16-07-2025
Should the state pension stay frozen for expats?
More than 450,000 pensioners in countries including Australia and Canada are missing out on thousands of pounds because their pension payments have not gone up since 2012, according to Interactive Investor, an investment platform. Those living in the UK and EU and some other nations, meanwhile, have their income protected by the triple lock. Is this fair? We hear both sides of the argument.
Jan Zeber from the public policy consultancy Bradshaw Advisory
'Britain is broke and the state pension is one of the main reasons' is how I would summarise last week's verdict on the state of the public finances by the Office for Budget Responsibility.
According to its forecast, the state pension is now 'unexpectedly' going to cost an extra £15.5 billion each year by the end of the decade than if it had risen in line with wages instead of the triple lock — an increase three times greater than expected. By 2073, we are forecast to be spending just under 8 per cent of gross domestic product to pay for the state pension.
The triple lock is a coalition government-era commitment to increase the state pension every year in line with inflation, earnings or 2.5 per cent, whichever is highest that year.
These metrics are all based on what is happening in the UK, so you should be a resident here to benefit from the increases. If you live overseas, then UK inflation and earnings growth have no bearing on how far your state pension goes in the country you live in.
It should be uncontroversial for the state to focus its scarce resources on those who are within its borders because, for an overwhelming majority of people, remaining within them isn't a choice.
I understand that there are many reasons why people become expatriates, but it's always a choice and often a luxurious one.
Escaping to the sun while benefiting from the triple lock increases would be a smart arbitrage, but not one that the cash-strapped UK state should have an obligation to fund.
• David Willetts: The triple lock has been far more damaging than I ever feared
And what about the countries in Europe, the US, Israel, Jamaica and the other seemingly random hodgepodge of countries in which British pensioners do benefit from increases to their pension?
You might be surprised to hear that the arbitrary nature of these agreements lies in international diplomacy. Reciprocal agreements to increase pensions date back to when the cost of the state pension was lower, the world was globalising and governments wanted to enable smooth movement of labour.
As the cost of pensions rose for the Treasury, the government changed its approach in 1996 and there have been no new commitments to increase pensions for those abroad since. The agreements that remain are international treaty obligations with no justification other than the 'give and take' of dealmaking.
At a time when the government's finances are under such strain, and so many people within our borders are struggling, there are a number of policy decisions the government must make to improve the situation. Extending pension entitlements for those that have chosen to live abroad, should definitely not be one of them.
Sir Peter Bottomley, former MP for Worthing West and father of the House of Commons in 2024
It should not be a discussion. All pensioners, whether in Britain or overseas, should have their pensions rise with inflation.
No sensible government would create a system in which only half the state pensioners living overseas get increases in line with those at home. Successive governments have stuck to this unfair anomaly that developed in the British Commonwealth in the 1950s.
This was at a time when inflation in Britain was low, and even lower abroad, and old dominions and newly independent colonies did not think it necessary to negotiate increases in the state pension.
As a result, more than 450,000 pensioners in countries like Canada, Australia and South Africa today, are denied upratings.
It is absurd that a pensioner in British Columbia is worse off than one across the strait in the USA's Washington state. The arbitrary injustice is as shameful now as it has been a disgrace for decades.
When Sir Roger Gale MP and I were campaigning thirty years ago, we knew of British pensioners stuck in Zimbabwe and South Africa who were facing poverty because they were denied the increases given to pensioners in the UK or those in European Union countries.
A pensioner living in Australia for the past 20 years, sometimes because that is where their family is, might now get just £4,200 in state pension, instead of the £11,500 they would have had if they stayed in the UK.
• Retiring abroad could cost you £160,000
It's unfair. Remember how much is saved on healthcare and other state costs for everyone choosing to live abroad. Your state income, based on compulsory and voluntary contributions throughout your lifetime, should bring the same payments whether you choose to, or have to, live here or overseas.
It's a crazy system in which you can move from New Zealand to Ireland to get the increases. You get the upratings in Barbados and Jamaica but not Trinidad and Tobago; in the Philippines but not Indonesia.
The problem continues because ministers consistently decide that they should give priority to those living in the country rather than living outside. Unfortunately, court judgments over 20 years have failed to put things right. This means it is up to ministers to act, and act now.
