Feb 20, 2014

Here’s a $1b saving for Abbott’s audit: convince UK to thaw pensions

British citizens who paid into the UK pension scheme only receive 58 pounds a week from the UK government now they've immigrated to Australia. It's become an expensive drain on Australian taxpayers, reports freelance journalist Ava Hubble.

A billion dollars over four years: that's the benefit Australia could reap if the federal government was willing to take the gloves off in negotiations with the United Kingdom over its frozen pensions policy, according to the chief lobbyist of the cause. The policy penalises Britons who retire to Australia and most other Commonwealth countries -- while they contributed to the UK’s mandatory national pension scheme during their working lives in Britain, their pensions are not uprated each year in line with inflation. The policy does not penalise Britons who retire to most non-Commonwealth countries. About half of the 550,000 Britons penalised by the policy are living in retirement in Australia, with most leaving the UK to join family here. Their British pensions have not been increased since their arrival, which in some cases was 20 years ago, when the basic British weekly pension was about 58 pounds a week (about $107). It is now roughly twice that sum. Tens of thousands of these "frozen pensioners" are currently dependent on means-tested Centrelink assistance because they can’t survive on their long-frozen British pensions. The British policy dates back over 50 years. Jim Tilley, chairman of the British Pensions in Australia organisation, has written to the federal government's National Committee of Audit calling for an investigation into the current cost. He argues that if the UK granted immediate parity to all its pensioners in Australia they would no longer be in need of a partial Australian supplementary pension -- with estimates of the benefit to Australia over four years, conservatively, at around $1 billion:
"With the eventual success of our combined fight in Britain to force the UK Government to uprate annually our UK pensions as they do for about 96% of Britain’s pensioners, including over 630,000 living abroad in other countries, this will inject into the Australian economy about $590 million each year, and lead to an annual reduction of Centrelink pension payments by approximately A$220 million or approaching A$1 billion over a four-year budget period."
Tilley, the Australia-based member of the International Consortium of British Pensioners, made international headlines last year when he proposed Britain be suspended from the Commonwealth until it revoked its frozen pensions policy. The consortium later formally called on the Queen and Prince Charles to support the sanction. The policy, however, remains in force. Furthermore, British Foreign Secretary William Hague, Secretary of State for Work and Pensions Iain Duncan Smith and Pensions Minister Steve Webb are all on record as insisting the policy will remain. It not only penalises contributors to the UK’s mandatory national pension fund, but those who also contributed to a range of so-called "optional extra" British government retirement schemes. Derrick Prance, 88, of Perth is a World War II British veteran who went on to work for 50 years in the UK. He told Crikey that during that time he contributed to a total of three British government pension funds, two of them in tandem with his employers, which were promoted as "optional extra" government funds. But not one of the three funds has been indexed against inflation since he and his wife arrived in 1996 to join family in Perth. Steve Webb insists the UK can't afford the cost of granting parity to expats in Australia, Canada, New Zealand and most other Commonwealth countries, even just for those over 80. Tilley argues the penalised expats are saving the UK billions in healthcare and aged care costs.

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6 thoughts on “Here’s a $1b saving for Abbott’s audit: convince UK to thaw pensions

  1. Bill Parker

    And while were are about it, make the UK pension tax free in Australia!

  2. Andybob

    I expect our govt to spring into action immediately and freeze indexing on payments to Australians in the UK. That will show em !

  3. Salamander

    There probably aren’t a lot of Aussie pensioners in the UK. But what happens to their pensions?

  4. Jane Davies

    Steve Webb is lying about the UK not being able to afford giving the 4% the same rights as the rest of UK pensioners, who by the way have paid for their pensions just the same as the rest, the surplus in the NI fund which pays out the pensions is around £20 billion and it’s not government money, it belongs to those who have paid in over a lifetime. Webb has actually said, and I heard him say this, that the frozen countries whose governments top up the British pension shortfall would end up benefiting by not paying this money out at the expense of the UK taxpayer. Total BS and lies…the brass neck of the man beggars belief.

  5. Brian Corrigan

    It also should be noted that Mr Steve Webb,the British Minister responsible for the policy of freezing pensions in Australia, made the statement,while the new pension policy was being debated in the British Parliament, that it was OK to free load on the Australian tax payer,as it saved the British tax payer having to finance the uprating.
    The truth is that the British Tax payer saves nothing,as pension payments come out of the NI fund,which is currently in surplus to the tune of Billions of pounds.
    It is time for All Australians to put an end to this disgraceful free loading and force the British Government to think again.

  6. Jane Davies

    Salamander along with Canadian expats who live in the UK, Australian expats get their annual up-rating. The UK is the only country with a state pension scheme to treat their seniors in this disgraceful way. I will just add that although Canadian taxpayers are footing the bill for topping up the UK seniors one has to be resident in Canada for 10 years before being eligible for this. I, like many, retired to join family here and 10 years is a long time to survive on a frozen pension without this help, even though I have other pensions to have ones income reducing annually as the cost of living increases is very hard especially as the majority of expats around the world are not victimised in this way.

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