House of Commons Library

Frozen Overseas Pensions

Published Monday, December 31, 2018

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 March 2018, Pensions Minister, Guy Opperman explained:

The policy on uprating pensions abroad is a long-standing one of successive post-war Governments. UK State Pensions are payable worldwide, however they are up-rated overseas only where there is a legal requirement to do so.

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)

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 EDM praying against the regulations has provided an opportunity to debate the issue. For example, EDM 1097, led to a debate on 20 April 2017. The Social Security Benefit Uprating Regulations 2018 (SI 2018/332) were laid before Parliament on 8 March 2018.

 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 (31 December 2018).

Commons Briefing papers SN01457

Authors: Djuna Thurley; Roderick McInnes

Topic: Pensions

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