Frozen pensions: an open letter to Steve Webb


Telegraph Expat is campaigning for an end to the injustice suffered by ‘frozen’ expat pensioners. Here, our finance specialist Alison Steed writes an open letter to pensions minister Steve Webb.

By Alison Steed

Dear Mr Webb,

frozen pensions - an open letter to steve webbOn behalf of the 400,000 or so expat pensioners who have had their state pension payments frozen at the rate they were at when they left the UK, we tried to speak to you last month.

We wanted to ask you – when the total cost of uprating these frozen pensions in 150 countries, such as Canada, South Africa, Australia, New Zealand, is just over £540 million, set against an increase in the national debt of £357.5million a day – how it is that this anomaly cannot be rectified?

In opposition, Mr Webb, you were, quite rightly, rarely shy about criticising the Labour government’s stance on pensions, and specifically highlighted the frozen pensions problem while pensions spokesman for the Liberal Democrats.

Indeed, you tabled an amendment to the Pensions Bill 2003-04 that would see pensioners living outside the UK “be subject to annual uprating by the same percentage rate as is applied to such pensions payable to pensioners living in the United Kingdom”, an amendment backed by the now Chancellor George Osborne. At the time, he said that “if the system worked in the way that most people think, it would not matter where a person lived”.

Now, Mr Webb, we think it’s only fair to point out that Mr Osborne and yourself are in the strongest position possible to sort this injustice out. But so far, what has been done?

Sitting on your hands is no better than what James Purnell, the then pensions reform minister, did with the Pensions Bill of 2006-07, when a separate amendment tabled by your Liberal Democrat colleague, David Laws, would also have seen the uprating of pensions extended to all those living overseas. This Bill, now an Act, re-establishes the link between earnings and pension increases from 2012. Yet again, Mr Purnell trotted out the argument that uprating would cost too much, and UK-based pensioners had to take priority, and the amendment was dropped.

Not only that, Mr Webb, but via one of the many Department for Work and Pensions press officers, you’ve told me in response to my request for an interview on this subject, that you had “nothing to say at this time”.

It’s odd, is it not, Mr Webb, that you should find yourself incapable of even talking to The Telegraph on this issue now that you are in power, given the many years you spent fighting for it while in opposition? There seems to be no good reason for either your reticence, or your failure to discuss the issue.

The International Consortium of British Pensioners, which has been fighting for justice on expat pensions for the past 20 years, has some pretty compelling arguments as to why these frozen pensions should be uprated the same as any other UK state pension, not least when you consider the savings made in the UK by a pensioner retiring abroad.

Let me share some of them with you, Mr Webb, although you may already be familiar with many of these.

Anyone moving from the UK has no right to use the NHS after six months, and they are not entitled to a pension credit, free bus passes, rent assistance or council tax assistance.

Well, here are a few figures to make your toes curl. Take free bus passes. The Government spends £1 billion a year on 11 million free bus passes for the over-60s, which works out at £909 each. The basic state pension is £97.65 a week, and the pension credit guaranteed element takes that up to £132.60 – £34.95 per person.

If you have this pension credit, you can get 25 per cent off your council tax bill. The average bill for next year is expected to be £1,438.72 for England, so that is £359.68 off. Add to that the cost per capita of NHS spending, which is £1,499 a year.

So taking just the bus pass and NHS spending, which would be available to all, the UK saves £2,408 a year per pensioner who decides to move overseas. For the 400,000 who have chosen to retire abroad and do not have their pensions uprated, the saving here alone is £963.2 million a year.

Let’s assume – and that is all we can do – that just a fifth of these people might be entitled to the pension credit and council tax benefits. This would add nearly another £177 million of savings to the pot each year, creating a £1.14 billion total annual saving for the Government, thanks to these people having moved abroad.

Yet they still suffer the pension freeze – which happens to add another £478 million a year to the British Government’s coffers.

Don’t get me wrong, Mr Webb. I agree with poorer pensioners being given this help, but it does serve to illustrate how remarkably unfair the frozen pension system is.

The British Government admitted to the Grand Chamber of the European Court in the test case brought by Annette Carson, who lives in South Africa (a case which failed in March of this year) that it would cost just one per cent of the annual pension budget to remove the discrimination. It seems strange that so much effort is being made to keep it in place.

There is also a significant cost to be borne by the Department for Work and Pensions to administer the frozen pensions separately to the other pensions which benefit from uprating.

And let’s not forget the one, outstanding reason for these pensions to be paid evenly across the board, Mr Webb. None of these individuals is being paid a state pension without having paid significant National Insurance contributions throughout their lives to qualify for them. They paid at the same rate as everyone else who is having their pension uprated in line with inflation.

The courts have seen fit to say that they are not being discriminated against, there is nothing we can do about that. But that is the law, and law is not always just.

Surely logic, and the British sense of fair play, tells you, Mr Webb, that if someone has paid into a scheme under the same rules as everyone else, they should get the rewards at the same level as everyone else. That is not happening, and as we’ve already noted, you yourself, your Liberal Democrat colleagues, and the Conservatives recognised this in opposition, and tabled amendments to Pension Bills that would have seen the injustice removed if they had been passed.

So, frankly Mr Webb, we don’t think it is good enough that you don’t have anything to say about this issue when so many people are suffering an injustice that you have earned political capital from in the past.

The only way this can be remedied is by you being prepared to listen to what these people have to say, and then giving an honest and frank assessment of what will happen next.

We wait to hear from you, Mr Webb, as do all our readers.

Yours sincerely,

Alison Steed

For more articles about the plight of British pensioners abroad visit


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