MPs to debate end to freezing of state pensions of British pensioners abroad

MPs will debate pension freezing tomorrow in the main chamber at the House of Commons

MPS will tomorrow (Thursday) debate a motion that the freezing of state pensions for Britons abroad, as happens in most non-EU countries, should be axed. This is an issue that could affect British pensioners in EU countries after Brexit.

Freezing means the pension amount never goes up.

It is the UK’s policy to freeze people’s pensions if they move abroad, unless there is a reciprocal agreement in place with the country they are moving to (or live in if claiming for the first time on reaching state pension age). In other words Britain agrees it will pay its expatriates in the country their full pensions with the same increases as pensioners at home, and the other country agrees the same for its pensioners in the UK. The DWP says this has been the case for 70 years.

At present freezing does not affect British pensioners in the EU (or wider EEA), because there is automatic reciprocity under single market free movement rules. However the position after Brexit is expected to depend on either the article 50 negotiations, or new unilateral agreements between the UK and other countries after the UK leaves the EU.

Elsewhere in the world the situation is varied – for example UK state old age pensions are uprated in the USA and Turkey (and 14 other places, half of which are small islands) but not in Canada, New Zealand or Australia. It depends on whether the UK has signed with the country a social security agreement including pensions and guaranteeing uprating (which last happened in 1981). 

In fact prior to the UK joining the EU the country had such agreements with several European countries, including France, Italy, Switzerland, the Netherlands, Luxembourg and Ireland.

At a meeting of the MPs' select committee on Brexit in January, former social security minister Peter Lilley said he understood Britain had historically typically agreed to uprating in countries with roughly similar numbers of migrants in each direction, but not in those, like Canada or Australia, where there was a ‘net outflow’ (more Britons leaving the UK to live there).

Pensioners outside the UK as of 2016 included: 474,721 in the EU (uprated), 189,334 outside the EU whose pensions are uprated and 542,565 whose pensions are frozen. 

Tomorrow’s motion, to be debated in the main chamber of the commons at around noon French time as part of ‘backbench business’ will be aired live at: http://www.parliamentlive.tv/Commons 

The motion, led by Sir Roger Gale (Con) and Ian Blackford (SNP) is also supported by shadow pensions minister Alex Cunningham and Labour leader Jeremy Corbyn – a development which has been welcomed by a group representing ‘frozen pensioners’ world-wide, the International Consortium of British Pensioners (see interview below). The motion says freezing has a ‘detrimental effect’ on expats’ lives and calls for it to be ended through annulling the regulations (renewed annually) through which it takes effect. (A total of 74 MPs have also signed an 'Early Day Motion' with similar wording: see http://www.parliament.uk/edm/2016-17/1097).

The office of Mr Cunningham said Labour backs ending freezing, but without backdating – in other words they would start to apply annual uprating to all pensions as of the freezing policy being removed.

Uprating involves a ‘triple-lock’ – pensions go up each year by whichever is higher, price inflation, average earnings growth or 2.5%.

Sir Roger is the chairman of an all-party parliamentary group on frozen British pensions, which liaises with groups such as the IBPC.

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INTERVIEW via email with John Markham of the International Consortium of British Pensioners (pensionjustice.org)

Mr Markham lives in Canada, one of the many countries where pensioners are frozen. Uprating is only done in the countries listed at the following link. The consortium was originally formed to coordinate the efforts of campaigners in Canada, South Africa and Australia.

Mr Markham told Connexion he welcomes the move by Jeremy Corbyn and Labour to back an end to freezing, which he said has raised new hopes among ‘frozen pensioners’, who he said number more than half a million.

He said: “Those affected face a declining real terms income throughout their retirement. For those dependent on this income, pension freezing can quickly lead to hardship, loss of independence and, in the worst cases, dire poverty.

“With the Brexit process now underway, the issue is now more salient than ever, as many EU resident expats are increasingly concerned that, without the social security provisions of the single market, Britain’s departure from the EU may leave them with a frozen pension too.

“My own pension, has been frozen at £64.70 a week since 1998. If I lived in the UK I would now receive £119.31. I am lucky to have other income, but many others are not so fortunate.

“Within our membership, there are some very challenging cases. One member is currently concerned that he may have to abandon his Canadian wife, who has dementia and is in a care home, to return to the UK, because, at 91, he can no longer pay the bills on an income of £50 a week.

“Our argument is that freezing is immoral because all pensioners paid National Insurance, which should have been a contract with the government – and we are treated unequally. Those affected will have lost out on £30,000 over the last 20 years. We estimate that those retiring now will lose more than £50,000 over the next 20.”

Mr Markham said Mr Corbyn had called freezing “arbitrary discrimination” and against “natural justice”, saying the next Labour government would treat all pensioners equally.

He said Labour’s decision to support the motion was significant in giving “frozen pensioners real hope of success”.

Freezing is applied each year as a result of ‘social security benefit uprating regulations’ which go through without a vote unless MPs seek to annul them, he said.

“Given the shortage of parliamentary time, it is very unusual for such challenges to be debated or voted on without official Opposition backing.”

He added: “I have long maintained that frozen pensions are the dirty secret of successive governments, who have been content to ignore pensioners they felt were out of sight and therefore out of mind, regardless of the implications.  

“Many expat pensioners are just as reliant on their state pensions as those living in the UK. Freezing their pensions leaves recipients with dwindling incomes, deprives them of their independence and leaves many in dire poverty towards the end of their lives. I am glad this national embarrassment is finally getting the attention it deserves.”

Mr Markham said Brexit was a “key driver” in bringing the freezing issue to the fore. However the ICBP argues that rather than continue uprating for almost half million pensioners (in the EU), while continuing to freeze ones for a similar number in many other countries, it should abolish the system outright.

 

What is the ICBP doing to help with the issue of pensions of Britons in the EU?

The ICBP is calling for pension parity for all British pensioners living overseas. As an organisation it is coordinating member campaigning efforts, directly lobbying parliamentarians and ministers in the UK, supporting the work of the all-party group, and seeking to raise the profile of the injustice in the media. Before announcing Labour’s change of position, Labour’s Shadow Pensions Minister, Alex Cunningham MP, reported receiving over 300 emails from frozen pensioners. The result of an ICBP campaign.

The ICBP’s constituent organisations in Canada and Australia offer advice to British expat pensioners on their pension rights and entitlements.

 

What is your policy on how uprating should be applied to people with frozen pensions ?

As a matter of policy the ICBP believes the only truly fair solution would be to give all British pensioners their full, as UK, pension in accordance with the qualifying National Insurance Contributions made.

Anything less than that, including uprating going forward only, would be a welcome break in the logjam to reform, but will not offer the help the ICBP would like to see received by the poorest, worst affected, frozen pensioners.

That said, the ICBP and members of the all-party group worked closely with Oliver Letwin MP when he was minister for government policy, to develop a ‘partial uprating’ (up-rating going forward) option over the last two years [meaning the 'triple lock' formula would be applied to the pension the person currently receives].

This is understandably attractive to politicians as it avoids the initial parity adjustment (£580m), costs just £30m more a year - a tiny amount in the context of pension spending - and does not worry the government’s lawyers, in terms of potential backdating claims for lost income which ministers have claimed is the case for full uprating. For the ICBP it is clearly a second best, achieving the objective of ending frozen pensions over a generation, not immediately.

The ICBP is strongly supporting the campaign to annul the Social Security Benefit Up-rating Regulations, which freeze pensions each year. The impact would be the inclusion of currently frozen pensioners in this year’s 2.5% up-rating (granting partial uprating). But it hopes any parliamentary victory would stimulate a wider rethink by the government with regards to the payment of the state pension overseas. This is especially relevant in the context of the Brexit negotiations.

 

Have you specifically been contacted by Britons in the EU recently?

We are aware that many of the 476,000 recipients of the state pension, living in the EU are now increasingly concerned that without the social security provisions of the single market they too will be subject to the government’s frozen pension policy.

The government has long maintained its position that it only uprates where there is a legally binding obligation on them to do so.  This means that unless pension up-rating is legally guaranteed in the Brexit deal, EU/EEA-resident recipients would be frozen. 

The problem is that future social security arrangements are a contentious element of the negotiations ahead. If there are benefits that the UK government wants to withhold from EU workers, either in the UK, or from those who have returned home, then it is possible that other EU countries will block other aspects of the social security cooperation we want to see.

The situation is further complicated by the fact that DWP does not appear to know the nationality of state pension recipients living in the EU. Some will be returned EU migrants.

Pensions Minister Richard Harrington gave the following parliamentary answer to a question by Naz Shah: “Entitlement to a state pension is based not on nationality but on a person’s national insurance contributions record. Therefore, from the information we hold on those in receipt of the UK state pension in EU countries we cannot separately identify EU and UK nationals.”

The ICBP has been connecting with a range of EU pensioner and expat groups to warn them of the prospect of pension freezing and to support their campaigning efforts to secure continued up-rating after Brexit.

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