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Frozen solid: when retiring abroad results in a frozen pension

Paul Lewis / 08 March 2022

Nearly half a million UK pensioners retired to countries where their pensions haven’t risen since they arrived.

Retired couple on a bench in Canada
Retiring abroad is not without its complications, especially if you have retired to one of the places state pensions have been frozen, such as Canada.

When Anne Puckridge decided to move to Canada early in November 2001 to be near her daughter Diane, she did not realise just how much that move would cost her. She was 76 and believed her full state pension would mean she could afford to live in Calgary, despite its harsh winters. But then she discovered it wasn’t just the roads that were frozen.

‘I reckon I have lost close on £30,000 from my state pension,’ she told me. ‘I didn’t know at all that if I came to live in Canada my pension would be frozen. And when I heard, I thought it just could not be true.’

Nearly half a million pensioners live in more than 200 states and territories around the world where their UK state pension is frozen at the rate first paid to them abroad. It never rises with inflation. Anne’s state pension is frozen at £72.50 a week, which is the rate she received when she moved to Canada more than 20 years ago. If she had stayed in the UK, her basic pension would be nearly twice as much – £137.60 a week, which will rise with inflation to £141.85 in April. But in Canada it has stuck at its 2001 level.

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One rule for some

This rule does not apply to every country – there are 54 where the pension rises each year as it does in the UK. These include the whole of the EU and many other European nations, as well as some much further afield. There seems little rhyme or reason behind the choices. More than 10,000 people in Jamaica, along with 4,500 in Bermuda and Barbados, have their pensions uprated. But not the 1,300 UK pensioners in Trinidad, nor the 900 in Grenada. UK pensions paid to more than 3,000 in the Philippines are uprated but not those paid to 5,700 pensioners living in Indonesia or Thailand. But for Anne the worst anomaly is the 5,500-mile land border between Canada and the USA. While 126,426 UK pensioners in Canada have their pensions frozen, another 126,977 who live in the USA get the full uprating every year.

UK rejection

The reasons for this discrimination are historical. Pensions are uprated in most European countries even though we left the EU. Other countries where UK pensions are uprated – such as the USA, the Philippines and Jamaica – have reciprocal agreements with the UK so that benefits are paid equally to nationals living in each other’s country. But no new deals have been done since the 1970s, and every UK government since has been firm in resisting their extension.

Recently, the Canadian government reiterated its demands for a full reciprocal agreement with the UK so that the state pensions of people living there would no longer be frozen. It said, ‘Canada’s longstanding position is that British pensioners who live in Canada have contributed to the British pension scheme and have therefore earned the right to be treated the same way as other British pensioners.’ This request, made in November 2020, was rejected by the UK in April 2021.

‘I’m ashamed of the rejection and the callous attitude of the British government’

Canada’s reasons are not entirely altruistic. A pensioner who has lived there for ten years can be entitled to a pension paid by the Canadian government. The Canadian Alliance of British Pensioners, which campaigns against frozen pensions, says that costs about half a billion Canadian dollars a year. For Anne that just brings home the unfairness. ‘I feel embarrassed knowing my neighbours are paying taxes to support me and others. And I’m ashamed of the rejection and the callous attitude of the British government, which seems to have absolutely no concern about us at all.’

A simple change

In fact, a reciprocal agreement is not needed to pay full pensions with annual upratings to UK pensioners who live abroad in any country. All it needs is a simple change in the law by the UK government. But none has ever done it.

The Government estimates that uprating the frozen pensions paid to these half a million people would cost £630 million a year. But to Anne and many others that is irrelevant. She told me she had worked and paid National Insurance contributions for all her working life in the UK as an administrator and later an IT lecturer, just like millions of pensioners who do get annual rises. She sees it as unfair discrimination.

‘We earned our pensions. How can you justify leaving us without full indexation when 96% of pensioners who paid exactly the same get it?’

Almost all of the people affected live in just four Commonwealth countries – Australia, Canada, New Zealand and South Africa. They account for more than 90% of the UK’s frozen pensioners. A total of 489,000 people who, like Anne, paid their full National Insurance contributions all their working lives. Many, like Anne, are veterans of World War II. She served in India supporting the Royal Air Force, adding a year to her age of 17 so she could join up. Ironically, she gets what she calls ‘a small stipend’ from the Canadian government for her service, but nothing from the UK.

She told me how the loss of more than £70 a week of her full state pension affects her life. She has seven grandchildren and five great grandchildren ‘but all I could afford at Christmas was to send them cards. I’ve written to Buckingham Palace, to every member of the Royal Family, hoping somebody might feel a bit of a conscience about it. I don’t get bored. I may be 97 but this campaign is keeping me alive. I am determined not to die until I get my full pension paid to me in Canada.’

Article first published in Saga Magazine January 2022

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The opinions expressed are those of the author and are not held by Saga unless specifically stated. The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.