Expat pensioners face frozen income
So why is this happening, and how can it be fair?
Unfair pensionsThe issue depends entirely on where you retire to. Around 5.3% of all pensioners (635,300 of them) have retired to Europe, the US or any one of 40 countries which have an agreement with the UK. It means their pensions increase in exactly the same way as if they lived in the UK.
It's the 4.4% of pensioners (55,750 of them) who retired to Commonwealth countries and elsewhere who have had their state pensions frozen at the rate it was paid at on the day they left. The five affected countries where British ex-pats are most likely to live are Australia, Canada, New Zealand, South Africa and India.
For those who live many decades in retirement, their pension can easily dwindle away. The current rules mean that a pensioner who paid National Insurance contributions throughout their working life but moved to overseas and took a pension from 1995 still only gets £59.20 per week. Many are living on less than £30 a week.
Clearly this is a ridiculous anomaly. All the pensioners are paid an income that depends on the number of years they paid National Insurance between the ages of 16 and retirement. They all paid at the same rate, so it's clearly wrong that they should have pensions paid out at different rates.
Why?The source of the problem is that those countries which do uprate pensions in line with inflation do so because of legislation, which is renewed every year. It's this same legislation that means they are still entitled to their Winter Fuel Payment every year - despite the fact that many of them are living in dramatically warmer climes. Those countries which don't uprate the pension simply don't have the legislation.
There have been a number of legal challenges by campaigners, but after fighting through the British and European courts, last year their appeal in Europe failed and they are back to raising awareness and putting pressure on the government. Last week the International Consortium of British Pensioners stepped up their campaign for fairness, by launching a Pension Justice website.
They say that half of all people between the ages of 45 and retirement would like to move overseas after retirement, but 62% of them don't know that their pensions will be frozen if they move somewhere without an agreement.
The Runnymede Trust has argued that the situation discriminates particularly against those who were encouraged to move to the UK from the Commonwealth in order to help rebuild the country after the second world war. They are being punished once they retire to their country of origin.
Mark Bodega, Director at currency broker HiFX comments "The cost of living for expats receiving a fixed income in sterling has already shot up in the last few years as sterling has depreciated. So the fact that their income does not rise in line with inflation as it does for pensioners in the UK is a double blow for hundreds of thousands of pensioners who are already struggling".
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What can you do?If you are living overseas and affected by the change, Bodega recommends: "Any pensioners living abroad who want to get the most out of their pension payments and cannot afford to see the value of their pension income decrease any further through currency fluctuation should consider using one of the Regular Payments Abroad services offered by many currency specialists in the UK."
If you are struck by the unfairness, the Consortium is also calling on people to sign its e-petition. At the moment there are just under 20,000 signatures, and it needs 100,000 by September in order to have the issue debated in parliament.