House of Commons Library

Frozen Overseas Pensions

Published Tuesday, May 17, 2016

Looks at why the UK state pension is not uprated in some overseas countries, the debates on this policy and the recent legal challenge.

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UK pensioners living abroad in certain countries, including Australia, Canada, New Zealand and South Africa, have their state retirement pension "frozen". In other words, their pension is paid at the same rate as it was when they first became entitled, or the date they left the UK if they were already pensioners then. This applies in countries which are not party to a reciprocal social security agreement with the UK which requires increases to be paid. Where the individual lives in an EEA country, or one with which there is a relevant reciprocal agreement, the pension is uprated.

 The policy of not awarding increases has been followed by successive governments and continues with the introduction of the new State Pension from April 2016. Essentially, the reason for not uprating retirement pension in these countries is cost and the desire to focus constrained resources on pensioners living in the UK.

 The Government estimates that uprating frozen pensions in payment to current levels would cost over £0.5 billion a year (Explanatory Memorandum to SI 2016/199). The All Party Parliamentary Group (APPG) on Frozen British Pensions has put the case for “partial uprating” – which means currently frozen pensions would be uprated going forward, from their current rate. It estimates the “upfront cost” of this at £37 million. The Government states that external sources have estimated the costs as being “around £200 million a year by 2020” (HL Deb 24 February 2016 c251).

In a backbench business debate on 11 May 2016, SNP Pension Spokesperson Ian Blackford called on the Government to “pay UK pensioners at home and abroad their due state pension with the same uprating adjustment in the interests of fairness and equity.” (HC Deb 11 May 2016 c609), Shadow Pensions Minister Angela Rayner called for a solution that was “credible affordable and fair” (Ibid, c664). Work and Pensions Minister Shailesh Vara responded that the Government had to take “difficult decisions about how best to use limited resources” and that its position remained unchanged (Ibid c661-2).

The policy has been subject to legal challenge. The case was heard by the European Court of Human Rights' Grand Chamber in September 2009 and the Court's judgment of March 2010 was in the UK Government's favour.

Commons Briefing papers SN01457

Author: Djuna Thurley

Topic: Pensions

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