UK MPs vote to back landmark expats frozen pensions overturn motion

UK MPs have voted in favour of a motion that would call for the axing of the Government’s long-standing policy of “freezing” the pensions of certain expats, which currently affects more than half a million Britons living abroad.

The long-running issue, described by activists as Britain’s “dirty secret” and “a national embarrassment”, was debated in a special meeting in the House of Commons yesterday.

The ‘frozen pensioners’ issue, which affects UK expats who live in certain countries, such as Australia and Canada, but not others, was raised in a poorly-attended debate (see picture above) as part of what was dubbed “backbench business” yesterday. MPs agreed a landmark motion asking the government to “take the necessary steps” to withdraw the annually-renewed freezing regulations.

According to the International Consortium of British Pensioners, some 544,000 British pensioners who happen to live in one of some 120 countries, excluding Europe, have their pensions “frozen” at the level at which the individual in question begins to take it, rather than being “up-rated” to keep up with inflation, the way the pensions of those who remain in the UK are. Over time, this can represent a significant hardship for some very elderly people, campaigners say.

Some of the most popular overseas retirement destinations for British pensioners are on the UK’s frozen-pension list, including New Zealand, South Africa, Canada and Australia. The campaigners took their fight for pension parity all the way to the European Court of Human Rights some years ago, but the court found against them, arguing that the UK’s refusal to link the expats’ pensions to inflation, the way it does those of retirees living in the UK and in certain other countries, was “not discriminatory”.

The matter has taken on new urgency, meanwhile, as Britain prepares to leave the European Union, as some fear this could see an end to the up-rating of UK pensions in EU countries.

Following yesterday’s vote, a call has now been made for the inclusion of the change to be added to the government’s 8 June election manifesto, meaning that the reforms could be approved as early as this summer.

Labour leader Jeremy Corbyn, pictured left, who, as reported, spoke publicly on the matter and  joined the cross-party bid to overturn the controversial ruling, didn’t attend yesterday’s debate.

There is no obligation for the government to now act on the ruling, but with an 8 June election imminent (and up to 1.5 million expats registered to vote), coupled with the fact that the frozen pensions ruling could also affect Britons in the EU, unless agreed otherwise in the Article 50 negotiations, the opportunity for the landmark reform is stronger than it has been previously.

Outside the UK, recent figures showed 542,565 pensioners whose pensions are frozen. A total of 474,721 Britons in the EU have them uprated due to EU single market rules, while another 189,334 have uprating because they live in one of 16 places (around half being small islands) with bilateral agreements on pension uprating with the UK. No such agreement has been signed since 1981.

‘Dirty secret’

John Markham, chairman of the International Consortium of British Pensioners, said on the organisation’s website that frozen pensions are “the dirty secret of successive governments, who have been content to ignore pensioners they felt were out of sight out of mind, regardless of the implications,” he said.

“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 prized 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.”

During the debate Conservative MP Sir Roger Gale, pictured left speaking at the debate yesterday, who chairs an all-party MPs’ committee on frozen pensions, said that the ruling has led to “ludicrous” situations.

“A British pensioner living on one side of Niagara Falls, in Canada, receives a frozen pension while another living just a mile across the falls, in the United States, has their pension uprated every year,” said Gale. “Additionally, some Caribbean islands enjoy uprated pensions, while other small countries and overseas territories do not.”

Relating to Brexit, potentially affecting even more UK expats, Gale asked: “Will there be 27 different agreements, or one blanket one? Will EU pensioners find their pensioners frozen like those in Canada, Australia, New Zealand, India and other countries? Surely now is the time to put all expat pensioners who have paid their dues on an equal footing.”

He added that previous governments have claimed that uprating would “cost billions”, however, he said, the version of the amendment that the all-party committee supports – with uprating moving forward, not backdated, would cost just £33m if it was implemented this year.

UK pensions minister Richard Harrington said that the rules on uprating were straightforward and had been the same for 70 years – there was no uprating where the government had no legal obligation to do it. He estimated the costs of “uprating all state pension payments in full” to be an extra £500m per year, which he said could not be justified.

He said when people move abroad pension entitlements are usually part of the calculation they make before doing so. 

Gary Robinson
Head of Video and Ezines at Open Door Media Publishing. Deputy Editor, International Investment. An experienced journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as a fully qualified IFA, Gary works across both International Investment and InvestmentEurope titles. Previous video production credits include projects on BBC, C4 and SKY.

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