Funds in the sun

More than half a million UK pensioners who live abroad are denied their full state pension because of the country they live in. They are launching a new campaign to warn UK citizens of the dangers of choosing the wrong country to retire to.

In the UK the state pension is guaranteed to rise each year by prices or earnings or 2.5% whichever is the highest. The Government calls it the ‘triple lock’. This year for example the state pension rose with inflation – a 5.2%,  rise which added more than £5 a week to the basic rate. People who go to live in the EU and more than 20 other countries also get their UK pension increased each year as it is back home. But ex-pats living in the other 156 sovereign states of the world do not get this rise. Their state pension is frozen at the rate it was first paid abroad. More than half a million UK pensioners who live in these countries are locked out from any rise even though they have paid their taxes here, often for all their working life.

Nine out of ten of these ‘frozen’ pensioners live in four countries - Australia, Canada, New Zealand and South Africa. But another 55,000 live in more than 100 countries around the world. People in their eighties may be living on a UK basic state pension first paid to them in 1985 which is just £21.50 a week instead of the £107.45 which would they would get if they lived in the UK. The record may be held by Annie Carr, aged 100, who gets a pension of just £6.12 a week, first paid to her in 1970 when she moved to be with her daughter in Australia.

The reasons for this odd division between frozen countries and the rest are historical. After World War II the UK entered into agreements with a number of countries where it had interests or a special relationship to pay full pensions to UK citizens living there. Joining the EU added more countries to the list as no discrimination is allowed against citizens of member states.

The result is that UK pensioners living in the USA get their pensions uprated each year as if they were back home. Across the border in Canada they are frozen. In the Philippines UK pensions are raised each year with inflation. In nearby Australia they are not. Other anomalous pairs of neighbours where UK ex-pats live include Barbados, uprated; Trinidad frozen. France uprated; Andorra frozen. Israel, uprated; Lebanon, frozen. Mauritius uprated, Madagascar frozen.

The newly revived campaign wants the Government to reverse this international equivalent of a postcode lottery which penalises half the UK’s ex-pats just because of where they choose to live. It faces an uphill struggle. The latest estimate for paying all ex-pats the same pension as they would get in the UK this year is £655 million. Many politicians have taken up the cause of frozen pensions over the years in opposition. But once in Government they look at that cost and decide they prefer to uphold the status quo.

As a result governments of all colours have ignored parliamentary motions, whipped their MPs to win every vote in Parliament, and successfully defended a key legal challenge brought by a campaigner living in South Africa, Annette Carson. Her case was finally rejected in 2005 by the House of Lords. Ten years ago the ex-pat campaigners began a parallel case in the European Court of Human Rights to try to find some fresh lever to move the Government. Thirteen pensioners argued that under the European Convention of Human Rights the UK government had to protect their property and was prohibited from discrimination. The state pension was property, paid for by National Insurance contributions. So by paying increases in some countries but not others the UK Government was discriminating against their enjoyment of their property according to where they chose to live.

It was a clever argument but in March 2010 the Grand Chamber of the European Court of Human Rights rejected it by 11 votes to 6, ruling that freezing the state pensions paid to people in 150 overseas countries was not a violation of their human rights because the circumstances of people were different depending where they lived and therefore discrimination in their treatment did not breach the convention.

Two months later the indefatigable campaigners briefed every member of the new Parliament elected in May 2010. Now they are lobbying for a debate when the Government's plans to change the state pension come before Parliament later this year.  John Markham, the Director of UK Parliamentary Affairs for the International Consortium of British Pensioners, recognises that cost is a key issue.

"We want to discuss an age-tiered solution. This year index the pensions of the over 85s. Next year, 80-85s. Then those 75 to 80. And so on. That would cost around £100m in the first year, a figure they could slip through without anyone noticing. An alternative suggestion is just to do it for new retirees from, say, next year. That would cost nothing. Once it is done for one group it's a foot in the door and harder to defend doing for others."

The campaign is also reaching beyond Parliament for support from people in the UK aged 45 to 65.

"A lot of people of that age consider emigrating and they don't know their pension will be frozen. Also true of a lot of ethnic minorities. People from India and Bangladesh, for example, simply don't know that if they return to their birth countries their UK pension will be frozen."

He has got more than 100 MPs to sign a motion supporting the campaign and there is an e-petition to put on more pressure for a full debate in Parliament http://epetitions.direct.gov.uk/petitions/16387.  Its new website, launched in May, has a map showing where pensions are uprated and where they are not as well as explaining the effects on ex-pats around the world. It also puts a figure on the savings to the UK government in health and social care for every UK citizen who chooses to retire abroad. The campaign now has a Facebook page facebook.com/pensionjustice and is on Twitter @pensionjustice. Through these new media John Markham hopes to bring a new generation into the campaign and broaden it worldwide beyond the Old Commonwealth countries. Already he says there are groups in Thailand and Indonesia where more than 3000 UK ex-pats live on frozen pensions.

A DWP spokeswoman told Saga "People who are considering emigrating abroad should always consider the impact the move could have on their future State Pension entitlement.”

FROZEN PENSIONS
UK state pensions are frozen in more than 150 countries throughout the world. Only in the 51 listed below do they rise each year as if they were paid in the UK:-Alderney,   Austria,   Barbados,   Belgium,   Bermuda,   Bosnia Herzegovina,   Bulgaria,   Croatia,   Cyprus,   Czech Republic,   Denmark,   Estonia,   Falkland Islands (frozen but Falklands Legislative Assembly tops up to UK level),  Finland,   France,   Germany,   Gibraltar,   Greece,   Guernsey (includes Herm,  Jethou,  Lihou),   Hungary,   Iceland,   Ireland,   Isle of Man,   Israel,   Italy,   Jamaica,   Jersey,   Kosovo,   Latvia,   Liechtenstein,  Lithuania,   Luxembourg,   Macedonia,   Malta,   Mauritius,  Montenegro,   Netherlands,   Norway,   Philippines,   Poland,   Portugal,   Romania,   Sark (includes Brecqhou),   Serbia,  Slovakia,   Slovenia,   Spain,   Sweden,  Switzerland,   Turkey,   United States of America.

e-mail Paul Lewis on paul@paullewis.co.uk