State Pensions: UK Expatriates

Jeremy Lefroy Excerpts

Thursday 20th April 2017 Commons Chamber

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

It is a pleasure to follow the hon. Member for Worthing West (Sir Peter Bottomley), who made a gracious and fine speech about why this House, working cross-party, must deal with this issue. I commend all the other Members who have spoken in this debate, too. Let me say to the Minister that I suspect this is the last time in this Parliament that we will be discussing pensions matters. I have always enjoyed our spats across the Dispatch Box. I know he is an honourable and decent man, and I ask him to reflect carefully on all the speeches made this afternoon and to give us an indication that the Government are prepared, on the basis of affordability, to deal with this very real injustice that too many people are facing.

I am grateful to the Backbench Business Committee for granting this important debate on a motion standing in my name and that of the hon. Member for North Thanet (Sir Roger Gale). I am also grateful but saddened by the fact that we have to be here today debating this issue, which is fundamentally about fairness and which should, as has been said, have been resolved many decades ago.

The motion addresses the rights of just over 1 million UK pensioners who live overseas. We are talking about those who have paid national insurance on the basis that the payments made to the UK Exchequer entitle an individual to a UK state pension. When someone makes national insurance contributions, building up their entitlement, there is nothing that suggests that their right to a full pension will be determined by where they choose to live in future. Each individual has earned that entitlement, and it should be honoured. It is a simple matter of entitlement in what ought to be a contractual arrangement.

The Government repeatedly call the state pension a benefit, but that argument is undermined by the basic principle that entitlement is earned by making contributions. To achieve a full UK state pension, a person needs to have accrued 35 years of payments. In such a regime, why should someone’s place of domicile affect their rights? The UK is the only member state of the OECD that does not confer full pension rights, including the annual uprating of pensions, to those who have made contributions. It is simply not right that we discriminate against pensioners because of where they live; and let us make no mistake: that is what it is—discrimination. It is a failure of the United Kingdom to accept its responsibility to give full pension entitlement to those who have earned that right.

A person’s entitlement to the annual uprating of the state pension is determined by what country they live in. Some 679,000 UK pensioners who live in other countries do get the annual uprating, but there are 551,000 whose pensions are frozen at the level at which they first received their state pension when living abroad. Someone who is now aged 90 who had retired aged 65 in April 1991 would, had they qualified for pension uprating, now be receiving £119.31 per week; if their pension was frozen at the 1991 level, their weekly pension would be £52 per week. That is without justification. Such an individual would have lost out on £39,489 of pension income over a 25-year period as a consequence of their being in receipt of a frozen pension and denied their full rights. Think about what that means: by refusing to grant uprating, we are impoverishing our pensioners.

The average amount received by a pensioner with a frozen pension is just £2,258 per year, whereas the average for a pensioner living in the UK is £7,198 per year. We are denying pensioners income that rightfully ought to be theirs. Many will have to receive support from relatives, or perhaps they will have to return to the UK, where the cost of supporting such elderly residents is invariably higher when health and other social costs are taken into account. We also have to think about the fact that many people came to this country to work, often for many decades, and want to return to their country of origin in retirement. Such folk are put off by the reality of potentially being penalised through the receipt of a frozen pension. Where is the humanity in this? Where is the dignity in stopping people who have given long service to this country and paid their way retiring as they wish? They want to know that they will receive their full pension rights. This is a wrong that we must deal with. People who come to this country should not be penalised when they choose to go home.

Other countries see the current situation as a diplomatic grievance, and that will no doubt be a factor when the UK discusses trade deals. Other countries are going to turn around and say, “You want a decent relationship with us, but you are not prepared to treat your pensioners who live in our country fairly.” The fact that we are unique in the OECD in not accepting our obligations does not go down well with other Governments. We need to show leadership, and that we will stand by those who have earned a pension entitlement.

The International Consortium of British Pensioners has been mentioned by many speakers. I commend the consortium for the work it has been doing with the all-party group and the research it has conducted, which shows that because of the lower health and social care costs of somebody not living in this country, there is a saving of £1,575 for every pensioner who moves abroad. Such savings would partly offset the costs of annual uprating.

The House debated frozen pensions on 11 May last year. This debate follows other debates on this matter going back over the past few decades. The hon. Member for Worthing West mentioned Winston Churchill at the turn of the century; indeed, his grandson, also Winston Churchill, was involved in this matter, too. I have been sent a copy of a letter sent in 1993 by the younger Winston Churchill, the then Member for Davyhulme, to a retired pensioner living in Australia called Victor Humphries. Churchill stated in his letter that he hoped the

“Government may be shamed into taking steps to honour its commitment to expatriate pensioners”.

He went on:

“I have no doubt that if sufficient weight of Parliamentary support can be demonstrated for redressing this clear injustice, the Government will have no alternative but to back down.”

Winston Churchill was right in 1993, and all the Members who have spoken in this debate are right in 2017. It is shameful that, collectively, we have not yet dealt with this issue.

There is, of course, a topical aspect to the debate. Brexit hangs like a black cloud over this issue. Of the 679,000 UK pensioners who do receive an annual uprating, 492,000 are currently protected by the social security provisions of the EU single market. What is going to happen to the rights of those 492,000 UK pensioners post-Brexit? Will the Minister commit today to the continuation of the annual uprating for those living in EU member states? We often hear from the Government how they want to protect the rights of UK citizens living in Europe. Many of those citizens will be listening to or will hear about this debate. They will be concerned about their pension rights to the extent that, in the absence of any guarantees, many will consider whether they might not be able to afford to continue to live in an EU member state. The Minister can deal with that uncertainty today.

[Jeremy Lefroy (Stafford) (Con)]

Does the hon. Gentleman agree that it is inconceivable that this Government, or the Government after the election, would not guarantee uprating to British pensioners who live in the EU 27? As my hon. Friend the Member for North Thanet (Sir Roger Gale) said, it is therefore inconceivable that justice would not come at the same time for the people who have been denied it for so long. That would be discrimination of the worst sort.

[Ian Blackford]

I concur 100% with the hon. Gentleman; he is absolutely right. We have the opportunity today to deal with this matter and with the uncertainty facing UK citizens who live in Europe. That would be the right thing to do. As has been demonstrated, the cost of doing this for other British citizens would not be all that great. We can actually deal with this matter today if the Minister will recognise that it is a matter of good faith. As we go into the election campaign, I implore us all to make the commitment, collectively, to deal with the injustices we are discussing. If he so chooses, the Minister can remove the uncertainty today, or he can at least give us an indication that the Government are prepared to do something about this issue.

A further 186,000 UK pensioners live in countries with which the UK has a historical bilateral agreement on social security, including the US. A total of 551,000 UK citizens live in countries in which their pensions are frozen, with the largest numbers being in Australia where there are 246,000, and Canada where there are 144,000. The all-party group has met members of the Canadian diplomatic community, and I can tell the House that they are less than impressed with the behaviour of the UK Government on this matter. We are offending our international friends with our failure to take action.

We often hear about a postcode lottery; this is a national lottery, but one in which 551,000 British pensioners are paying the price. I am glad that the motion has cross-party support, and hope that the Minister will recognise the nature of that support and that we are all appealing to the Government to signal that there is an obligation on them to see sense on this matter. I look forward to the Minister’s response, and I hope we will hear from him that the Government are prepared to take action. It is about doing the right thing, and standing up and recognising that all pensioners, irrespective of where they live, deserve to be treated equally.

When we consider that the Government are lifting the limit on the period that UK citizens may live abroad but vote here from 15 years to their entire lifetime, we have to ask why the Government would want to confer voting rights on UK pensioners but deny them full pension rights? Perhaps the Government should reflect on the fact that more than 1 million UK pensioners live overseas. Those pensioners may have a reason to want to register to vote in this coming election campaign, given the infringement of their pension rights. As the hon. Member for Worthing West mentioned, there are 264,000 registered overseas voters—400 per constituency. Can Members imagine the threat to MPs up and down this country if frozen pensioners and others decided that they were going to exercise their franchise? With an election coming, a rise in registrations may just help focus the mind of the Government. What drives the decision-making process of the Government? Is it cost saving, or is it about accepting our obligations to meet a commitment to paying pensions regardless of country of residence?

I appreciate that the Minister will have been told by the Treasury not to offer anything. I know that he is a loyal Government servant and I understand his position. Let me, if I may, try to help him by strengthening his arguments with the Treasury. The right hon. Member for Tatton (Mr Osborne), the previous Chancellor of the Exchequer, said during a debate on the Pensions Bill in the 2003-04 session, when acting as the shadow Chief Secretary to the Treasury:

“If the system worked in the way that most people think, it would not matter where a person lived.”––[Official Report, Pensions Public Bill Committee, 18 March 2004; c. 256.]

I have to say that, on this occasion, I agree with him; it should not matter where a person lives. I appeal to the Minister to reflect on the words of his friend, the former Chancellor of the Exchequer. Those words were spoken when the right hon. Gentleman was in opposition, but each and everyone one of us should be judged by our deeds in government. It is not good enough to say the right thing when in opposition and then, when in government, claim that it is all about cost. We should be judged by our deeds, and today we have that opportunity. I implore the Minister to do the right thing on this issue today.

I have faith that the Minister will listen to reasoned argument and recognise that this is an injustice that needs to be corrected. Let me deal with the issue of affordability. The Government like to claim that the cost of unfreezing pensions is unaffordable. Ministers have sometimes cited numbers in the billions, but any such claim is highly misleading. The motion for debate proposes the withdrawal of the Social Security Benefits Up-rating Regulations. That would include previously frozen pensions in this year’s 2.5% increase, which would cost £30 million. Assuming that this inclusion continued in subsequent years, the total cost would rise by around £30 million extra each year.

The ICBP has historically campaigned for pension parity, bringing currently frozen pensions up to UK levels immediately, which would cost £580 million, but that is not what is being proposed today. Any higher number cited by the Government involves looking at the cumulative cost over a longer period, which is not how new policies are usually assessed and is therefore misleading. The additional cost of uprating at 2.5% over the next five years would have a cost in year one of £30 million, rising to £33 million by year five, by which time it would have a cumulative cost of £158 million. Let me put that in context: the bill for UK state pensions is currently £86.8 billion. Partial uprating is equivalent to 0.03% of current pension spending.

Let me assist the Minister again. We are all aware that there is a separate national insurance fund, and we know from the Government Actuary’s Department that it is anticipated that that fund will have a surplus of £30.7 billion this year. Clearly, the cost of doing this can be met from the surplus that currently sits in the national insurance fund. Of course this is affordable. This is about our obligation to our pensioners and the human cost of not meeting those obligations. We need to listen to the voices of those who are discriminated against by our failure to pay full pension entitlement.

I will close now with some quotes. I know that the hon. Member for North Thanet has eloquently presented us with some human experiences, but let me just add to them, because at the end of the day it is the cost for the individuals that should concern us. Abhik Bonnerjee is 72 years old and now lives in Kolkata, India. After contributing to the British economy for 38 years, he is now scared of losing his home as he is struggling to survive on his frozen pension. He is considering moving to an unfrozen country. He said:

“The Government should be doing more, especially for Commonwealth countries, and MPs can’t explain why they are not.”

Bernard Jackson, 91, moved to Canada, but was forced to return to the UK in order to obtain his full pension. He said:

“I was brought up to believe that Britain was a fair country. It’s a disgrace, it has to end. It’s terrible to meet pensioners over here who say they have to come back to Britain because they can’t manage.”