Pensions: Expatriates

Torsten Bell Excerpts

Tuesday 20th May 2025 Westminster Hall

[The Parliamentary Secretary to the Treasury (Torsten Bell)]

It is a pleasure to serve under your chairmanship, Mr Dowd. I thank the hon. Member for Farnham and Bordon (Gregory Stafford) for opening today’s debate, which was granted by Backbench Business Committee, and for setting the scene so well, in a way that others then followed.

I thank all hon. Members who made the time to speak and set out their cases. They covered issues that are important to many state pension recipients living abroad. I recognise that those who are affected, who obviously cannot speak today, feel strongly about this issue; many of us, in their shoes, would feel the same. On that basis alone, it is right to debate this subject and to hear from hon. Members about their constituents, including my hon. Friend the Member for West Dunbartonshire (Douglas McAllister), the hon. Member for Aberdeen North (Kirsty Blackman) and others who are not in Scotland.

Late last year, my predecessor, now the Economic Secretary to the Treasury, met Anne Puckridge and others from the End Frozen Pensions campaign to discuss the policy’s impact. We have listened, and I read case studies every week, either from hon. Members who have written in about them or in letters directly from pensioners themselves. We are all aware that there are many countries where high inflation has posed particular challenges in recent years, so I recognise the salience of today’s subject matter.

We all recognise the importance of the state pension, as the UK’s foundation of support for older people. In 2025-26, the Government will spend over £174 billion on benefits for pensioners. That represents 5.8% of the UK’s GDP and includes £145 billion spent on the UK state pension, including for those living abroad. I raise those facts because they are important; they sit behind the debates that we often have here or in the main Chamber about the size of the state and the level of taxation.

As hon. Members are very aware, the state pension is uprated abroad only when there is a legal basis for doing so, which is why we are here today.

[Kirsty Blackman]

On that, the state pension is uprated abroad only when there is a legal requirement to do so. There is no legal bar to the UK uprating those pensions in countries where there is not a reciprocal agreement in place.

[Torsten Bell]

There must be a legal basis for making payments. However, the hon. Member is right to say that under the specific policy I am setting out, payments are made only when there is a legal requirement to do so. As the hon. Member for Farnham and Bordon set out right at the beginning, that is a long-standing policy that has lasted for 70 years. For many years, the priority for successive Governments of all parties has been to prioritise those living in the UK when making difficult spending decisions on pensioner benefits. That was true of the coalition Government, when a Lib Dem Pensions Minister chose for five years not to make any progress on this issue. He did that under a Conservative Government and a Conservative Prime Minister all the way through.

The hon. Member for Brecon, Radnor and Cwm Tawe (David Chadwick)—my constituency neighbour—mentioned Lloyd George, who introduced a state pension with no uprating whatever. The first uprating of the contributory state pension in 1946, under the Attlee Government—again, I am making a point about the cross-party basis of some of these decisions—was not paid to pensioners living abroad. So since the beginning, policy on pension uprating has been consistent.

As we have discussed, people move abroad for many reasons—to be with their family, as the hon. Member for Strangford (Jim Shannon) set out, enjoy a particular climate or return to their country of birth. It is for individuals, not the Government, to make those decisions, but when they make them, they will of course consider the impact on their finances, alongside a wide range of other factors. As the hon. Member for South West Devon (Rebecca Smith) set out, our duty is to ensure that information regarding the effect of living abroad on the state pension entitlement is available. These days, that is on gov.uk, and includes information on where the uprating does and does not occur.

Pensioners who have retired to other countries will obviously take into account the UK state pension position, but they will also look at the wider provision for pensioners in those countries. Many countries will have a means-tested provision that is similar to the UK pension credit. It is true that the real-terms value of some people’s state pension will fall over time, but in most cases, particularly in the countries that have been mentioned today, that will be compensated for by higher means-tested payments when they are living abroad.

It is also important that further advice can be obtained from the International Pension Centre or the Pension Service. The hon. Member for South West Devon asked whether there is more we can do, and I want to be clear that I am always open to new ideas about what more we can do to communicate what happens to the state pension if people choose to retire abroad. More generally, I am happy to meet with any hon. Members who have suggestions in that area.

[Jim Shannon]

I gave the example—others will have similar examples—of a constituent who had moved to Canada. She phoned the DWP to ascertain her pension obligations and responsibilities, and was assured that her pension would follow her, but quite clearly it did not. The Minister outlined a system whereby it should be able to follow her, but that lady went a stage further—she actually phoned the Department, which told her that it would not matter and she would still receive her pension—and quite clearly it did not.

[Torsten Bell]

I thank the hon. Member for sharing that story. I have not heard of specific cases like that, and he might like to write to me about it. The position with respect to Canada is clear: somebody can take their state pension with them, but the uprating will not be paid once they are living in Canada. That is what the gov.uk website spells out. However, I am open to talking about individual cases and to hearing suggestions about what more we can do to communicate clearly, because this is an important issue.

Of the 1.1 million state pension recipients overseas, 652,000 live in countries where pensions are uprated. However, I do not want to hide from what that means, because that is why we are here today; as my hon. Friend the Member for Poole (Neil Duncan-Jordan) said, it means there are more than 400,000 pensioners living in countries where uprating is not paid. By volume, those are in the countries that have been mentioned most today: Australia, Canada and New Zealand. Many hon. Members have spoken eloquently of the impact of living in a country where that uprating is not paid, and I have heard about it myself in correspondence from those affected, as I have said.

That does not mean that we can wish away the real trade-offs that are involved. There would be significant additional costs to be borne by current taxpayers if uprating were extended to everybody living overseas, as the hon. Member for Aberdeen North calls for. The cost of increasing all state pensions in payment to current UK levels would be approximately £0.9 billion a year, as has been mentioned. If there were any above-inflation uprating, it would then increase gradually over time.

[Jim Shannon]

Will the Minister give way?

[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.

[Sir Roger Gale]

Does the Minister consider that it is morally acceptable for Canada to uprate the pensions of its citizens in this country and to also bear the cost of this country not uprating its pensions for UK expats in Canada when Canada has formally offered to enter into a reciprocal arrangement? Why is that offer not being accepted?

[Torsten Bell]

Canada is a close ally of this country. We talk about that a lot in the current climate, for a whole host of reasons, and that is not going to change.

The right hon. Member is correct that Canada has made requests for a formal reciprocal arrangement, but the UK Government’s position—and that, again, of all parties—is that we are not in the business of new reciprocal arrangements with any countries. The only recent agreements have been the roll-over agreements with the EU and the EEA by the previous Conservative Government, but that was to maintain the existing social security arrangements, not to put in place any new reciprocal arrangements over that time.

I fully recognise the case that many hon. and right hon. Members have made today. I see the ongoing campaigning that those Members have put in place and that of many pensioners who are affected, but as I have said, the policy on uprating pensions is a long-standing one. More importantly, changing it involves real costs and trade-offs.

I gently note—very gently, so that I get out of this room safely—that many of the people calling for pensions to be uprated are also calling for reverses to the winter fuel payment policy and compensation for WASPI women, but are not calling for less investment in the NHS or higher taxes. In the current financial climate, there are real choices, and there have been no suggestions in this debate about how any of these policies would be funded.

I fully recognise the issues raised by Members today. I hope that I have explained why that recognition sits alongside the long-standing policy in this area, and I look forward to hearing the closing remarks from the hon. Member for Farnham and Bordon.