Pensions: Expatriates

Sarah Olney Excerpts

Tuesday 20th May 2025 Westminster Hall

[Sarah Olney (Richmond Park) (LD)]

It is a pleasure to serve under your chairmanship, Mr Dowd. I thank the hon. Member for Farnham and Bordon (Gregory Stafford) for securing this debate.

Nearly 13 million UK citizens receive the state pension, and around 1.2 million of them live outside the UK. Most of those people are entitled to state pension increases because they live in the European economic area or in the 15 other countries with which the UK has signed an agreement. In return for uprating the state pension, those countries have promised to continue supporting their own citizens living in the UK.

It is right that UK citizens who have diligently paid into the UK national insurance system over many years are entitled to receive their UK state pension, whether or not they decide to move abroad. However, the issue at the forefront of today’s debate is whether pensioners who reside overseas receive annual increases to their pension.

As other hon. Members have set out, this depends on the specific country in which a person lives. My Liberal Democrat colleagues and I know it is unfair that some UK pensioners abroad receive state pension increases while others do not, simply because of the country in which they live, not because of the contributions they have made to the UK national insurance system. Addressing that is a matter of fairness and equality, especially for those who have paid into the UK system for their entire working lives.

There has been a long-standing campaign to rectify this discriminatory system. However, the last Conservative Government refused to take any positive steps to increase the number of reciprocal agreements, which would have had the effect of uprating pensions. In fact, it is disappointing—although unsurprising—that under the last Conservative Government, agreements lapsed and the best interests of both British nationals residing overseas and non-British pensioners residing in the UK were neither prioritised nor championed.

We saw catastrophic economic mismanagement under the last Administration, with spiralling inflation rates and a soaring cost of living. That hugely exacerbated the gap in the value of pensions paid to recipients in countries with reciprocal agreements and those paid to recipients in countries without, with a completely unacceptable impact on hundreds of thousands of pensioners.

The majority of pensioners who live overseas receive pension increases because they live in countries with reciprocal agreements. However, many fall through the gaps and are left struggling. Currently, half a million UK pensioners living overseas do not receive the annual state pension increases that those in the UK and in certain other countries are entitled to. This issue affects my constituents and the constituents of many hon. Members. Their pensions are effectively frozen at the rate when they first started claiming—sometimes decades ago. This frequently leaves long-term pensioners abroad significantly worse off over time.

The UK Government have stated that they uprate pensions only in those countries where there is a mutual agreement. Many of those agreements have not been updated or renegotiated for decades, and no new ones have been signed since 1981. Countries such as Australia and Canada have repeatedly requested new agreements, but the UK has declined. Frozen pensions are the norm in countries such as Australia, Canada, New Zealand, South Africa and parts of the Caribbean and Asia, despite significant British expatriate populations. It is critical that the Government tackle this injustice and take steps to ensure that all pensioners receive the support to which they are entitled. However, it is also critical that this comes alongside a fair deal for the UK taxpayer.

Rather than unilaterally increasing the state pension for UK citizens living abroad, I urge the Government to prioritise entering new arrangements with other countries that would manage costs and provide oversight. That would be more affordable and provide a better framework for monitoring payments. Colombia, Mongolia, Thailand, Uruguay, Brazil, Australia and Canada have all approached the Government in the past decade to ask for a reciprocal agreement, and each time the Government have refused.

We have seen the Government enter new bilateral and multilateral trade negotiations over the last few weeks. As they work to build new trade partnerships with countries across the globe, there is a real opportunity to speak out for thousands of British pensioners who currently face unfair financial hardship. I urge the Minister to ensure that existing agreements are not allowed to lapse. The Liberal Democrats also call for the inclusion of reciprocal pension agreements in future trade deals. More broadly, the Liberal Democrats believe that the Government should conduct an independent review of frozen pension policy, an issue that has been raised with me time and again by constituents.

The previous Conservative Government abandoned pensioners and totally failed to give them proper support. This Labour Government have also treated pensioners poorly by cruelly ripping away the winter fuel payment. The Liberal Democrats are proud to be the ones who introduced the triple lock, lifting thousands of vulnerable pensioners out of poverty.

[Sir Roger Gale]

It saddens me enormously that the hon. Lady is trying to make a partisan case, simply because—as I recall, and I think I do recall correctly—a member of her party was the Pensions Minister in the coalition, and one of many pensions Ministers who stood by the present policy of refusing to allow these pensions to be paid. The blame lies across the board, not with any one political party.

[Sarah Olney]

I am grateful to the right hon. Member for his intervention; his memory obviously goes back further than mine on this issue. However, we are dealing with the current situation, and the Minister here today is the person who currently has the power to do something about it. I am merely reflecting on the set of circumstances that led us here.

What I will say is that, in the Liberal Democrat manifesto for the last election, we committed to the triple lock. We remain committed to the triple lock, and I will take further opportunities to ask the current Minister, with the power currently to do something about this issue, to redouble his commitment to it. I will also make the point that, as I am sure the right hon. Member will agree, that this Government are not doing everything they can for pensioners.

The Liberal Democrats are looking to the future, and we want to build a country that is the best place in the world in which to save for and enjoy retirement. We want to give everyone the chance to enjoy a decent retirement, by developing measures to end the gender pension gap in private pensions and to ensure that working-age carers can save properly for retirement. We must also improve the state pension system by investing in helplines to ensure quicker responses to queries and resolution of underpayments, as well as ending the scandal of lost top-up payments by overhauling the processing system and providing proper receipts.

The Liberal Democrats are proud to be the party that champions the rights and protections of pensioners. We will continue to hold the Government to account to ensure that a fair outcome is reached for all pensioners—both those who reside in the UK and those who live abroad.

--- Later in debate ---

[Torsten Bell]

Let me get through the discussion of the costs, and then I will take any interventions on that issue.

I recognise that many campaigners are asking for indexation in future, not for retrospective indexation, although there are obviously disagreements among campaigners about the exact ask to prioritise. However, arguing that we can simply put in place indexation going forward does not escape the need to recognise the real trade-offs involved. The long-term impact would be the same, as the right hon. Member for Herne Bay and Sandwich (Sir Roger Gale) explained. In the end, moving to forward-looking indexation would take us to the same increase in spending levels as would immediately lifting people up to the current level of the basic and new state pension. It is the same effect in the long-run, and we owe it to everyone to make financial decisions based on the long-run effects of the policies that we call for.

There are wider considerations about the net financial effects of these decisions. The hon. Member for Strangford and others raised the issue of health expenditure. To get to a wider understanding of the net effects, we have also to take into account where income is taxed and where it is spent. That does not get us away from the underlying point, which is that, focusing narrowly on the question of uprating, the costs are as I have set out.

[Sarah Olney]

Does the Minister not agree that under a reciprocal arrangement, not only would we uprate the pensions of our citizens who are living in a partner country, but that partner country will then be required to uprate the pensions of their citizens living here, and that would obviously be a benefit to this country, because they will have a greater income that they can spend here? Can the Minister assure me that that particular effect is included in the estimates?

[Torsten Bell]

I recognise the point that the hon. Member is making. I offer a few reflections on that. Some countries already do provide uprating for their pensioners based in the UK, so some of that is already in place, although it does vary across countries. It is, obviously, always for countries to set in place their own social security system. That is why the Australian system, for example, provides means-testing of the state pension, or elements of means-testing of their state pension. I suspect most people—with the possible exception of the Leader of the Opposition on occasion—do not support means-testing of the state pension.

I come on to the other point made by the hon. Member in the debate, which was to call for new reciprocal arrangements to put in place more widespread uprating. As I have explained, that would require significant tax rises. There is no way around that. The issue she raised would not negate that effect.

It is worth putting ourselves in other’s shoes. Why did the Liberal Democrat Pensions Minister for five years not change the policy on this issue? It was because he recognised the costs involved, and that it would involve tax rises. It is worth us reflecting on why the situation is not as some people would like.

--- Later in debate ---

[Gregory Stafford]

I think I have 22 minutes; I usually get about 22 seconds to wind up, so this is a luxury, but I will not test your patience, Mr Dowd, by taking the full time.

We have had a very wide-ranging and helpful debate today. I am especially grateful to my right hon. Friend the Member for Herne Bay and Sandwich (Sir Roger Gale) who brings a significant amount of experience from many years on this issue. It was interesting to hear his historical knowledge and, indeed, the potential solutions that he raised.

This is very much about the social contract, as the hon. Member for Aberdeen North (Kirsty Blackman) suggested. People have paid in, so they should expect to receive an equitable and fair playing field, whether they happen to have moved to somewhere in the European Union, the Philippines, Canada or Australia, or they are still living in this country.

The hon. Member for Strangford (Jim Shannon) highlighted exactly why this is morally unfair—it is by not just the dint of the policy itself, but its impact on people. There are people living on very small incomes who are having to choose between paying their heating bills in those countries and their medicine and food. That is clearly not appropriate, especially as we have discovered many people who have paid into this country not just financially but in terms of the things they have done, for example, serving in the armed forces.

It was interesting to hear from the hon. Member for Brecon, Radnor and Cwm Tawe (David Chadwick) on the Welsh perspective and his interesting idea for a number of MPs for overseas citizens. I am not sure whether that is Lib Dem policy.

[Sarah Olney]

indicated dissent.