frozen.
By the way, neither of these pensioners makes any further claims on the UK taxpayer. They don't claim national health service benefits, they don't get bus passes, they don't get a minimum income guarantee. They just get the age pension. One is indexed, one is frozen.
Look in your favourite gazetteer for all the towns called Kingston anywhere in the world - and don't forget Kingston upon Hull! Then try to guess whether a pensioner living in Kingston has an indexed pension or a frozen pension. Unless you know the answers, you will get some of them wrong. You'd have more chance of winning Tatts *
No wonder Jeff Rooker admitted that there is no logic in it.
So if you have grandchildren overseas, or if you know someone who has, ask your MP and other candidates for Parliament if they know why this illogical situation is continued.
* Tatts - An Australian lottery.