This piece first appeared in The Daily Telegraph on 11 March  2000 and in The Weekly Telegraph on 22 March 2000
The text here may not be identical to the published text

Faint hopes were raised this week among half a million ex-patriate Britons living around the world that their pensions would be raised in line with inflation for the first time since 1955.

The Government has told The Daily Telegraph that it is "considering the full implications" of the formal announcement earlier this month that Australia is terminating the 45 year old social security agreement between the two countries. The Australian Government is pulling out of the deal because the UK Government refuses to pay full pensions to the 210,000 UK citizens living in Australia. Some are still getting a UK pension of a few pounds a week, the amount paid when they first claimed it in the early 1970s and never raised with inflation since. Announcing the change, Australian Family Minister Jocelyn Newman said

"The Australian Government is taking this action because of the United Kingdom’s continued refusal to index the payments it makes top its pensioners living in Australia, even though it indexes the payment for pensioners in many other countries. This is all about being fair and equitable. Over 200,000 individuals now living in Australia who receive a UK pension are being seriously disadvantaged because of the United Kingdom’s decision not to index their pensions."

Anyone currently receiving a pension from the Australian Government will continue to do so after the agreement ends next March. But new immigrants will not be able to look for help to Australia’s social security system until they have been in the country for ten years.

This diplomatic rift follows more than a decade of campaigns by successive Australian governments to get Tory and Labour administrations here to unfreeze the pensions paid to ex-patriates. It was first raised as long ago as 1989 when Australian Premier Bob Hawke met Margaret Thatcher. Two years later the Australian social security minister Graham Richardson visiting London and threatened to "come over here and annoy people" again until Britain changed its mind. And in 1994 the Australian parliament passed a law to make sure that British ex-pats in Australia claimed all the benefits from Britain they were entitled to. None of these attempts worked. Britain has refused to spend the £300 million which it says it will cost to pay full unfrozen pensions around the world.

Although pensioners living in the European Union and some other countries have their pensions uprated in line with inflation each year, those in the rest of the world, including many Commonwealth countries, do not. The ‘frozen’ states include Australia, Canada, New Zealand and South Africa – the four countries in which the majority of the 460,000 frozen pensioners live.

Australia is unique in topping up the frozen pensions paid by the UK. The Australian Age Pension is worth £70.25 a week, about £3 more than the full UK pension, though to get it pensioners have to pass a stringent income and assets test. Recent ex-pats who pass those tests get their UK pension topped up to the full amount of the Age Pension. After ten years' residence, they become entitled to the full Age Pension, but the means-test claws back half the UK pension. For both groups, Australia argues, if Britain paid the full UK pension, it would save the Australian government money – at least A$100 million (£38 million) a year. About one in three British ex-pats get no Australian pension at all because their income or savings are too high.

Senator Newman warned the Government last year that she might end the agreement when she met Stephen Timms, then the Pensions Minister, in London (Money Go Round July 17, 1999). In the intervening months Australia has been hoping that the threat would force the UK Government to re-think its policy. But it has not done so. And formal notice to terminate the agreement in 12 months was given on March 1st. A spokesman for Senator Newman told Money Go Round they still hoped for action.

"We’re hoping the Blair Government will see the good sense of changing its policy within the next twelve months. But if they don’t they know what the result will be. In the main it will be a detriment to its own former citizens living in Australia. Senator Newman has said that she does not think that is the right way to treat your own citizens."

Although the Government has not changed its policy, nor even agreed to consider doing so, the statement issued by the Department of Social Security in response to the termination notice was surprisingly conciliatory. It said

"It is unfortunate that the Australian Government has decided to end this long-standing agreement. However, it remains in force until the end of February 2001. People who are already receiving benefit with the help of the agreement on that date will not be affected. The Government is currently considering the full implications of termination."

Campaigners around the world hope that this twelve-month deadline will sharpen the resolve of other Governments to put pressure on the UK. However, no other country seems likely to follow Australia’s lead just yet.

Jane Stewart, the Canadian Minister of Human Resources Development told MPs there recently

"Canada has nothing to gain financially by canceling its Convention with the United Kingdom…I have not yet had the opportunity to discuss the issue of unindexed pensions with my British Counterpart, the Secretary of State for Social Security.  I can assure you that I intend to pursue this question vigorously.  The Government of Canada strongly supports the cause of British pensioners and will continue to do so until the problem is resolved."

Douglas Ross, President of the Canadian Alliance for British Pensioners told Money Go Round

"This is a gutsy political move by Australia.  We applaud their determination in taking steps to force Britain to clean up its disgraceful act on pensions paid in most Commonwealth countries. Australia has provided Britain with a great opportunity to take steps within the next twelve months to end pensions freezing.  It is clearly to Britain’s advantage to end it and provide encouragement for its elderly citizens to move abroad to be close to their children."

11 March 2000

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