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Pensions offer cold comfort abroad when frozen in time

Posted by on Sep 24, 2011 in Retirement | 0 comments

Published on Friday 23 September 2011 19:00

Yorkshire Post

British people who want to live abroad in retirement don’t necessarily realise how it may affect their state pension. Sheena Hastings reports.

RALPH Clegg, now 82, was a policeman in Leeds when the government asked for officers with experience of Africa to go to Kenya to fight against the Mau Mau in the rebellion that lasted from 1952 until 1960.

Ralph volunteered because he had served in Kenya in the Army during the war. He worked with the police over there for three years, and stayed on to work in local government afterwards, marrying and returned to UK when Kenya gained independence. In 1970, after jobs in various businesses, prospects looked bleak in Britain so the Cleggs moved to South Africa. At the time the government was encouraging Britons to emigrate and even offering cheap fares to some countries.

“I volunteered to go, and now I am reaping the benefits of helping our country – my pension is frozen at just £60 a week, “ says Ralph, who is now a widower living in a care home.

“I can hardly afford to stay at the retirement home I live in and have to rely on the kindness of my children to make ends meet. Any savings I had were spent on my wife’s cancer treatment. I fought for my country when I was still a teenager, paid all National Insurance contributions that I could and kept my British citizenship, but it seems it was all for nothing.” The full British state pension is £156.15 a week.

New research carried out for the International Consortium of British Pensioners (ICBP) has found that 53 per cent of middle-aged people aged 45-65 in Yorkshire would consider retiring abroad; however 60 per cent of them are unaware that their pension will be frozen if they move to one of over 120 countries.

A fifth have children overseas making a move abroad liely.

‘Frozen’ means that pension payment stays at the rate paid in the first year the person receives it in the country they have retired to, with no entitlement to future increases for which those living in the UK are eligible. The freeze applies to popular retirement destinations such as New Zealand, Australia and Canada.

The ICBP has launched a petition for people to call for a House of Commons debate on this issue, calling also for the removal of the clauses relevant to the pension freeze to be removed from the Pensions Bill currently making its way through parliament.

The consortium argues that unfreezing the pensions of all British people living abroad would, in the long-term, benefit our economy, as people living abroad put less pressure on public services and housing here. Oxford Economics research shows that in 2011 the net benefit to the Treasury of a pensioner moving abroad wass £2,500 a year.

“This situation has existed since the days of Harold Wilson,” says John Markham, UK parliamentary director of ICBP.

“There were two key influences – the government concluded that it had to bring the state pension scheme up to date with annual increases in line with inflation and the fact that there was a sterling crisis going on.”

Whitehall said British people retiring abroad or going abroad after retirement would not receive pension increases unless a reciprocal agreement was made with the country they lived in. Sixteen countries signed such an agreement, including Guernsey and Jersey, the US and the Phillipines.

Markham himself is 78, and he has been living in Canada since before he was 65. His pension is the same now as they day he first received it, whereas the 130,000 Brits who live over the border in the US receive regular increases.

The Consortium is not seeking backdating of pension increases.

“The frozen pension policy actively discourages those who have worked hard all their lives and paid their national insurance contributions from moving to join their children. It also means that half a million people currently affected have to live out their old age in destitution, rather than dignity. This must change.”

A Department of Work and Pensions spokesperson said: “The State Pension is uprated throughout the European Economic Area and in countries where we have reciprocal social security agreements.

“People who are considering emigrating abroad should always consider the impact the move could have on their future state pension entitlement.”

Around 1,160,000 UK State Pensions are paid to those living overseas; around 550,000 are in frozen rate countries. In 2008/09 the UK spent an estimated £2.7bn (in 2010/11 prices) on State Pensions paid overseas; around £980m was paid in frozen rate countries.

To sign the e-petition go to http://bit.ly/BritPensions

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