Dear Prime Minister,
First of all may I congratulate you on setting up the Coalition Government and express my appreciation of the transparent manner in which you are involving the taxpayers in your deliberations.
I wrote to Nick Clegg some time ago, before the election, regarding the 'issue of the injustice surrounding frozen pensions' (his words). He was kind enough to reply and advise me of the Liberal Democrat's position on this matter.
Obviously, since the ECHR judgment against the appellants in March 2010, there would appear to be no legal avenue left to us, although there is still the moral issue. We did not understand how living in USA or Israel was legally different from living in 'frozen' countries. Living in Commonwealth countries such as Australia, Canada, South Africa and New Zealand results in frozen pensions. How could it be different to live on opposite sides of the Niagara Falls?
James Purnell, as Minister for Pensions Reform stated (Hansard 25 Jan 2007 column 114) ‘Of course it is not legally necessary to have a reciprocal agreement before making such payments. Any Government could do that unilaterally’
On 12th May you said 'fairness at the heart of everything we do'; the Chancellor stated on delivering his budget on 22nd June 'with this coalition government pensioners will have the income to live with dignity in retirement'.
I know the immediate focus of your government must, quite rightly, be on reducing the structural deficit you inherited from the previous Labour government (who promised, like many previous governments, to rectify the matter and never delivered). However, we would be happy, if no immediate relief were possible, to get an undertaking to resolve the matter during the lifetime of this parliament; whilst this might not happen in the lifetime of some pensioners living abroad, it would rectify a grave injustice. Of course, we hope our arguments relating to the benefits to the UK economy of having a large ex-patriot pensioner population will lead to a solution sooner rather than later.
From a pecuniary viewpoint, the average cost of overall benefits paid to pensioners in the UK is of the order of £7,000 p.a. whilst the cost of paying all overseas pensioners would be around 1% of the current pension cost. The UK saves around £6,000 per capita for each pensioner living abroad by virtue of the additional benefits not paid.
A friend of mine recently returned to UK after 20 years here in Thailand as his pension had become less and less in real terms on an annual basis. He now enjoys free housing, free bus travel, free NHS etc etc; had he kept up with inflation in his pension he would still be here - another reason for paying the annual increase to all?
Age Concern reported in 2009 that 23% of over-50s would like to live abroad when they retired; one could ask what would be the figure when they found out their pensions might be frozen.
ONS reported in 2008 that the projected increase in the number of over-65s resident in the UK by 2032 was 61%. (Around 25% of the population) For that reason alone the policymakers should be encouraging emigration to save on benefit costs in the same way they are encouraging controlled immigration in order to increase the level of taxation income.
Many of us still make a contribution to the economy of the UK, by virtue of taxes on our pensions and we see the ‘Triple Lock’ as being, in our case a ‘Triple Lock-out’.
I know you are extremely busy at present but would appreciate a response in due course; I still have the right to vote in UK national elections and I received an encouraging reply from my Conservative constituency MP, who agreed that the situation was unjust.
Yours sincerely
Thank you for your letter of 10th August.
The failure to pay annual increments has nothing to do with the dire state of the economy caused mainly by two wars, corrupt banking practices and widespread welfare benefit fraud.
The reality is that the refusal to pay increments is unjust, unfair and blatantly dishonest. Expats paid the same contributions as everyone else and should receive the same benefits.
Nobody has yet been able to explain the meaning of reciprocal agreements. You state in your letter that they exist where the country concerned has similar pension and healthcare arrangements as the UK. Sorry, this is just not true. There are no such pensions or healthcare arrangements in the Philippines, Mauritius or Turkey and where they do exist such as in Australia, New Zealand and Canada, there are no reciprocal arrangements.
We ask if you would vote in favour of paying expats their full pensions in line with the Government's stated object of fairness and honesty.
Yours faithfully,
From the International Consortium of British Pensioners to Iain Duncan Smith, Work & Pensions Minister in response to the Structural Reform Plan of the DWP
In considering the question of restructuring, we would hope that you will take a more enlightened look at the question of frozen pensions for some 50% of all expat recipients of BST. DWP are guilty of flying the red flags every time this topic is raised by saying that the economy cannot afford the GBP540M it is estimated that pension parity would cost ( or less than 0.9.% of the pension budget ).
However maybe you should consider the fact that there exists a considerable number of pensioners who would emigrate (often to join their families in their declining years) were their pensions not to be frozen. According to a survey carried out by Age Concern, before it became AGEUK, these number some 1,000,000. We understand from Government sources that every individual over the age of 60 in the UK costs the UK taxpayer some GBP7000 in terms of benefits over and above BSP and share of NHS costs; this indicates that if pension parity were legislated the net saving to HMG would be in the order of GBP 6.5 Billion per annum.
We have currently contracted a well respected economic think tank to validate these numbers; their report is due 16th Aug and will be immediately forwarded to you.
The other unknown factor in the research has indicated that between 24% and 42% of current workers have indicated a desire to retire outside the UK. There is no way that this figure can be quantified but it is indicative of the general mood.
Whichever way one looks at it, getting rid of the practice of freezing pensions can only provide a significant mid to long term benefit to the UK economy.
We would ask you to give due consideration to this issue in any restructuring.
John Markham
Director UK Parliamentary Affairs
International Consortium of British Pensioners
Extract from a letter from the Liberal Democrats
2nd Dec. 2009
I can assure you that Liberal Democrats firmly believe that pensioners that have paid taxes and contributed towards National Insurance should not be penalised for choosing to live abroad in retirement. We believe that the government should meet with groups representing pensioners to discuss how provision of a pension can be secured for those living overseas. We are very concerned that an estimated 524,730 British pensioners who live overseas have had their pensions "frozen" at the rate that they were first paid when they moved abroad. As you know, under this system in some countries, Britons living abroad become financially worse off each year despite the fact they may have a full contribution record their pension is not increased with inflation as it is for those pensioners living in Britain. We continue to believe that there is a pressing issue of injustice surrounding frozen pensions.
The Liberal Democrats also proposed an amendment to the 2006 Pensions Bill that called for pensions, including for those served overseas, be linked to prices and earnings. We again raised the issue of overseas pensions not being up-rated in debates on the Pension Act 2007. Please rest assured that the party’s long held commitment to challenging and rectifying the situation remains steadfast.
From the Office of Nick Clegg MP
