Expatriate British Pensions Update February 2018

The draft Social Security Benefits Up-rating Order 2018 was debated by the Commons on 5  February. The Parliamentary Under-Secretary of State for Work and Pensions (Kit Malthouse) confirmed the commitment to the triple lock guarantee for the duration of the present parliament allowing a 3% increase in the state pension. This takes it to £125.95 per week, or 18.56% of average earnings, its highest for two decades. In 2016, the Government introduced the new state pension for people reaching their state pension age from 6 April 2016 onwards. The full rate of the new state pension will increase by 3% this year, meaning that, from April 2018, the full rate of this new state pension will increase by £4.80 to £164.35 a week —around 24.2% of average earnings.

While expats tend to think in terms of the state pension there are a host of other benefits, some of which are covered by the government’s austerity programme while others are not. As Debbie Abrahams (Lab) pointed out “The uprating order provides for the annual uprating of social security entitlements excluded from the Government’s freeze to levels of social security enacted in the Welfare Reform and Work Act 2016. As we have heard, that includes attendance allowance, carer’s allowance, ​disability living allowance, personal independence payment, industrial injuries disablement benefit, bereavement benefits, incapacity benefit and severe disablement allowance.” On the other hand, as she went on to say “The uprating order does not include child benefit, jobseeker’s allowance, employment and support allowance, income support, housing benefit, local housing allowance rates, child tax credit, working tax credit and the majority of comparable elements of universal credit.”

There was quite a lively debate though almost entirely devoted to topics which will generally not have been followed to any extent by expats – the amounts going into this fairly new universal credit system which replaces some benefits and tax credits, scrapping the severe disability premium, limiting child tax credit support to two children and wider topics such as the increasing income gap between the richest and poorest in society.

Abrahams was the first to raise the frozen pension issue. Her main contribution in this regard reads as follows:

“Although the state pension is being uprated, people who have frozen pensions are excluded from the uprating and will not see an increase in their state pension in line with inflation. Pensioners living abroad face very different circumstances depending on whether their country of residence has a reciprocal agreement with the UK for the uprating of state pensions. Pensioners in countries without this arrangement see their pensions frozen at their initial retirement level, which means that the value of their pension falls in real terms every single year.

“More than half a million people currently have their pensions frozen, mostly in Commonwealth countries such as India, Australia, Canada, parts of the Caribbean and New Zealand, and in countries with strong family and historical links to the UK such as Pakistan and parts of Africa. The Opposition believe that their pensions should be protected in the same way that the pensions of other UK citizens living abroad are in the future, yet the Government are choosing to withhold the pension uprating in this order from 550,000 recipients living outside the UK. This is a chance for the Government to make an historic change to our pension system and support our policy to end future arbitrary discrimination against some British pensioners living overseas by uprating in line with inflation from this point. Will the Minister look again at that issue and take action to address that inequality?”

This was supported in a similar vein by Neil Gray (SNP) including “It is an injustice that some people, who have earned the right to their pension like everyone else, have their payments frozen at the rate they first received for the rest of their life abroad. It is just not right that the pensions of those who live in some countries continue to rise while those of others are frozen. Some 550,000 British pensioners are affected, who represent 4% of all recipients of the state pension and half of all those drawing their pensions abroad.”

These comments were however the exception and occupied possibly three or four minutes of the roughly 90 minute debate. It will be interesting to see to what extent the post Brexit position of EU expats influences all of this.

Source: Hansard