Pensions: British Pensioners Overseas

Lord Freud Excerpts

Wednesday 11th March 2015 Lords Chamber

[Baroness Benjamin]

To ask Her Majesty’s Government what consideration they are giving to uprating fully or partly the state pensions of British pensioners currently living overseas whose pensions are frozen.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord Freud) (Con)]

My Lords, there are no plans to change the current arrangements for payment of state pension to those recipients who live outside the UK. The policy of this coalition Government is to uprate UK state pensions where they are legally required to do so under the terms of EU law or through a bilateral social security arrangement which covers uprating. Changing the policy as suggested would incur significant costs—moneys which are currently just not available.

[Baroness Benjamin (LD)]

My Lords, I thank my noble friend for that Answer, but it is unbelievable that British pensioners who have paid in their full contribution do not receive their full pension when they retire to many parts of the world, including to the Commonwealth. If full uprating is thought to be costly and a liability for back-payment claims, will the Government adopt the solution of partial uprating of frozen pensions at their current level, since this involves neither of these barriers? It is affordable, it is cost effective and it will stop the gradual decline of pensions year on year. I beg the Government to include a partial uprating option in the Budget and put an end to this injustice once and for all.

[Lord Freud]

I regret I cannot give my noble friend any comfort. Full uprating to today’s levels would cost us more than £0.5 billion and while partial uprating—in other words, just starting to move current levels of pensions up by the increases—would start off being much less than that, those costs would rise in the medium term to a level similar to the full uprating.

[Baroness Turner of Camden (Lab)]

My Lords, is it not really rather unfair? I have a relative who retired to South Africa, where there is no reciprocal agreement. He is very upset that he paid the appropriate contributions before leaving this country and his pension will nevertheless be frozen. Should not people who have made some contribution at least have some gesture from the Government in favour of fairness, which is, apparently, not available at the moment?

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[Lord Freud]

This policy has been running now for 60 years. It has been upheld in the European Court of Human Rights. We have made pensions available to many pensioners abroad, which is different from many OECD countries which do not do so. Most pensioners migrated well before they became pensioners and have built up rights in their adopted countries.

[Baroness Gardner of Parkes (Con)]

My Lords, your Lordships will not be surprised that, with my Australian origins, I have been approached many times about this, and successive Government after successive Government have given me exactly the same reply over the 30 years that I have been asking this question—that it simply cannot be afforded. But when I followed this up at the Australian end, I was assured that they top the pensions up, or did so. Does my noble friend know whether it stills happens that a number of the Commonwealth countries take on and give the extra pension?

[Lord Freud]

This is the reason why this is a complicated area: it is about a bilateral agreement with another country. In practice, to take the example of Australia, I estimate that for any extra amount that we paid to ex-UK pensioners or UK pensioners living in Australia, more than 25% of that money would go straight into the Australian Treasury.

[Lord Rooker (Lab)]

My Lords, I fully accept the position that the Minister is in by answering this Question, but how often do the Government check and audit that the recipients of these pensions who are thousands of miles away are still alive?

[Lord Freud]

The noble Lord will be very pleased to know that we now have a system, which has been introduced reasonably recently, of checking that rather more regularly than it used to be done.

[Lord Shipley (LD)]

My Lords, could I add to my noble friend’s example of Australia that of Canada, which uprates the pensions of its pensioners who are living in the United Kingdom? Given also that in some countries in the Caribbean pensioners from the UK have uprated pensions whereas in other countries in the Caribbean they do not, does the Minister not agree that it really is time to get this sorted out and that the partial pensions uplift route is the way to go?

[Lord Freud]

The reason for those differences in Caribbean countries and elsewhere is that we have historic bilateral agreements. Interestingly, to pick the Canadian example, no Canadian pensions were paid in the rest of the world when we were looking to do a bilateral in the 1960s. That is the reason that we do not have one today with the Canadians.

[Baroness Scotland of Asthal (Lab)]

My Lords, is there not a difficulty because, while I accept that there has been an iterative process over time, what we now have is a situation of fundamental unfairness? A number of British citizens who worked in this country all their lives, making a considerable contribution, are going to be treated differently if they choose to return to the countries of their birth. For example, if someone from the Caribbean was, happily, a Barbadian or a Jamaican, they would be treated in one way; if they were not, they would be treated in another way. Does the Minister not think that there is now absolute necessity for us to address this unfairness, as opposed to allowing it to continue?

[Lord Freud]

My Lords, bluntly, this is about money. The approach in this policy has been in place for 60 years —effectively, the current structure dates from 1955—and, as far as I am aware, during the discussion that we had on this during the passing of the Pensions Act 2014, both the Government and the Opposition confirmed that they had no desire to change current arrangements.

[Baroness Hooper (Con)]

My Lords—

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[Baroness Hooper]

My Lords, can my noble friend tell us about the situation for British pensioners in the overseas territories, such as the Falkland Islands, St Helena, Gibraltar and so on? Would it be possible for the scheme of partial uprating described by my noble friend Lady Benjamin to apply at least to the small number of pensioners who live in our overseas territories, which are, after all, a very special case?

[Lord Freud]

Of the 14 overseas territories, two are uprated—that is, Gibraltar and Bermuda, where we have bilateral agreements—but the other 12 are not. The reason that we cannot go ahead and treat them differently is that that would open the door for us having to do it elsewhere.