House of Commons Library

Frozen Overseas Pensions

Published Thursday, April 13, 2017

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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The UK State Pension is payable overseas only uprated annually if the individual is resident in an EEA country or one with which the UK has a reciprocal social security agreement requiring this. UK pensioners in other countries – most notably Australia, Canada, New Zealand and South Africa – have their pension frozen i.e. 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.

The policy of not awarding increases in some countries overseas has been followed by successive governments and continued with the introduction of the new State Pension on 6 April 2016. Essentially, the reason is cost and the desire to focus constrained resources on pensioners living in the UK.

In 2016, the Government estimated 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 estimated the “upfront cost” of this at £37 million. Non-government sources have estimated the costs at “around £200 million a year by 2020” (HL Deb 24 February 2016 c251).

Recently, UK state pensioners resident in other EU countries have been asking for reassurance that their pensions will still be uprated when the UK leaves the European Union. Ministers have responded that this is a matter for negotiations (PQ 67111 17 March 2017)

EDM 1097, currently with 58 signatures, calls for the annulment of the Social Security Benefits Uprating Regulations 2017 (SI 2017 No 349) (this year’s SI providing for the State Pension to be frozen in some overseas countries). A backbench business debate is scheduled for 20 April 2017.

In a 2016 debate on the same issue, 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). The then Shadow Pensions Minister Angela Rayner called for a solution that was “credible affordable and fair” (Ibid, c664). The then 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

Authors: Djuna Thurley; Richard Keen

Topic: Pensions

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