Expats are still getting a raw deal from the British state pension even though they can pay more to top up their contributions.
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As the government introduces the pension top-up that lets those approaching retirement buy extra state pension payments, tens of thousands of expats will have to pay more to get less.
While those living in the UK, Europe and some select countries with special agreements with the UK, others living in 150 countries are set for another state pension disappointment.
The rules say the government only has to index-link state pensions for retired expats living in certain countries – which are the UK and the 27 other European Union states, Iceland, Switzerland, Barbados, Bermuda, Bosnia, Croatia, Guernsey, Isle of Man, Israel, Jamaica, Jersey, Liechtenstein, Mauritius, Montenegro, Norway, the Philippines, Serbia, Turkey, the USA and Macedonia.
Each £1 of weekly state pension income will cost a cash contribution of £890, and the maximum top-up is £25 a week, at a cost of £22,250.
State pension top-up frozen
The top-up is designed to help those approaching retirement who do not have enough qualifying working years for the full flat rate pension coming in April 2016. The pension is expected to be around the £155 a week mark.
Although pensioners in every country will get a top-up according to the amount they pay in up to the maximum, anyone living outside the index-linked zone will continue to receive that amount every year for life.
So although they can buy £25 a week extra state pension for £22,250, their contribution misses out on any cost of living increase.
Assuming inflation will run at an average 2.5% for a decade, index-linked pensions will go up £323 but non-linked pensions will stay at £1,300.
Cameron’s sympathy but no action
The Department for Work and Pensions said that anyone wanting to retire overseas will need to ‘bear in mind’ how their state pension is treated in the country they’re moving to, as they won’t see the annual increases to their pensions in some.
Around 500,000 expats are affected by the state pension freeze.
Anyone living outside the index-linked zone is paid the state pension at the rate of their first payment for life.
Prime Minister David Cameron has expressed some sympathy with their plight, but the government claims the cost of bringing all state pensioners in line by increasing their payments would cost too much.
Campaigners are trying to lobby MPs to vote for a change, but lost their legal fight in the European courts.
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