Looks at why the UK state pension is not uprated in some overseas countries, the debates on this policy and the recent legal challenge.Jump to full report >>
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 March 2018, Pensions Minister, Guy Opperman explained:
There are two main reasons for not paying annual up-ratings to non-residents. First, up-ratings are based on levels of earnings growth and price inflation in the UK which have no direct relevance where the pensioner is resident overseas. Second, the cost of up-rating state pensions overseas in countries where we do not currently up-rate would increase immediately by over £0.5 billion per year if all pensions in payment were increased to current UK levels. (PQ 131353, 12 March 2018)
In April 2019 he confirmed that the Government had no plans to change the policy:
The policy on the up-rating of UK State Pensions paid to recipients living outside the UK is clear and is a long-standing one of successive Governments since WW2. The annual index-linked increases are paid to UK State Pension recipients where there is a legal requirement to do so. For example, where UK State Pension recipients are living within the European Economic Area, Switzerland and Gibraltar or in countries where there is a reciprocal agreement in place that provides for the uprating of the UK State Pension. The Government has no plans to change this policy. (PQ239930, 10 April 2019)
DWP estimates the cost of uprating frozen pensions to the rate they would be if they not not been frozen at £600 million in 2019/20, rising to £640 million in 2023/24. (DWP research, Feb 2019).
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).
In some years, an Early Day Motion (EDM) praying against the regulations has provided an opportunity to debate the issue. Peter Bottomley tabled an EDM praying against the Social Security Uprating Regulations 2019 (SI 2019/552).
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.
The position for recipients of the UK State Pension resident in the EU post-Brexit is discussed in Library Briefing Paper CBP-7894 Brexit and State Pensions (April 2019).
Commons Briefing papers SN01457
Authors: Djuna Thurley; Roderick McInnes