Pensions Bill

Written evidence from British Pensions in Australia Inc (PB 23)

Summary

1. British Pensions in Australia Inc [BPiA] is a non profit volunteer association of over 11,300 British expatriate pensioners, dedicated to achieve universal UK State pension uprating, and bring the UK into line with every other OECD nation, so that every one in receipt of a UK State pension is treated equally, fairly and even-handedly. There are strong economic reasons for making this change to the treatment of all UK pensioners, for such a change would most likely encourage many thousands of retirees and many more approaching pension age, who still live in the UK, to leave Britain and thus save the British economy £billions over the next decade or so. These net savings would be achieved because the pensioners who emigrate will no longer require Britain’s National health services, free prescriptions, free pensioner bus passes, TV licences for over 75’s and winter power subsidies. By not indexing the UK pensions for all UK pensioners retired overseas, especially those living in 47 of the 54 Commonwealth nations, is incompatible with the current Commonwealth Charter in which it is clearly stated, "we are implacably opposed to all forms of discrimination". We are mindful that the British Government claims the Courts, including the European Court of Human Rights, have found its pension payment regulations are in the British Government’s favour. We however would counter that theirs is a case of legalised discrimination, which is one of "all forms" which therefore fail to comply with the Commonwealth Charter and its values, a test of honour, morality, ethics, equality and fairness. These are Commonwealth values included in the Singapore Declaration 1971 and the Harare Declaration of 1991. BPiA as a consequence requests the omission of Clause 20 from the Pensions Bill now being debated in Committee.

Personal and professional background

2. I’m Honorary Chairman of BPiA. I’m in receipt of a part UK pension for the 25 years contributions I paid to the UK Government, 10 of which were paid for, from Australia, by voluntary contributions, during the negotiations for which, no mention was ever made in any correspondence sent me from Inland Revenue NI Contributions Office in Newcastle of the freezing of my UK State pension once it had commenced in Australia.

My secondary education was received at Latymer Upper School, London W6, following which I studied at the University of Wales, Aberystwyth and graduated with a 2 (1) honours degree. I received a commission for 3 years in the Royal Navy as an Instructor Lieutenant. I then worked in the Midlands and Scotland for GKN while I studied and passed the exams to become a Chartered Secretary, followed by graduating as a Chartered Management Accountant. In 1965 I joined as Management Accountant, Scot Meat Products Bletchley Bucks, in 1968 Cooper Bros and Co as a Consultant Management Accountant, 1970 Financial Controller, Mixconcrete Holdings Ltd, Great Billing, Northants. In September 1971 I migrated to Australia to join a partial subsidiary of GKN, John Lysaght Australia Ltd [JLA], I qualified as an Australian Certified Practicing Accountant. I completed my career as National Finance Manager of a subsidiary of BHP Steel, which had taken over JLA in 1979.

3. As BPiA’s Honorary Chairman, I receive no payments for the considerable efforts I expend to right this palpable and dishonourable UK Government wrong of freezing 550,000 British expats’ State pensions [BSPs]. BPiA represents the desires of 252,000 BSP recipients, for fair pension treatment. There are many more in Australia approaching pension age, hundreds of whom we assist in understanding and applying for their UK State pensions, most of whom we assist live in Australia.

Submission

4. All people who work in the UK pay mandatory National Insurance [NI] contributions which are deducted from their gross pay. The employers pay a NI contribution too on behalf of their employees. These contributions entitle the payees to a British State Pension [BSP] at a specified age. Generally today it is 65 for men, while women received a pension at 60 until April 2010 since when the pension age has gradually moved towards 65, which will be reached after April 2016. The amount of pension paid is related to the number of years one has paid contributions. Hence some who have emigrated earlier than at age 65 will be paid a lesser BSP. Some of us have been invited by the UK Department of Revenue and Customs to pay voluntary contributions from overseas to add to the pension we paid for while working in the UK.

5. However although everyone paid their contributions according to the same rules, when BSP payments are considered, an anomaly arises, as was noted by the Work and Pensions Select Committee in its report on the draft Pensions Bill.

6. This anomaly is that some recipients of the BSP are paid in a different manner. This difference relates to the payment in the UK and in about 50 selected countries in which an annual uprating adjustment to compensate for inflation is paid. There is no logic in the countries selected viz; - Hansard 13th November 2000 House of Commons;

· Mr. Rooker: I have already said that I am not prepared to defend the logic of the present situation. It is illogical. There is no consistent pattern. It does not matter whether a country is in the Commonwealth or outside it. We have arrangements with some Commonwealth countries and not with other. Indeed, there are differences among Caribbean countries. This is an historical issue and the situation has existed for years. It would cost some £300 million to change the policy for all concerned.

We must also consider that as the European Union expands--pension upratings are,
naturally, paid in the EU--the issue will not go away. I accept that.

This anomaly was identified by the UK’s Black and Ethnic Minority [BME] population and mentioned in Hansard, during a Commons committee debate, 18th. March 2004, a comment is included below from the late Piara Khabra, previous Labour MP for Southall, where many Sikhs and other Indians live, that;-

· "There is definitely an anomaly in the law because some people are deprived of the right to uprate their pensions while others are not. Many ethnic minority pensioners from India, Pakistan and other Commonwealth countries have lived in this country for 40 to 50 years. They have worked hard and they are entitled to pensions when they retire. Some would like to spend their last years in their country of origin and they are bitter about the current law which deprives them of the opportunity to uprate their pensions, while making it available to people in other countries." "I make this point on behalf of the ethnic minority communities in particular. I know that people living in other parts of the world are also deprived of the right to uprating but the issue is particularly relevant to ethnic minority communities."

7. Moreover many arguments made against uprating the BSP and which are still aired in current discussions about this issue were mentioned in this 2004 March 18th Committee debate. Steve Webb refuted some;-

· a) the purpose of my new clause is the pensions of those who now live abroad should be annually uprated where-ever they live."..."In the case of countries like Australia there seems to have been an oversight in the reciprocal agreements the payment of pensions was covered but uprating wasn't" "We are now in an extraordinary situation."..."British citizens who have paid their national insurance all their life, accrued entitlements to a state pension and committed the misdemeanour, as it were, of moving to Australia, New Zealand, or Canada  instead of the United States do not receive an uprated pension" ...."Some of the principal agreements were signed in the 1950s when our culture as regards inflation was different" ..."Inflation was so low when the levels could be left for a few years before introducing an ad hoc uprating" ..."The consequences of not uprating can be quite severe"

· b) There are those who have argued that the issue is just making a noise for the rich few who can afford to live in sunny climes and that frankly they can look after themselves. Some of those people are well off –I cannot deny that- but some are not. Some have ceased to be well off because they have been retired for a long time on frozen pension. We are not talking of feathering the nest of the favoured few, but justice. It is said that they knew what they were doing. Probably some did and some did not, but it is known that pensions are frozen if one goes to certain countries. I have met overseas pensioners who say that was far from clear at the time.

· c) The British Government are free riding on the welfare states of countries that British citizens are moving to"  ..."We are asking other countries taxpayers to support our pensioners"... "The composition of the list of countries where one does have uprating and the list of those where one does not is pretty odd".... "It hard to understand the logic".... "The entire pattern was arbitrary." "There is no logic to it and it is hard to justify the situation we are in."  "The question relates to cost but sorting out unfairness does have a cost"......We are not feathering the nest of the favoured few, but justice" ....The question is moral rather than legal ..."The moral claim rests on the fact that we ha ve a contributory pension system . We ask people to make contributions all their life to accrue an entitlement. Why should that accrued entitlement vary according to where they choose to live?"....That doesn't sit well with the idea of a contributory system".... "Different Caribbean countries have different rules which seem crazy." None the less the provisions seem odd." The world has moved on and peoples’ lives are more global; people are more likely to work overseas and their parents may want to go to live with them in retirement. Should we penalise those who retire overseas to be with their children or should we say 'You've worked hard and paid hard. It's your pensions take it with our blessing?"

7. This anomaly has not gone away. It is proposed that it be maintained in Clause 20 in the Pensions Bill now subject to committee review. It causes the freezing of the BSP in over 120 countries but it is especially noticeable in 47 of the 54 Commonwealth countries, in which over 90 % of the "frozen" BSP recipients reside.

8. Recently the Queen signed the new Commonwealth Charter. At Page 1 and Page 2 in sections 1 and 2 of that Charter it states;-

· We the people of the Commonwealth, reaffirm the core values and principles of the Commonwealth as declared by this Charter.

· We support the role of the Commonwealth Ministerial Action Group [CMAG] to address promptly and effectively all instances of persistent violations of Commonwealth values without fear or favour.

· We are committed to equality and respect for the protection and promotion of civil, political economic, social and cultural rights including the right to development for all without discrimination on any grounds as the foundations of peaceful just and stable societies. We note these rights are universal indivisible, interdependent and interrelated and cannot be implemented selectively.

· We are implacably opposed to all forms of discrimination whether rooted in gender, race, colour, creed, political belief, or other grounds

Having regard to these Commonwealth principles and values and the potential role of the CMAG, one has to question the continuation of the anomaly within Clause 20.

9. Emigration by the thousands still retired in the UK, many of whom have expressed a desire to retire overseas to rejoin their families there, would probably result in £billons being saved in the medium to long term in other areas of Britain’s budget, because of fewer pensioners remaining in Britain and therefore a lesser need for National Health services, free prescriptions, winter power subsidies, free bus travel, free TV licences for over 75s etc. These benefits to the total economy have been identified in an Oxford Economics Study "Uprating Frozen Rate Pensions". A figure of a net saving per migrating pensioner approximating £3800 /year has been identified. A copy of this Oxford Economics Report is attached as an annexure

10. We understand the Government’s reluctance to remove Clause 20 from the Pensions Bill, for the Government is of the view this would cost the Pension budget over £650 million per annum. However there are contrary views:-

· a) that this approach is ring-fencing the pension budget without full consideration of the adverse consequences of such an approach; for if the BSP was to be universally up-rated there would most likely be a gradual emigration of thousands of UK based pensioners to their original overseas homelands, as identified in a recent study by Opinium Research. [see Oxford Economics Report page 5]

· b) In a February 2013 UK Supreme Court case, UK SC 6, O’Brien v The Minister of Justice O’Brien won his case on the basis that a discriminatory practice can only be justified by a legitimate aim other than by the simple saving of cost. :   http://www.bailii.org/uk/cases/UKSC/2013/6.html  (Clauses 65-75 in particular) Date: 6th Feb 2013.

Conclusion.

10. It is requested that Clause 20 of the Pensions Bill, which continues the existing system whereby some recipients of the BSP, most of whom live now in Commonwealth countries, will continue with their BSP being frozen, be removed from the Pensions Bill.

11. This is requested so that the BSP is eventually universally uprated each year and the British Government’s approach to BSP payments becomes compatible with the Commonwealth Charter, which calls for the Commonwealth’s affirmation of its core values of equality, fairness and "an implacable opposition to all forms of discrimination".

12. The current practice of uprating the BSP in some countries but not other appears to be in conflict with the requirements of the UK’s 2010 Equality Act. http://www.legislation.gov.uk/ukpga/2010/15/contents

July 2013