State Pensions: UK Expatriates

Peter Bottomley Excerpts

Thursday 20th April 2017 Commons Chamber

[Sir Roger Gale (North Thanet) (Con)]

I beg to move,

That this House notes the detrimental effect that the Social Security Benefits Up-rating Regulations 2017 will have on the lives of many expatriate UK citizens living overseas with frozen pensions; and insists that the Government take the necessary steps to withdraw those Regulations.

As chairman of the all-party parliamentary group on frozen British pensions, and with cross-party support, I move this motion on behalf of some 550,000 UK citizens living in countries overseas whose pensions have been frozen at the point at which they left the United Kingdom, in some cases many years ago.

Those people paid taxes and national insurance contributions in Britain throughout their working lives, and elected to move abroad in retirement to be close to family and friends, or simply through personal choice. On the basis that—as my hon. Friend the Minister said in November—entitlement to state pension is based on a person’s national insurance contribution record, they paid their way and are entitled to receive their state retirement pension uprated and in full.

Let me make it clear from the start that this is a matter not of cost but of moral responsibility. It is a duty that has been disgracefully shirked by successive Governments of differing political persuasions since the mid-1960s. It is past high time to recognise that an injustice has taken place and to take a modest step, which I shall detail shortly, to redress a wrong that has been a running sore for too long. The motion calls on the Government to withdraw the social security benefits uprating regulations that effectively exclude overseas pensioners from pension uprating in all countries but those with which the UK has an historic, arbitrary and illogical reciprocal agreement.

My hon. Friend the Minister knows of the illustrious precedent for the motion. In 1998, a similar prayer against the Social Security Benefits Up-rating Regulations 1998 was tabled. It was signed by the then Opposition Chief Whip, now Lord Arbuthnot; my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith), a former leader of the Conservative party and distinguished Secretary of State for Work and Pensions; the then leader of the Conservative party, now Lord Hague; my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley), another former Secretary of State; and the then shadow Leader of the House, now Baroness Shephard.

All those years ago, the party of which I am proud to be a member recognised the need to right a wrong inflicted on those who, in many cases, have served their country in the armed forces, the foreign service and many other walks of life, and who have, collectively and severally, paid their way. We are now—and I trust will remain—in government, so we have the opportunity finally to address and put to rest a debt of honour that must be paid.

I quote a UK pensioner living in Rayong, Thailand:

“I am resident in Thailand, where I retired nearly 8 years ago, and my State Retirement Pension remains at the same level as when I left, because Thailand, unlike the Philippines, for example, is not a country where pension increases are paid…there are some points which I feel should be brought to the fore.

Successive governments have always argued that pension increases can only be paid in countries with which the UK has ‘reciprocal agreements’, and that to extend increases outside these arrangements would negate their ability to conclude other such agreements in the future. However, that argument is utterly threadbare, given that the government announced more than 20 years ago its intention not to make any further reciprocal agreements.

There is a common misconception that expats pay no UK income tax. In the case of pensioners this is totally untrue, because all pensions paid from the UK are subject to tax, and I pay as much as I would if I were still living in—”

his former home in the United Kingdom; I will not identify him at this stage. He continues:

“While pensioners such as myself are paying into the UK economy, we take nothing out, so we make no demands on the NHS or social care. Now, even if we fall ill on a visit to the UK we have to pay for hospital in-patient NHS treatment. If over the years a significant number of us decide that because of reduced circumstances we have to return to the UK, the extra costs in health and social care would outweigh a good proportion of the ‘saving’ of not paying us the increases.

There is uncertainty at the moment on the status after Brexit of expat pensioners living in the EU, and their future right to pension increases…I can’t speak for anyone else, but personally I would not ask for any back payment of the increases I have ‘lost’ in the last 7+ years. I would just be happy to feel that in the future I will have that little extra security of a few extra pounds to sustain me in the last years of my life.”

I will return to his points that refer to Brexit and a possible solution in a moment, but first let us take a look at some hard facts. There are 13 million recipients of the United Kingdom state retirement pension. A fraction over 1 million of them live overseas. Of that number, some 650,000 have their pensions uprated as they would in the United Kingdom because of the reciprocal arrangements already referred to. Baroness Altman said in 2016 that

“UK state pensions are payable worldwide and uprated…only where we have a legal requirement to do so.”—[Official Report, House of Lords, 24 February 2016; Vol. 769, c. 251.]

That means that many people are denied that uprating. In fact, some 551,000 are excluded from uprating and find their pensions frozen from the point at which they moved abroad, in spite of paying their taxes and national insurance contributions in the United Kingdom throughout their working lives. As my hon. Friend the Minister made plain in November 2016, pensions are based on national insurance contributions.

Those 551,000 people have made those contributions. However, we still have the ludicrous situation that a British pensioner living on one side of Niagara Falls, in Canada, receives a frozen pension while another living just a mile across the falls, in the United States, has their pension uprated every year. Additionally, some Caribbean islands enjoy uprated pensions, while other small countries and overseas territories do not, with unintended and perverse consequences.

The UK representative of the Government of Montserrat, Janice Panton, wrote to me to say:

“A number of Montserratians now living in the UK wish to return to take up residence on the island but are hindered from doing so due to the fact that should they emigrate to Montserrat—”

go back home, effectively—

“their pensions would be frozen. Many of these individuals have lived, worked tirelessly and paid their national insurance contributions over the course of many years. It now seems they are being victimised simply because they desire to return to Montserrat or another Overseas Territory.”

The representative of the Falkland Islands in the United Kingdom, Sukey Cameron, also wrote to me, saying:

“The Overseas Territories have a different constitutional relationship with the UK and are not independent Commonwealth countries; therefore they should not be treated as such. To quote from the 2012 White Paper on the Overseas Territories ‘…the underlying constitutional structure between the UK and the Territories, which form an undivided realm, is common to all.’”

Of course, it is common to all, except in the case of pension uprating, where it is not.

The human consequences of this injustice can be devastating and are illustrated by scores of communications that the International Consortium of British Pensioners and the all-party parliamentary group on frozen British pensions have received from expatriate UK citizens. A spokesman for the Parity or Poverty Group, which has members in Canada, Thailand, Turkey and South Africa, says:

“We are trying desperately hard to undo the predicament that’s driving us into poverty. I can see it on the horizon for myself as once affordable items are now out of reach. I dread the future for myself and my wife.”

[Sir Peter Bottomley (Worthing West) (Con)]

No one could have prepared better for this debate than my hon. Friend, and by the end of it I hope we will have set forces in train that lead to a curing of this injustice.

[Sir Roger Gale]

We shall await the Minister’s response with great interest. I am grateful to my hon. Friend.

A former constituent of mine, and a friend, now living in South Africa, wrote to me to say, “I have been looking after my wife since her stroke and increased dementia, plus incontinence now, for over a year. Reviewing the situation with our daughter, my wife is slowly going downhill. I am heading that way, too. I am worn out. To help with catering and finance, we are now on to Meals-on-Wheels for four days a week and are shortly to arrange five day or even five and a half day care support. Right now, our medical aid—insurance—takes half our combined basic OAP pension and the new care plan will certainly take the other half. Our daughter looks after our finances and generously helps and tops up when needed.” That is what my former constituent, a friend, is now reduced to. Sadly, I learned only this morning that his wife died last week, leaving him not only in penury but, apart from the care and affection of his daughter, alone.

Bernard Jackson, 91 years old, has returned to the United Kingdom from Canada and says:

“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.”

Joe Lewis, 90 years old, who lives in Canada and has recently lost his wife, will be moving back to the United Kingdom as he can no longer cope with his frozen pension. After suffering a severe fall, Joe is increasingly struggling to afford living and medical costs. The only way he can make ends meet is to use up all his savings. Joe Lewis, a nonagenarian, says:

“All I want is my full state pension which I have paid into my entire life”.

Here is another anomaly: any returnee, including those visiting the UK for a couple of weeks to see family on holiday, is entitled to claim their full uprated pension for that period.

Of course, cometh Brexit, cometh another issue that will have to be addressed. The 492,000 British pensioners living in the 27 European Union member states and EFTA countries are protected by the social security provisions of the EU single market, but what will happen to their pensions when we leave the EU? A resident in France wrote to me to say:

“I have been a ‘victim’ of a frozen pension for the past 15 years having lived in Zimbabwe for 45 years and being forced to move to a EU country in order to get my pension... During my working life, I continued to pay Class 3 NI contributions to safeguard my UK pension and it was only when I reached age 65 that I found out that my pension would no longer be indexed, and this has cost me many thousands of lost pounds over a period of 15 years. Now the same issue is rearing its head because of Brexit.”

Will there be 27 different reciprocal agreements or one blanket agreement? Will former EU pensioners find their pensions frozen like those in Canada, Australia, New Zealand, the Indian subcontinent, Montserrat and other countries? Surely now, in the light of Brexit, is the time at least to start to put all expat UK pensioners who have paid their dues on an equal footing.

I return to the resident in Thailand who said that he

“would not ask for any back payment… I would just be happy to feel that in the future I will have that little extra security of a few extra pounds to sustain me in the last years of my life.”

Successive Governments, plucking figures out of the sky, have suggested that uprating overseas pensions would cost billions. In fact, the proposal that the all-party group supports, which goes nowhere near as far as the proposal that some would like and that justice probably dictates, is to uprate payments at the 2.5% from which UK-based recipients will benefit this year. That will cost not billions, but just £33 million. After five years, the budgetary impact will be £158 million. To set that in context, the triple lock costs the Government an extra £2 billion each year.

In the great scheme of Government expenditure, £158 million is small change—small change to settle a debt of honour, with no threat of legal challenge in respect of potential retrospective claims. That, surely, is a bill that, in the interests of a society that is fair for all, the Government cannot afford not to pay.

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[Sir Peter Bottomley (Worthing West) (Con)]

The House should thank my hon. Friend the Member for North Thanet (Sir Roger Gale) and the hon. Member for Leeds North West (Greg Mulholland) for the way in which they have spoken, and we look forward to the contribution from the Scottish National party. If my friend the Minister does not mind, I will talk through him, because he will not be authorised to make the kind of commitment that this House is asking for. The questions we have to address are: is what is going on fair? Is it logical? Is it right? The answer to each of those is no, and I thank John Markham and the International Consortium of British Pensioners for the briefing they sent, which points out that the situation is grossly unfair, completely illogical and morally wrong.

To illustrate the point, were I to have retired overseas in the “wrong” place, in the seven years since I could have taken the state pension, I would have lost £5,000. I plan to be re-elected; in five years’ time—we may have an election then—the loss would be £13,000. Clearly, I can afford it, as when I retire I shall have a second pension. It will come from the state, but any increases in it will not be determined by whether I live in one part of the West Indies or another. Just to make sure that the Minister is paying attention, perhaps he would like to tell us in which of the areas represented by the West Indies cricket team people would get increases. If I were to retire to the United States part of the West Indies, would I get an increase? Yes. If I were to retire to the Dutch part of the West Indies, would I get an increase in my state pension? Yes. If we went through some of the independent countries, we would hear the Minister tell us about the difference between Guyana and Barbados.

The point has been made about the lack of a parallel between Canada and the United States. As my hon. Friend the Member for North Thanet asked, what is the reason for the difference in position in Thailand and the Philippines, except total chance? The point about this House is not to leave things to total chance. Old age pensions were introduced in 1906, or thereabouts, by a combination of Lloyd George and Winston Churchill to make sure that people were not left struggling in their old age.

Ministers may have been briefed to say that there is social security in some countries, but not in many others—Zimbabwe, which has been mentioned, perhaps being one of the worst examples. People who were asked by this country to stay on during Ian Smith’s illegal declaration of independence now find themselves in penury. That is made far worse by the freezing of their state pension.

The number of overseas pensioners who are registered to vote has doubled since the last election, and it could double again and again. If instead of there being 400 of these people for each constituency, there were 800 or 1,600, people might start paying more attention more widely, but the arguments for unfreezing to deal with this injustice should not be about numbers of votes; they should be about whether unfreezing is right or wrong. Let us suppose that at the moment four pensioners in every 100 are affected, and the issue affects a third of their state pension. We can clearly cope with the sum involved. We will in any case be coping with a growing number of pensioners—give or take, depending on the lifting of the state pension age. When we were considering decimalisation in the early 1970s, somebody said, “This will confuse the elderly. Let’s wait until they are all dead.” The fact is that the situation for overseas pensioners will get worse until we can establish a fair principle right across the board.

I do not want to repeat all the speeches I have made in the past, but briefly and clearly, we have to ask Ministers: when will the time come when a Minister of a Conservative, Labour or coalition Government of any kind can stand up and say that they will put before Parliament, or accept from Parliament, proposals that are fair, logical and right?

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[The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)]

I hope we would all agree—I know you have been in the Chair for only some of the debate, Madam Deputy Speaker—that we have had an interesting debate. Before I attempt to address the points that have been raised, I would like to thank those who have spoken. In particular, I thank my hon. Friend the Member for North Thanet (Sir Roger Gale) and the hon. Member for—I have been practising this for quite a long time—Ross, Skye and Lochaber (Ian Blackford) for securing the debate, which has been wide and varied. It concerns an important subject, which I do not take lightly.

The hon. Gentleman was very kind in the comments he made about me, and I would like to say something about the way he has conducted himself while I have been Pensions Minister. I have disagreed with him and the Labour party spokesman, the hon. Member for Stockton North (Alex Cunningham), on a lot of things, but we have also agreed on a lot of things. However, when we have disagreed, we have discussed things properly in this Chamber, in Committee and personally, and I wish all Government and Opposition relationships were like that.

On this particular subject, however, I have to say that I disagree with a lot of things that the hon. Member for Ross, Skye and Lochaber and my hon. Friend the Member for Worthing West (Sir Peter Bottomley) have said.

[Sir Peter Bottomley]

I know that that remark may have been addressed to just some of the things we said, but one of the things we said was that what is happening at the moment is not fair, not logical and not right. Is the Minister trying to say that it is fair, logical and right?

[Richard Harrington]

Well, it is about the subjectivity of those words, if I may say so. I will try to address some of the points he made, but I cannot successfully answer his cricket team question. However, given that our civil servants will probably have less to do over the next few weeks than they have had to do over the last few weeks, I will formally write to him. As a child, with “Wisden” and everything else, I would probably have been able to answer his question myself, but I am afraid I cannot do that now.

As I was about to say before I was hit for six by that intervention, the United Kingdom state pension is payable worldwide, regardless of the recipient’s country of residence or their nationality. I say that formally on the record because were I a member of the public watching the broadcast of this debate or reading it in Hansard, I could quite easily get the impression, when we talk about scandals and things like that, that people were leaving the country and not getting their pension at all. The state pension is paid to people who are entitled to it when they leave the country, but increased—“uprated” is the expression in this context—abroad every year only when the recipient is in certain areas: in the European economic area, Switzerland, or a country with which the UK has a specific reciprocal agreement that allows for uprating. This is a long-standing policy that has remained consistent for about 70 years, and, as has been said, it has been the policy of consecutive Governments of all persuasions.

I recognise that this subject arouses strong opinions, and some of the language used is very concerning. Please do not think, Madam Deputy Speaker, that I think that the language used has been improper in any way, but it is very strong language about people suffering hardship and so on.

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[Richard Harrington]

I perfectly accept that in some cases people have no practical choice, but many who emigrate decide to do so for a number of reasons, including personal ones. When people move away, pensions are, by and large, part of their calculations, as is the cost of living.

The hon. Member for Ross, Skye and Lochaber was eloquent, as usual, in making his point about uprating the state pensions of people residing in the European economic area and Switzerland. It is a requirement of UK law that those payments be the same as those made in the UK. However, as everyone is aware, the article 50 process is under way, and in accordance with what happened in the referendum and everything that has been discussed in this House, the UK is leaving the European Union. The Prime Minister has made clear that securing reciprocal rights is one of the top priorities. The rights and entitlements that will apply following the UK’s exit, such as those relating to the UK state pension paid to individuals living in member states, are subject to the wider negotiation on our future relationship with the EU. The Government have made it clear that we plan to strike an early agreement on the rights of EU citizens living in the UK and, obviously, vice versa. As the Prime Minister has said, it is in no one’s interests for there to be a cliff edge when we leave the EU, so the current laws and rules will, wherever practicable, continue to apply, to give certainty to individuals and businesses.

[Sir Peter Bottomley]

We understand the limitations on the Minister, and I hope that anything we think will not be taken personally by him or anyone else. I remind him of the Old Age Pensions Bill debate on 10 May 1907, when the Member moving the Bill’s Second Reading said that Chancellors always want to stop people getting “Money! money! money!” My hon. Friend has said that we are now likely to make decisions that will affect hundreds of millions of people, so surely now is the time make a small change for fewer than 500,000 people. I ask him to commit to revisiting the issue after the election and to looking at it properly.

[Richard Harrington]

I thank my hon. Friend for his intervention. Perhaps he was present during that debate in 1907; I was not, but I look forward to reading about it.

Those who are eligible for a UK state pension can have their pension paid wherever they choose to live. The rules governing the uprating of pensions are straightforward, widely publicised and have been the same for many years. The Government’s position remains consistent with that of every Government for the past 70 years. The annual costs of changing the long-standing policy will soon be an extra £500 million, which the Government believe cannot be justified.

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[The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)]

I will have a go at responding to the hon. Gentleman’s question. I do not know the answer to it, but I will find out straight away and communicate it to him. I suspect that this is a matter that is decided by the civil service based on previous protocols about purdah and so on, but I do not feel experienced enough to give him the answer that he wants and deserves.

[Sir Peter Bottomley (Worthing West) (Con)]

Further to that point of order, Madam Deputy Speaker. The Minister has been very clear and helpful. If the practice is for such helplines, which are for our constituents rather than for us, to be closed down before Parliament has stopped sitting—before we stop being Members of Parliament—may I suggest, through you, that those who are listening should change the practice and make sure that that happens when Parliament is dissolved, and not simply because an election has been called?

[Margaret Ferrier (Rutherglen and Hamilton West) (SNP)]

Further to that point of order, Madam Deputy Speaker. The Minister has made it clear that he will communicate with the shadow Minister, but can we ensure that there is communication with all Members of the House if this closure happens? We hope that it will not, because it will impact all our constituents in a very big way.