UK pensioners living in the EU should be afraid, very afraid… but help is on its way

LAST UPDATED: 17 Aug, 2016 @ 09:30
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TODAY there are over half a million UK state pensioners living overseas who do not receive an annual increase to their UK state pension. Since the pension payment is never increased, it is known as the “frozen” pension policy. What has this got to do with UK pensioners living in the European Union (EU) you may ask? The answer is six letters: b-r-e-x-i-t.

british-pensionsWith Brexit the UK has voted to leave the EU and this may have a seismic impact on UK state pensioners residing permanently in the EU, of which, there is 472,000 of them living mainly in Spain, France, Cyprus and Portugal. The UK state pension is based entirely and solely on a person’s National Insurance Contribution (NIC) record. However, the annual increase is based on a different set of rules altogether, and the UK government only pays the annual increase where they are legally obliged to pay it. Currently an overseas UK state pensioner only receives the increase if they live in the EEA (which is the EU plus Norway, Iceland, and Lichtenstein), or a handful of disparate countries such as the USA and Jamaica. Just like the “frozen” pensioners living here in Canada (I am a Brit and a Canadian), UK state pensioners living in the EU may no longer receive the annual increase to their state pension, as the UK government will no longer be legally obliged to pay it once the UK is no longer a member of the EU.

David Morris, the Chairperson for the not-for-profit organisation, the Canadian Alliance of British Pensioners (CABP) recently commented:

“For us, the emphasis is on Alliance as much as  Canadian – it is our goal to remove the “frozen” pension policy once and for all, thereby helping all overseas state pensioners. We encourage every UK pensioner living in an EU country to join us in this battle”.

There are many stories from UK pensioners who have lived in “frozen” countries for a number of years. There is one octogenarian who moved to Canada in 1983 and then retired in 1998. When he first retired, his UK state pension was £65 per week, which converted to CAD$150. Eighteen years later he is still getting £65 per week, but due to a significant drop in the exchange rate over the years he is only getting CAD$110 now – CAD$40 less than he was getting in 1998! During this time inflation has been an average of nearly 2%/year, and for every CAD$100 spent in 1998 you would now have to spend CAD$140. The octogenarian has lost significantly in his purchasing power!

There are heart breaking stories as well – one 91-year-old UK pensioner, who moved to Canada many years ago, is now living on the breadline. She says:

“It’s the small things, and the injustice, that is really getting to me. I value my independence, but I can’t go on living on the breadline and I don’t want to inflict this on my family. As well as ever-increasing poverty, I feel a sense of stress and shame, which is affecting my health. This is complete and utter discrimination. I have paid all my contributions to the National Insurance Fund in Britain and now I have no option but to return to get something back”.

See the following articles….

Quirks of the UK State Pension affecting UK Pensioners living abroad

Ouch!! How Brexit is hurting UK pensioners in Canada

Overseas pensioners left in limbo over state pensions

The Brexit effect on ex-pat state pensions

Please visit the CABP website as you will learn all you need to know about overseas UK state pensions. As well, Brexit updates are being posted frequently. You may want to even bookmark the website! Every member adds another voice to this hard working lobby group, which is striving to effect a change to the illogical “frozen” pension policy. Join now…



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15 COMMENTS

  1. May I make a comment or two? I originally retired to live with my Thai w?fe and our son in her home country and my pension was frozen. A change in circumstances resulted in our moving to Turkey where the pension is uprated annually. Depending on the decision of the UK government following Brexit I may be frozen again and possibly faced with a move for the three of us back to the UK.
    The article states that in addition to countries in the EEA where the index linking is a legal requirement it also applies to a few disparate countries like the USA and Jamaica. It should be noted that such is the chaotic nature of the frozen pension anomaly these (fourteen) “disparate countries” are up-rated on the whim of the UK government and not under any legal obligation.
    The savings to the UK economy – yes, you read that correctly, savings – amount to a around £4,000 net per year per pensioner who retires abroad…even if pensions were unfrozen universally; it is within the power of the UK government to do so unilaterally.

  2. Dear Rob,

    First of all, thanks for your post.

    When you say the “whim of the UK government”, I assume that you mean those countries outside of the EEA, with whom they have entered into a “bilateral agreement”, and the whim is – why those disparate countries? I would agree that it is most bizarre.

    I hate to disillusion you, but the average annual net savings per pensioner per year is less than half the number you are quoting – try closer to GBP 1,600 per pensioner per year – a number that the UK government are now quoting.

    We need to find a reason for the UK Government to annul clause 20 in the Pensions Bill. We, in Canada, are hoping that Brexit is that reason.

    There are nearly 2,000 UK pensioners living in your new country,many, the last time I checked, Turkey is not in the EU – at least, not yet.

    Next time Turkey wants to pull off a coup, they can take a page out of Ms. May’s playbook!

    I will be writing a number of articles for The Olive Post (if they will let me!), and, I am sure we will have some interesting dialogue.

    Take care

    The Retiree

  3. “I hate to disillusion you, but the average annual net savings per pensioner per year is less than half the number you are quoting – try closer to GBP 1,600 per pensioner per year !”
    NOT TRUE !! as the DWP have admitted that about GBP 3,800 is the figure saved and the UK government gain GBP 2.2 Billion/ yr as a result of freezing 560,000 pensioners in the Commonwealth countries plus others frozen abroad.

    • Thank you very much for responding to my post. The work that you have done over the years to try and bring pension parity for all is highly commendable. You have also put your money where your mouth is and joined the Canadian Alliance of British Pensioners. I hope everyone reading this does the same, so we can all unite in this battle for pension parity.

      Now, down to business. If you can produce any document or link from the DWP confirming that the”net savings per pensioner” is £3,800 per year, I would love to see it, since it will help build our case. I think that what you may find is that the DWP have never accepted/rejected the £3,800 figure (which, as you know, comes from the Oxford Economics report which was produced in 2011). There are some circumstances where the “net savings per pensioner” is close to £3,800, but there are other situations where there would be a “net cost” per pensioner of over £5,000, and hence why the average is around £1,575.
      The problem is that the £3,800 number has been around for so long, and because the DWP didn’t actually reject it, everyone assumed that it was a solid number. Sadly, this is not the case, and hence the amount the UK save each year is nearer GBP 900 million – still a huge number, which dwarfs the cost of Uprating, by some distance.

      I hope this clarifies the issue for everyone.

  4. Oh dear Mr Retiree You have not done your homework because their is no requirement for a bilateral agreement or any other agreement in order to pay a retiree abroad their rightful indexation as the freezing is done by section 20- of the Pension Act which now supercedes the regulation 3 which previously did the same thing. Check it out.

    • Thank you very much for responding to my post. The work that you have done over the years to try and bring pension parity for all is highly commendable. You have also put your money where your mouth is and joined the Canadian Alliance of British Pensioners. I hope everyone reading this does the same, so we can all unite in this battle for pension parity.

      Now, down to business. If you can produce any document or link from the DWP confirming that the”net savings per pensioner” is £3,800 per year, I would love to see it, since it will help build our case. I think that what you may find is that the DWP have never accepted/rejected the £3,800 figure (which, as you know, comes from the Oxford Economics report which was produced in 2011). There are some circumstances where the “net savings per pensioner” is close to £3,800, but there are other situations where there would be a “net cost” per pensioner of over £5,000, and hence why the average is around £1,575.
      The problem is that the £3,800 number has been around for so long, and because the DWP didn’t actually reject it, everyone assumed that it was a solid number. Sadly, this is not the case, and hence the amount the UK save each year is nearer GBP 900 million – still a huge number, which dwarfs the cost of Uprating, by some distance.

      I hope this clarifies the issue for everyone.

    • You need to calm down, and go back are re-read the article. The article only explains the rules by which the UK government pays the UK State Pension. That is a fact. I didn’t say that I agreed with the UK government (which is why I joined this lobby group).
      According to a House of Commons Briefing Note (SN 01457) , in 1966, a DSS (remember them?) memorandum said: “Reciprocal social security agreements are not entered into solely with a view to paying annual uprating increases to UK pensioners living abroad. They are not strictly necessary for that purpose as uprating can be achieved through UK domestic legislation…”. This was confirmed by a Freedom of Information Request raised in 2013 (it may even have been one of yours!), when the DWP said: “Bilateral agreements are not necessary in order for pensions paid outside Great Britain and the EU to be uprated”. The UK has not had bilateral agreements with any country since 1981. I am also aware of the infamous Clause 20 in the Pensions Bill, as well as the Statutory Instrument that is used in Parliament every year to keep the status quo I.e no Uprating. Paradoxically, bilateral agreements may come to our rescue with Brexit – if the UK Government enters into bilateral agreements with the 21 EU countries that don’t have social security agreements with the UK in order to ensure that UK pensioners living in those countries continue to get their state pension indexed, then all currently “frozen” countries can then say: “well, what about us?”.
      Still think I haven’t done my homework?

  5. Well my pension goes up around £36 per yr so I cant see why thousands of pounds per pensioner is being quoted, am I missing something ?

    • Sounds like you’re missing about £114.00 per year Chris. State pension is roughly six grand a year. The “(triple locked)” uprate is currently 2.5%, or prices, or inflation, whichever is the greater. The way the economy is going post-Brexit, two point five percent, is what you can probably rely on. So, this year, a raise of about a hundred and fifty quid, the princely sum of around three quid a week.
      Presume you don’t receive a full pension Chris, maybe being short of some contributions?

      • Yes I get full state pension & 24 pence a week graduated pension, my pension was increased to £120.53 in total in April this year. I also get a small Spanish state pension after working autonomo for 6.5 yrs. i still don’t get how losing around £36 per year is being posted as over a thousand.

        • Canadian Alliance of British Pensioners “www.britishpensions.com”
          This is the lobby group that is trying to end this unfair, immoral and discriminatory practice of the “frozen” pension – I think the annual membership is less than €20 per year.

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