Many of you signed the UK Government petition regarding our UK pensions being indexed linked.
Having reached over 10,000 signatures the UK government had to respond. Here is their response received this week.
The Government has responded to the petition you signed – “Give U.K. pensioners living abroad increases with parity as those in the U.K.”.
There are no plans to change the policy. The Government continues to up-rate the State Pension where there is a legal requirement to do so.
The UK Government has no plans to change the current arrangements for payment of UK State Pension overseas.
The United Kingdom’s state pension system is primarily designed for the benefit of those who are resident in the UK. It is, however, payable worldwide and is uprated in the UK and also in countries abroad where there is a legal requirement to do so.
This is a longstanding policy and has been implemented by successive Governments of all political persuasions for over 70 years. The policy has been the subject of Parliamentary debates over time and has been approved by Parliament and the Courts.
The rate of National Insurance contributions paid has never earned entitlement to the uprating of pensions payable abroad. This reflects the fact that the UK scheme is primarily designed for those living in the UK.
The National Insurance scheme operates on a “pay-as-you-go” basis. Contributions paid into the National Insurance Fund in any year finance contributory benefit expenditure in the same year.
A person’s contributions provide a foundation for calculating their future benefit entitlement but do not actually pay for those benefits.
UK expenditure on health care costs depends on where the UK pensioner settles. While the location may be decided by the pensioner, individual countries have their own immigration policies in relation to older economically inactive people.
Paying uprating to UK pension recipients in countries where it is not currently paid would mean an immediate increase in costs.
There are now around 1.2 million UK State Pension recipients who are overseas residents and around 0.5 million of them do not receive increases.
The cost would be £0.6bn
It would cost over £0.6bn extra a year to up-rate these pensions fully, that is to pay the pension at the rate that would be applicable if the pensioner had lived in the UK throughout.
Paying future increases only would cost tens of millions in the short term but would lead to the cost of full uprating (£0.6bn) in the longer term as older pensioners died and new pensioners became entitled to fully up-rated state pensions.
Cost has always been a factor in deciding whether pension increases should be paid in overseas countries and successive governments have taken the view that it would be unfair to impose an additional burden on contributors and taxpayers in the UK to fund increased pensions for those who have chosen to live abroad.
The Government concurs with that position. Ultimately, there is a choice for the individual to make where to live, and what the consequences are should that choice be somewhere other than the UK.
The rules on uprating the State Pension are clear and well publicised.
So, the choice to migrate or not remains a choice for the individual.
UK State Pensions paid to people living outside the UK also go to people who migrated for economic or other reasons well before they reached pension age.
Department for Work and Pensions