Pensions Bill

Written evidence from the International Consortium of British Pensioners (PB 18)

Exec Summary

(1) -The International Consortium of British Pensioners (ICBP) campaigns for the up-rating of frozen pensions for over half a million pensioners worldwide.

-The ICBP is calling for the removal of Clause 20 which continues the policy of freezing pensions for people who retire overseas to one of 123 countries.

- This policy will affect everyone who is working towards a state pension

The ICBP

(2) The ICBP is a worldwide consortium formed by interested groups in Australia and Canada with active support from groups in South Africa, Indonesia and Thailand. It represents the interests of some 560,000 recipients of the UK Basic State Pension (BSP) worldwide who have their BSP frozen at the level at which they first started to draw the said pension in their country of residence. The ICBP campaigns for these pensioners to have their pensions up-rated in line with inflation.

The frozen pension policy anomaly

(3) All recipients have at some point in their working lives paid mandatory National Insurance contributions, in the expectation that these payments would entitle them to BSP (or proportion thereof dependent on how long they worked). The anomaly arises from the fact that there are 4 classes of recipient of BSP;

1. Those resident in the UK who receive annual up-rating of their BSP plus all benefits.

2. Those resident within the EU, who receive annual up-rating of their BSP and some but not all benefits

3. Those resident in one of the 16 Countries that have signed a Reciprocal Agreement with the UK on State  Pensions, who receive annual up-rating of their BSP but no benefits.

4. Those who live elsewhere in the world , who receive their BSP at the level at which they first draw it in their country of reside nce. They receive no up-rating and no benefits.

The Work & Pensions Select Committee report on the draft Pensions Bill noted that the policy of freezing overseas pensions is "clearly an anomaly".

 

Addressing the anomaly

(4) The ICBP is calling for the removal of Clause 20 from the Pensions Bill. This clause provides for the continuity of the anomalistic freezing of certain recipients of BSP dependent on where they reside. This anomaly is purely historical and not rational, as observed by a Cabinet Minister.

(5) Clause 20 by continuing the practice of freezing the BSP, dependent on where a recipient resides, has a negative impact on the recipient's right to be free to choose his place of residence under the Human Rights Act This will provide a negative impact on all current workers, when they reach pensionable age.

 

The cost of up-rating

(6) The Government has indicated that were Clause 20 removed, it would cost the economy and harm the cost neutrality of the Pensions Bill. It is contended that this is a wholly false assumption. All pensioners after April 2016 will receive the new single tier pension. Removing Clause 20 will be fairer and significantly more equitable overall and will have no impact on the economy, or on cost neutrality, as it would allow for the payment of unfrozen pensions only for those reaching retirement age in 2016 and going forward. This is estimated to be zero in 2016, and an inconsequential amount in subsequent years

Financial benefits to up-rating

(7 ) Independent research from Oxford Economics has shown that each individual pensioner who emigrates provides significant long-term savings to the UK economy [1]

Ø S avings to the NHS budget and age related b enefits amount to £ 7,700 per capita per year. These savings begin immediately upon the emigration of each pensioner

Ø After taking into consideration additional cost s to the Treasury (i.e. lost tax revenues) each person emigrating from the UK saves the UK economy £3,800 per year

Societal pressures

(8 As the proportion of Britain’s ageing population increases, so too does the number of people who will be affected by this freeze should they wish to consider emigrating. The legislation freezing pensions causes great hardship on those affected, with some individuals prevented and separated from family and friends (Attachment A: Case study Rita Young).

( 9 ) A survey [2] by Opinium of UK adults aged 45-65 showed that a significant number were considering retirement abroad, and that 22% of them would be very likely to change their mind if their pension was to be frozen.

Conclusion

(10) It is recommended that Clause 20 be removed.

June 2013