Many UK pensioners living abroad are now facing the harsh reality of their state pension payments being frozen at the rate they were receiving when they left the UK. This situation arises for retirees who have moved to countries that do not have a social security agreement with the UK, such as Thailand, Australia, or Canada. These pensioners are excluded from receiving the annual increases to their pensions that those residing in the UK enjoy. As a result, their pension payments remain stagnant, unable to keep up with rising inflation and increasing living costs, which can lead to financial difficulties for those who had expected their pension to provide long-term security in retirement.
The Department for Work and Pensions (DWP) policy currently stipulates that pensioners living in countries without a social security agreement with the UK will not receive annual increases. While they are still entitled to receive their state pension, the amount they receive will be frozen at the rate it was set when they left the UK. This has become a growing point of contention among pensioners who have made the decision to live in countries with lower costs of living, only to find that their pensions are unable to adjust to rising prices. Many feel that this policy is unfair and punishes those who choose to retire abroad.
The Government’s Response to Frozen Pensions
The situation of frozen pensions was raised in correspondence with Tom Selby, Director of Public Policy at investment platform AJ Bell, following concerns from a pensioner who had moved to Thailand. In the letter, the pensioner questioned why their state pension had been frozen after relocating abroad. The pensioner asked:
“I retired abroad in Thailand and my state pension has been frozen as a result. Why is this the case? And how on earth can this injustice continue to be tolerated? Surely at some point the Government will have to listen to the growing calls for change from campaigners?”
In response to the pensioner’s concerns, Tom Selby explained that as long as individuals meet the necessary National Insurance (NI) contributions, they are eligible to continue receiving their state pension while living abroad. However, he pointed out that the freezing of payments is linked to whether the country has a social security agreement with the UK. According to Selby:
“Provided you have a sufficient National Insurance (NI) contribution record to qualify for the state pension, if you move abroad you should continue to receive the benefit. As a reminder, to qualify for the full state pension, you need a 35-year NI record, and to qualify for at least some state pension, albeit a reduced amount, you need a 10-year NI record. You can choose to have your state pension paid into a UK bank account or a bank account in the country you are living in.”
However, this response does not address the frustration that many pensioners feel about being denied the annual increases they would receive if they lived in the UK. This discrepancy has led to calls for reform and greater fairness in the pension system, especially as more pensioners decide to live abroad and need their pensions adjusted to match inflation.
How Pensioners Are Affected by the Freeze
For many pensioners, the freeze on pension payments has serious financial implications. Retirees who moved to countries with a lower cost of living to make the most of their pension are now finding that their pensions no longer stretch as far as they once did.
This situation has become a source of anger for many who feel that their long-term contributions to the UK’s National Insurance system should entitle them to the same benefits and increases as those living within the UK. Without access to the annual pension increases, these pensioners are increasingly finding themselves struggling to maintain their standard of living.
Campaigns for Reform
The issue of frozen pensions has spurred numerous campaigns for reform. Pensioners and advocacy groups are calling for a more equitable system where all pensioners, regardless of where they live, receive the same level of financial support and benefits. The current system has been criticised for disproportionately affecting those who choose to retire in non-EEA countries, where living costs may be lower but pension payments are effectively frozen.
Many campaigners are advocating for the government to negotiate new social security agreements with countries like Thailand and Australia, where pensioners currently face frozen payments.
The call for policy change has gained momentum, with the government urged to ensure fairness for pensioners living abroad, especially those in lower-income countries where their pensions could go further if the annual increases were applied.
What Needs to Change
The debate over frozen pensions has put pressure on the government to review the current system. The current policy is outdated and discriminatory, particularly for pensioners who have made the decision to retire in countries where their pensions are frozen. Campaigners are calling for the government to introduce a policy that ensures all pensioners receive regular annual increases, regardless of their location.
While the government’s stance on frozen pensions remains unchanged, the growing public outcry and pressure from pensioners and campaigners may eventually prompt reform. Pensioners who are facing the challenges of living on frozen pensions are hopeful that the government will take action to address the inequities in the system and ensure that all pensioners, no matter where they live, are treated fairly.
For now, pensioners living abroad are advised to stay informed about their rights and renew their pension eligibility before any further changes are made to the system. Whether or not the policy will change remains uncertain, but the growing calls for reform indicate that it may become a significant topic of discussion in the coming months.
