UK’s frozen pensions policy faces complaints

The UK’s frozen pensions policy dates back to just after the second world war and has been a source of complaints for decades.

The general position is that the state pension is payable overseas but, where someone is not “ordinarily resident” in the UK, there is no entitlement to an annual increase. Their pension is frozen at the rate on the date they left the UK or when they became entitled to it if they were living abroad at the time.

However, increases are payable to pensioners living in countries with which the UK government has a “reciprocal social security agreement” that provides for them, as well as those living in the European Economic Area (EEA), plus Switzerland and Gibraltar.

The current list on the Department for Work and Pensions website includes Barbados, Bermuda, Bosnia-Herzegovina, Israel, Jamaica, Kosovo, Mauritius, Montenegro, North Macedonia, the Philippines, Serbia, Turkey and the US.

Although the UK has social security agreements with Canada and New Zealand, you cannot get a yearly increase in your UK state pension if you live in either of those countries.

If a country does not appear in any of those categories, the UK state pension is not annually uprated there.

Criticism of the policy began to build during the early 1960s and over the years there have been legal challenges and campaigns but nothing has managed to overturn the status quo.

The government has said that post Brexit it will continue to annually increase UK state pensions for Britons living in the EEA or Switzerland by 31 December 2020 for “as long as they continue living there”.

However, the picture is a lot less clear for those who move to an EEA country or Switzerland from 1 January 2021 onwards, as this is part of the current negotiations with the EU.

If you move to a country where the UK state pension does not increase, you may find you are entitled to a pension or other benefits under its own system. But the rules can be fiendishly complicated and there will often be restrictions on what you can get.

For example, in Australia there is the Age Pension for those aged 66-plus but this is means-tested and British migrants are not eligible until they have been an Australian resident for at least 10 years. The maximum basic rate for a single person is A$860.60 (£478) a fortnight but the income and assets tests carried out may well greatly reduce what you receive.

In Canada the Old Age Security (OAS) pension is a monthly payment available to those aged 65-plus who meet the country’s legal status and residence requirements. To get it, you need to have lived in Canada for at least 10 years since the age of 18. What you receive will depend on how long you have lived there after the age of 18. For example, if you have lived there for 40 years or more, you will qualify for the full OAS pension.