UK pension rules change for expats

Q. Are you aware of a possible problem for expats who are due to receive their UK State Pensions after April 6, 2010?

After looking at The Pension Service’s website (www.thepensionservice.gov.uk) I learn that for those of us receiving state pensions after April 2010 there will no longer be an Adult Dependency Increase (ADI) payable for a non-working adult dependent who is not in receipt of a pension in their own right.

I was aware of pension changes and their effect, as both my state pension and my husband’s will not be payable until after April 2010 but I was not aware that ADI would no longer be payable and would be substituted by other benefits such as a pension credit - not available to those living abroad.

While I will receive a state pension in my own right, this will not be until nearly three years after my husband starts his and we had assumed that this gap would be plugged by the ADI. I am sure that we are not alone and this will affect a large number of expats.

Also ADI will no longer continue to be paid after 2020 for those who were receiving it before April 2010. By then it is estimated that a large proportion of those covered by ADI will be getting a pension in their own right, if not they will be able to claim other benefits such as the pension credit, again, not available to people living abroad.

M.N. By email

A. Your letter raises an issue that is frequently ignored or forgotten on moving abroad and that is the loss of certain rights to which one could have been entitled to as a UK resident.

However, being fair, the rules on UK pensions - including those relating to the Adult Dependency Increase and the Pensions Credit - are just that: UK rules. As such, they are generally applicable to tax residents actually living in the UK. So, it is only to be expected that if you leave the UK to live elsewhere, you run the risk of losing some UK benefits.

Moving to another country and still retaining all your rights of the initial country could be seen as a little too much like having your cake and eating it.

Furthermore, and in addition to the valid points raised in your letter, these benefits are means-tested (based on overall income) which may mean you might not have been entitled to them anyway. One issue most people forget with pension benefits means-testing is that an assumption is made concerning the amount of income received from investments, even if this is not being taken (for example from investment bonds that are not being drawn upon) of £1 income per week per £500 of capital invested above £6,000.

There is potentially good news: if you are a French tax resident, you may be entitled to claim French social security benefits, which are often more beneficial than the UK’s. So, the best thing to do is either to speak to a professional social benefits adviser, or speak to your local family allowances and social security offices to see what you may be entitled to so as to make up any pension income shortfall.