Nearly 500,000 pensioners will miss out on a £470 boost to their state pension in the coming months, as the government’s controversial policy affects those living abroad.
Under this policy, pension payments for retirees in certain countries will remain frozen, despite the annual increase provided by the triple lock system.
According to The devonlive, this has sparked concern, especially among expatriates who are not benefiting from the rising pension rates available to those living in the UK.
What Is the Triple Lock System?
The UK’s triple lock system guarantees that the state pension increases annually, based on the highest of three factors: inflation, average earnings, or 2.5%. For 2025, this means a 4.1% increase for most pensioners in the UK, ensuring their payments keep pace with inflation. However, the system is not applied uniformly to all pensioners, especially those living abroad.
Pensioners residing in countries without a reciprocal social security agreement with the UK are particularly affected by the ‘frozen pensions policy.’
For these expats, their state pension payments will be locked at the amount initially set when they began receiving them, with no annual increase despite the triple lock rising in the UK.
This includes retirees in countries like Australia, Canada, and South Africa, who face the prospect of receiving pensions that do not keep up with inflation.
The frozen pensions policy means that their state pension remains fixed at the amount first paid out, potentially leading to a significant erosion in value over time as inflation rises.
How Does This Affect Pensioners?
For those affected by the frozen pensions policy, the lack of an annual increase can mean significant financial strain over time.
While pensioners in the UK can rely on the triple lock system to maintain the real value of their state pension, expatriates are left with fixed amounts that lose value against the rising cost of living. This disparity has sparked concerns about fairness, especially for those who have paid into the UK system for years.
Options for Pensioners Living Abroad
Pensioners living abroad are advised to explore various options to mitigate the effects of frozen pensions. One such option is the Qualifying Recognised Overseas Pension Scheme (QROPS), which can offer tax advantages and more flexibility in terms of pension management.
QROPS allows retirees to transfer their pension funds abroad to countries that may offer more favorable tax treatment or benefits.
Retirees are encouraged to consult with financial advisors specializing in international pensions to ensure that their retirement funds are managed effectively, taking into account exchange rates, tax regulations, and the possibility of pension freezes.
For expatriates, it’s crucial to understand the transfer process for pension funds. Key steps include researching reputable QROPS providers, consulting financial advisors, and requesting a transfer value from the existing pension provider.
Additionally, retirees should be aware of the fees and tax charges that may apply, particularly if the transfer exceeds the lifetime allowance set by UK regulations.
How to Check Your State Pension Eligibility
To ensure you are receiving the correct state pension amount, retirees are encouraged to check their National Insurance record. The UK government offers an online service to help individuals determine how many qualifying years they have accumulated.
This is especially important for expats who may have missed years of contributions while living abroad.
Additionally, using the State Pension Forecast service can provide an estimate of future payments, helping retirees plan for their financial future.
If there are any gaps in your contributions, you may be able to make voluntary National Insurance contributions to increase your pension entitlement.
The Future of the Frozen Pensions Policy
The ongoing debate over the fairness of the frozen pensions policy continues, with many calling for its reform.
Advocates for expats argue that it is unfair for UK citizens who have contributed to the National Insurance system to see their pensions remain stagnant, especially when inflation continues to erode the value of their payments.
As the number of retirees living abroad grows, pressure may increase on the government to reconsider this policy and implement a more equitable solution for pensioners worldwide.
Some believe that expanding reciprocal social security agreements between the UK and more countries could be one solution to prevent pensions from being frozen for expatriates.
