MPs Push To Change Frozen Pension Rules

Expat Pensioners Could Soon Be Better Off

The pension freeze has a major impact on expats. But a motion by MPs aims to axe this policy, to improve the lives of more than 500,000 British pensioners.

The question of frozen pensions for pensioners living overseas has become a thornier issue than ever in the corridors of Whitehall over recent years. Many people have seen it as unfair that their pension is frozen the moment they leave the country, and they are not entitled to the periodic increases that would normally be added automatically if they remained in the UK.

But with the huge devaluation of sterling over the past year or two, the situation has become even more perilous. For example, ten years ago, £1 was worth approximately AU$2.50. Today, it is worth just $1.70. This means that a weekly pension payment of £80 would have been worth AU$200 in 2007, but is worth just AU$135 today.

Little wonder, then, that MPs have sought a change in government policy, saying that frozen pensions have a “detrimental effect” on the lives of thousands of pensioners.

Financial hardship

The difficulties faced by what are becoming known as Britain’s “frozen pensioners” was raised in backbench debate, where MPs agreed a motion asking the government to “take the necessary steps” to withdraw the freezing regulations. Regulations that mean many expat pensioners face increasing financial hardship every year.

While there is no guarantee that the government will act on the motion, it does give a welcome boost to the urgency accounted to this critical issue, which affects around 550,000 expats around the world, most notably in Commonwealth states like Australia, New Zealand and Canada.

During the backbench debate, Sir Roger Gale, the Member of Parliament for North Thanet and Chairman of an all-party committee on frozen pensions, remarked that the current system leads to ridiculous situations, citing the following example: “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.”

Sir Roger remarked that the proposals his committee is suggesting would not cost anything like the “billions” that previous governments had claimed it would. He said that by applying an uprating formula to what pensioners receive now, rather than fully uprating them to current rates, the cost would be a mere £33 million.

The Brexit Factor

Brexit means that the number affected could soon run closer to a million, unless an alternative arrangement is specifically carved out as part of the Article 50 negotiations.

There are almost 500,000 British pensioners living in EU countries, whose pensions are currently uprated in line with EU single market rules. However, there are currently no guarantees that this will continue after Britain leaves the EU.

It begs the question of whether there be 27 different agreements, or one overriding one. As it is, there is a very real possibility that pensioners in the EU will find themselves in exactly the same situation as those in Australia, Canada and various other locations. Surely, this is the perfect time to resolve this unfair treatment of pensioners, wherever they choose to live, once and for all.