Support is gathering to bring frozen state pensions paid to thousands of British expats into line with index-linked payments made to pensioners in the UK and the rest of the world.
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MPs and financial firms are urging the government to rethink policy as the third reading of the Pensions Bill passes through Parliament.
The bill includes an amendment calling on MPs to vote for index-linking the state pension for all expats.
Currently, if an expat lives outside the UK, the Europe Union or a country which has a reciprocal state pension agreement with Britain, the state pension is frozen at the level of the first payment on retirement.
Some of the most popular expat retirement destinations do not have a reciprocal agreement with the UK.
Unfair treatment
Annuity firm MGM Advantage is one company supporting the move to make state pension payments fairer for all expats.
Andrew Tully, the firm’s technical director said: “Leaving the UK to retire is a dream for many, but we have looked at which countries have reciprocal arrangements and where expats go and found three of the top 10 destinations are excluded.
“Those who have a frozen state pension feel unfairly treated.”
Tully explained that if two pensioners retired on the same day in 2003 and just lived a few miles apart – one in Canada and one across the border in the US, the Canadian pensioner receives state pension payments that are 42% lower than the US pensioner.
In 2003, the full state pension for a single person in Canada was £77.45. They are still paid that amount even though the state pension is now worth £110.45 a week
Legal challenge
Other top retirement destinations where the British state pension is frozen include Australia, New Zealand and South Africa.
British expats have lobbied for a change in the rules for years and even took their case to the European Courts of Justice.
However, the legal challenge was lost and the government steadfastly refuses to change the payment rules.
“These rules have been in place for many years and everyone should know how much state pension they will receive if they retire overseas,” said a spokesman for the Department of Work and Pensions.
“The government has no plans to change how the state pension is paid to expats.”
If the Pension Bill amendment passes through the House of Commons, the House of Lords still has to agree – and before the bill receives Royal Assent and becomes law, both houses have a second chance to make amendments.
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