Big increases in UK state pensions infuriate frozen expats

[reader]

From Pattaya Mail

By Barry Kenyon

The news that Britain’s old age pensioners are scheduled to receive an 8.5 percent increase next April, on top of 10.2 percent this year, has staggered foreign expats. Many had their entitlement frozen from the date ceased to be “ordinarily resident” in UK. There are about 500,000 British expats living abroad who are denied annual increases, mostly living in Australia, Canada and New Zealand. But the rule applies to Thailand too.

The good news for British-based seniors only is based on the triple lock policy which means that the annual increase in the state pension is the highest of average earnings, inflation or 2.5 percent. Since the decline of Covid, there have been substantial worker settlements in Britain to counter inflation which have resulted in a higher-than-expected average wage. For those receiving the new flat-rate pension, going to those who reached retirement age after April 2016, the total for the year is fast approaching 12,000 pounds.

It is well known that there are no rational grounds for uprating the state pensions of those expats caught in the freezing process. They paid national insurance in their working lives and should be covered. Although the British government sometimes talks about “reciprocal agreements” there is no sensible rationale why British pensioners living in Turkey or Serbia or parts of the Caribbean should receive increases when those in Thailand do not. The stark reality is a postal lottery pure and simple.

The British Department of Work and Pensions in July 2023 published data which likely explain the political resistance and indifference. The report claims that the cost of uprating the state pension in frozen countries-rate countries is around 4,590 million pounds in the five-year time slot 2023 to 2028. Whilst this is not in fact a huge sum in overall pension expenditure terms, it is designed to be the definitive “sorry folks” argument. Meanwhile, there is a division in the Conservative government whether even the trip-lock should continue as Britain lurches in its post-Brexit financial agony.

The main lobby group in Thailand is End Frozen Pensions Asia (Thailand Branch) which is easily found on Facebook and has a useful chat describing members’ campaigning activities. Local Brits feeling aggrieved by the lack of political will in UK to resolve the blatant discrimination should support this non-profitmaking pressure group. And yes, it’s likely to be a long haul.

[vinapu]

16 minutes ago, reader said:

there is no sensible rationale why British pensioners living in Turkey or Serbia or parts of the Caribbean should receive increases when those in Thailand do not. The stark reality is a postal lottery pure and simple.

 

it's hard not to agree about lottery comment although with option of picking up winning combination. It seems unjust and illogical ( for example in US indexed somebody told me ,  in Canada not as per list above ) but only UK votes and politicians can solve it. Until then British pensioner's   should chose their new home wiser. 

 

 

[forky123]

They should standardise it and not increase pensions anywhere outside the UK. Why should taxpayers increase pensions for people not contributing to the UK economy?

[xpaulo]

6 hours ago, forky123 said:

They should standardise it and not increase pensions anywhere outside the UK

I am Canadian and this is not really my business, but I have concerns about retired Canadian citizens with dual citizenship who move permanently back to their other country where they can live much more comfortably on their government pension. I don't judge them for that, I'd probably do the same thing if I could. But still, it rankles. There are claims that ex-pat citizens return to Canada only to receive free medical treatment. Not sure about that since provinces require people to remain residents to get their government medical insurance. Unless somebody rats them though, if they have an address in Canada it's unlikely anybody in the system would ever know they live abroad.

[vinapu]

2 hours ago, xpaulo said:

 Unless somebody rats them though, if they have an address in Canada it's unlikely anybody in the system would ever know they live abroad.

in reality it should be fairly easy to catch them , at least those who arrive by air which is majority. Canada is like Brunei, South Korea or Lesotho and has land border with only one country . Records of absence can be obtained from airlines passenger's lists. It's only matter of connecting the dots. Job for AI I guess.  

[PeterRS]

16 hours ago, forky123 said:

They should standardise it and not increase pensions anywhere outside the UK. Why should taxpayers increase pensions for people not contributing to the UK economy?

UK pensions are not basically related to the UK economy or an individual's contribution to it through taxes. Pensions are a specific item under the national insurance scheme which has separate contributions unrelated to specific taxes payable by an individual - if any. If they wish to receive a pension, those working abroad must still pay the national insurance contributions annually. After 40 years of contributions, in the UK they qualify for the full basic state pension along with annal increases. Those living abroad, as noted, have the pension frozen.

When I moved abroad to work, pensions for those living overseas were not frozen. It was the government of either Margaret Thatcher or Tony Blair which applied the freeze. Yet, even as one working overseas and continuing to pay my national insurance contributions, I never received any information from any goverment departmant to tell me that my rights had been taken from me. Since then, I have written to various Secretaries of State with responsibility for pensions. Total waste of time! No lobbby group is going to get this through parliament.

One of the above governments also stripped UK expats of the right to vote after being abroad for six years. Therefore there is absolutely zero incentive for any future government to pay any attention to that group's demands as lobby groups have zero effect on voting for or against members of parliament. We are in a government-mandated limbo. 

[forky123]

The rules have changed several times in the last 20 years. When I started paying NI contributions the pension age was 65 for men and 60 for women. Now my pension age is 67 and for younger people it will be 68 or even older, perhaps even no pension. It's also now 35 years of full NI contributions. You say they are not based on the economy, that may be the case but they most certainly do affect the economy. The cost of pensions due to an aging society is increasingly a larger share of GDP. There is no pension pot, the contributions today pay the pensions today and the cost is rising. The rules are that certain countries get increases and others don't. I'd prefer it simplified so no-one living outside the UK gets the increase. Why? 1) the cost and 2) Increases in cost in those various countries are not linked to UK pay rises or inflation.

I get people outside the UK are upset but imagine you are starting out paying tax and NI in the UK, contributing to those increases with no guarantee of ever getting a pension. I feel gyped that my pension age has increased but just have to get on with it. I'm 57 with 41 years of full contributions yet still have over 9 years before I'll be eligible. Why should I be paying for increasing the pensions of people outside the UK who do not contribute in any way to the UK economy?

[PeterRS]

3 hours ago, forky123 said:

Why should I be paying for increasing the pensions of people outside the UK who do not contribute in any way to the UK economy?

In that case, lobby your MP to change the national insurance rules. You are obeying them as they exist now. I obeyed them as advised when I started working - and yes, I started in the UK. Had I been informed of a change, I could have elected to cease paying annual national insurance contributions and put the cash into better savings funds instead.

[forky123]

You get the rules that apply when you get your State pension and not before. Until that point they are subject to change. 

4 minutes ago, PeterRS said:

lobby your MP

Really?? There are so many other more pleasurable activities to waste time doing.

You used to be able to contract out of SERPS (State Earnings Related Pension Scheme) but not out of NI as a whole unless your UK earnings were very low. I'm sure everyone that had their pension age increase feels they were hard done by as well. 

As to the rules in place when you started working, pensions were massively revamped in 2007 so whatever terms you were on before that changed, some of it for the better and some for the worse. Everyone gaining pension age after that just need to deal with it.

[PeterRS]

12 hours ago, forky123 said:

Everyone gaining pension age after that just need to deal with it.

On that we agree!