UK Frozen Pensions – the senseless inequity continues

There is surprisingly little movement on the UK Frozen Pensions issue.  1.1 Million British Old Age Pensioners have chosen to spend their retirement years overseas and in doing so, they save the British Economy over 7 Billion Pounds every year. More than half of these receive the same pension as they would receive if living in the UK.  The other 545,000 pensioners resident mainly in the British Commonwealth countries such as Australia and Canada have their pensions locked in value at the time they emigrated.

The UK Treasury would benefit from a change in policy and it would correct a moral debt of honour.  However the number of MPs who support this long-needed application of the English principle of fair play grows only slowly.

Some UK Pensioners Can No Longer Afford To Stay Abroad

The effect of this policy can have a devastating effect on recipients of UK state pensions who have emigrated or who are thinking of doing so.

One of the hardest hit groups is those who emigrated many years ago.  Trying to live on a pension whose value was locked in at say a 1985 value gets increasingly difficult, as costs rise including the costs of medications.  Their only recourse is to return to the UK and have their pension restored to its true current level.  At the same time they can then draw on all the social supports and benefits that are available.  The cost to the UK Treasury is significant and they must try to make a new home but what other choice do they have.

Other UK Pensioners Cannot Afford To Emigrate

Another group which is severely affected according to the Telegraph is those people from ethnic minorities who live in the UK and who would wish to return abroad to their country of birth.  The Runnymede Trust, a race relations think tank, has criticised the Government for refusing to inflation-proof the pensions of thousands of Britons.

The report’s author, Phil Mawhinney, said: “It is clearly unfair that people who were encouraged to rebuild the UK after the Second World War… should risk losing their entitlements if they return to the Caribbean, or elsewhere.  The current system of overseas pensions uprating is arbitrary, with no logic behind a pension being uprated in Jamaica but not Trinidad, the Philippines but not India. We therefore call on the Government to uphold fairness and uprate all overseas UK pensions.”

Unfreezing UK Pensions Would Benefit UK Taxpayers

What is particularly surprising about this unfair lack of action is that it costs UK taxpayers to support returning expat UK pensioners and those pensioners who cannot afford to emigrate.  A comment on the Telegraph article cited above explains why.  Peter Morris offered the following facts:

Unfortunately the DWP don’t talk to the Department of Health, who don’t talk to the Department of Communities and Local Government, who don’t talk to Treasury, who don’t talk to the DWP.  If they did they would find out that they could save over £3,000 per pensioner per year, after tax, by encouraging people to migrate.

It is as if the government does not want to save money in  these difficult economic times.

Costing per pensioner per year:

Cost of uprating £1,000
Savings to NHS, Social Services and Housing £8,500
Taxation lost £3,500

Net saving to the Government £4,000

Even stronger logic applies to those who would like to stay abroad but are forced to return to live in the UK.  Undoubtedly the costs to the NHS, Social Services and Housing would be even higher than those averages above, since the returnees would be the older and more needy.

More and more MPs are gradually opening their eyes to this inequity but progress to a resolution is still far too slow.