Will Labour finish the unfairness of frozen state pensions for expats?

On Jul 19, 2024

Updated: 08:11, 19 July 2024

Will your state pension be frozen if you retire abroad? Find a full list of affected countries below

I live in a country – as many do – with a frozen pension.

Now that Labour are in charge of pensions, will they be updating and bringing us in line to home-based pensioners?

Tanya Jefferies, of This is Money, replies: Many elderly expats live in a country where their state pensions are currently frozen at whatever amount they were set at when they moved overseas.

This depends entirely on where you retire to, because the Government has struck individual deals with some countries but left around 150 others out in the cold – scroll down to find a map and a full list of frozen countries.

Any reader who is considering retiring abroad should check this information, because unless you are wealthy your choice of destination could seriously affect your financial wellbeing in old age.

Campaigners have tried for many years to persuade the Government to unfreeze expats’ state pensions, and countries like Canada and Australia have pressed for change to no avail.

We asked a well-connected pension industry expert for his view on whether the new Labour Government will take another look at the matter.

Henry Tapper, chair of AgeWage, replies: This is a question that nearly half a million UK pensioners living abroad will be asking themselves. I’ve been asking about it too.

I’m sorry but I can give you no expectation that the Labour Government will be any more generous on this matter than its predecessors.

While no civil servant I spoke to ruled out the possibility of rules changing, no one would give you any hope and the Labour party manifesto is silent on this matter.

The Government says that if you return to the UK or go to live in a country where the UK does pay state pension increases to UK expats, you can have increases for the time you are resident at your new location.

But don’t expect to be fully reinstated to get the pension rises your UK peers got.

Henry Tapper: Whether you get state pension increases or not depends on a tax-treaty lottery

Missing a pay rise is never nice, but missing one when everyone else gets one is not nice at all.

But many people have been missing out on pay rises from the state pension over the past 40 years.

If as a woman you had emigrated to Australia as a state pensioner in 1984 you could be celebrating your 100th birthday this year on a state pension of £34.05 per week.

By comparison, if you had stayed in the UK, your old-style basic state pension would have been paying you £57.60 in 1994, £79.60 by 2004, £113.10 by 2014 and £169.50 today.

The triple lock suggests that the rate of real growth in income will not slacken.

The principle behind the Government’s policy of freezing state pensions was established over 70 years ago and means that in extreme cases expats can be getting paid less than a quarter of the pension they’d have got if they’d stayed put.

Whether you get state pension increases (lately with the triple-lock) or not, depends on a tax-treaty lottery.

Some countries, including the US and Switzerland have treaties, some don’t. You can see the details on this Government website: Countries where we pay an annual increase in the state pension.

Government is regularly asked to change the rules, most recently in 2023. Last year more than 56,000 expats signed a petition to lift the freeze.

The Government issued a formal response recognising that as of March 2022, there were around 480,000 recipients of the UK state pension living overseas who do not get state pension increases – 84 per cent of those live in Australia, Canada and New Zealand.

It quoted the cost of paying expat pension increases between 2023 and 2028 at over £4.5billion. In a research briefing to MPs on the subject, it stated:

In extreme cases expats can be getting paid less than a quarter of the pension they’d have got if they’d stayed put

The Government has no plans to change the policy on up-rating UK state pensions overseas; the policy is longstanding and has been supported by successive Governments for over 70 years.

The briefing speculates that this is because of cost-constraints and a prioritisation of UK pensioners.

But why treaties have been reached with the US and not the Commonwealth countries isn’t clear. This seems bonkers to most expats and indeed many MPs across parties have argued for reform.

Pensioners do not get the benefit of a state pension for nothing. Pension credits are earned either by earning and paying National Insurance or because someone cannot earn for good reason.

What is more, most pensioners who retire abroad have to rely on overseas medical facilities the cost of which is not charged back to the NHS.

So, while expat pensioners are getting a second-class deal in terms of their state pension, they can be getting zero value for money from the NHS.

Government may argue that they publish the rules and have done so for decades. Some cynical commentators suggest that the rules don’t change because expats rarely vote.

You don’t sound like the kind to let this lie. I would suggest that you take the matter up with the new Pensions Minister, Emma Reynolds.

Unlike her predecessors, Emma is a minister in both Department for Work and Pensions and the Treasury. If anyone can get things done – she can.

Will you get state pension rises if you retire abroad?

Where are state pensions frozen? Whether an expat’s pension is frozen or not depends entirely on where they move (Source: International Consortium of British Pensioners)

Source: International Consortium of British Pensioners

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