This piece first appeared in The Weekly Telegraph on 3 June 2002
The text here may not be identical to the published text

Pensions unfreeze as Europe expands


Nearly 2600 British ex-patriates will soon get big increases in their state pensions if plans to expand the European Union go ahead. Ten countries are set to join the EU in time for elections to the European Parliament in June 2004. The UK currently refuses to pay the full state pension to ex-patriates living in seven of those countries (see table). Instead, their pensions are frozen at the rate they were first paid abroad. But once their adopted countries join the European Union they will be treated like all other EU citizens and get their UK state pensions paid in full.

The biggest group to benefit live in Poland. Around 1800 people who live there get frozen UK pensions averaging about £33 a week. If those pensions are all increased to the full £75.50 a week paid in the UK it would cost the Government about £4 million a year and up to another £2 million a year to pay the full pensions to the 800 people living in the six other frozen countries which are due to join the EU in two years time. Not long after they join, three others, Bulgaria, Romania, where UK pensions are frozen, and possibly Turkey, where they are not, are set to join bringing the membership of the European Union up to 28 members.

The addition of another nine countries to the 40 states and territories where pensions are already paid in full will be a further blow to the credibility of the UK’s policy of refusing to pay annual increases to the state pension in the rest of the world. Nearly half a million UK pensioners living in more than 100 countries have their pensions frozen. That policy was supported by the courts last month in the Carson case, reported fully in last week’s Telegraph.

Nearly two years ago the Government Minister then in charge of pensions admitted that the policy made no sense – and would make less as Europe expanded. In November 2000 Jeff (now Lord) Rooker was Pensions Minister in the Department of Social Security and he told the Commons "I am not prepared to defend the logic of the present situation. It is illogical. There is no consistent pattern…This is an historical issue and the situation has existed for years. It would cost some £300 million to change the policy for all concerned. We must also consider that as the European Union expands - pension upratings are, naturally, paid in the EU - the issue will not go away. I accept that."

The cost of uprating pensions around the world is now put at closer to £400 million a year. That is the cost of raising the present frozen pensions to the level that would be paid in the UK - precisely what will happen to the 2600 people with frozen pensions living in the countries that are expected to join the EU. They will get their pensions raised to the current level paid in the UK. So if they have earned a full pension, it will rise from its frozen level to the full amount of £75.50 a week.

The addition of a dozen pensioners living in Bulgaria to the ranks of those who get a full UK pension will expose the lack of logic still further. Most frozen pensioners live in just four countries – Australia, Canada, New Zealand and South Africa - countries which would claim stronger historical ties to the UK than the Eastern European candidates for EU membership.

Even within the EU there are strange anomalies. The Northern half of the island of St Martin in the Caribbean counts as part of France and so the two people there who get a UK pension have it increased each year. The Southern half, known as St Maarten, is part of the Netherlands Antilles. Although that belongs to the Kingdom of the Netherlands it does not count as part of the European Union. So UK pensions are frozen for the 11 people there who have an entitlement to one.

There are similar anomalies closer to home. Andorra has a border with France and Spain and uses the euro as its currency. But because this tiny country is a separate state, and not part of the EU, British pensions are frozen there.

Ian Irving moved to Andorra with his wife Dorrie after he retired from his job in a bank, attracted by the skiing and low taxes. He claimed his pension when he reached 65 in July 1992. He got £56 a week and Dorrie £32 a week, amounts which have never increased since.

"I didn’t realise it would be frozen but I pretty soon found out. Like anybody who has contributed for the full whack I would expect a full pension – it is discriminatory not to give me the increases. True, I don’t live in the UK but I have paid in for more than 40 years. We make no claims on the National Health Service and we don’t get the Christmas payment and all that. I feel it is absolutely quite wrong."

Ian and Dorrie live in La Massana near the middle of Andorra. If they moved ten miles in any direction they would live in a country where their pensions were uprated and get around £35 a week more between them. There are 220 UK pensioners living in this tiny enclave - in Europe, using the euro, but with their pensions frozen simply because in 1288 Andorra established its independence.

Country Joins EU

UK pensioners

Frozen pensions
Czech Republic 2004 125
Estonia 2004 34
Hungary 2004 412
Latvia 2004 114
Lithuania 2004 63
Poland 2004 1761
Slovakia 2004 16
Bulgaria Later 12
Romania Later 15
Total frozen 2552
Uprated pensions
Cyprus 2004 6466
Malta 2004 2486
Slovenia 2004 n/a
Turkey Much later 574
Total uprated 9526

Source: Department of Social Security 1999

3 June 2002

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