The issue of frozen pension has been a hot topic for several years, affecting around half a million British expats living abroad.
The problem arises for people who retire to a foreign country which doesn’t have a reciprocal agreement with the UK.
This means that their state pension is not uprated in line with their UK counterparts and payments are ‘frozen’ at the sum they first receive when reaching retirement.
In a letter seen by International Adviser, the former chairman of the International Consortium of British Pensioners (ICBP), Nigel Nelson, has accused the under-secretary to the department of work and pensions (DWP) of cherry-picking facts in support of the government’s stance on the topic.
Nelson claims that in a recent response to member of parliament (MP) Ronnie Cowan – who said that the state pension is an entitlement rather than a benefit – Guy Opperman replied that it is “technically and legally” a benefit.
But the activist claims this is not the case.
He cited former pensions minister Steve Webb, who told British newspaper The Telegraph in October 2014 that the state pension is indeed a right and not a benefit that workers have when they retire.
In his letter to Opperman, Nelson wrote: “Just because a pensioner chooses to live outside the UK is no reason to renege on the payment of a full pension.”
He claimed the government’s freezing of pensions to retirees overseas is “robbery”.
Living on ‘less than £20 a week’
Nelson said: “There are nearly half a million UK pensioners who are living overseas in near poverty. The vast majority live in the four Commonwealth countries of Australia, Canada, New Zealand and South Africa, where they do not receive the annual cost of living increase to their UK state pension.
“Over 90,000 of these overseas UK pensioners receive less than £20 per week, whereas, if they had remained in the UK, they would now be receiving £134 ($163, €150) per week.
“The average for this cohort is just £11.11 per week. Could you live on that? I know I couldn’t,” he wrote in the letter.
Extra money in the fund
“In terms of informing both houses of parliament, you [Opperman] have told them that it will cost £3bn over a five-year period to uprate the state pension in ‘frozen’ countries,” Nelson added.
“As you are aware, all national insurance contributions (NICs) are paid into the National Insurance Fund (NIF), and 94.4% of the fund is used pay the state pension.”
Nelson said that, according to the latest set of data available from March 2019, the NIF had a balance of £30bn and that, by law, the fund needs to retain 1/6 of the annual payment – which was set at £17bn for the year.
He continued: “In the year to 31 March 2019 alone, this excess grew by nearly £6bn. The government actuary’s department has forecast that this excess will grow to £41bn by 2023/24.
“In fact, the UK government has been able to afford to uprate all ‘frozen’ state pensions since 2016. It appears that you have not informed parliament of these facts. This goes to show just how economical with the facts you have been.”
The DWP confirmed to IA in October 2018 that it would cost around £500m a year to uprate state pensions to those who have seen theirs frozen.
Political tools
The reason for not increasing retirees’ state pension is that the countries where they have moved to need to have bilateral agreements in place with the UK – which EU countries have and, as a result, British pensioners in Europe receive a rise to their state pension every year in line with their UK counter parts.
But Nelson argues that, according to a Freedom of Information (FOI) request published in 2013, the DWP revealed that bilateral agreements are not necessary for the uprating of state pensions.
“All it needs is a change in domestic UK legislation – something that you could do at a stroke of your pen which would go a long way to relieving the suffering felt by 500,000 UK pensioners living in ‘frozen’ countries,” the activist added.
“If you had a modicum of decency you would give parliament all the facts and not just cherry pick those that support maintaining the status quo.”
IA has reached out to the DWP for a response but none was received ahead of publication.
