Freezing of expats British OAP's resident outside the EU

[idun]

[quote user="Rabbie"][quote user="Benjamin"][quote user="Rabbie"]It's always been the rule whatever you think of it.[/quote]

If I'm understanding correctly what you're saying, this hasn't always been the rule with, let's call them "Commonwealth Pensioners". My sister and her family were £10 Poms and the freezing of the UK pension was certainly introduced after they left the UK.

I'll Google the topic and see what I can find.



[/quote]IIRC this was a topic of discussion in the 1960s. As I had just started working then and had no plans to emigrate I did not give it much attention. I await the results of your research with interest[/quote]

But Benjamin, IF they have kept up their payments, they will still be getting their money back within a fairly short period and even if it doesn't go up then it'll still pay some bills, it's over £100 a week at the moment. If they left 30 years ago or more they should have a working life there and got other pension plans together? Non?

[allanb]

[quote user="You can call me Betty"]...if I was pressed to come up with an equitable solution I'd say that at best I'd suggest people living outside the UK had their pensions index linked to inflation in the UK, or the country they were residing: whichever was the lower.[/quote]With respect, that doesn't make sense.  Inflation refers to a currency.  If you have a pension determined in sterling, it should be indexed on the basis of the inflation of sterling.

If you live in a country with a different currency and a different inflation rate, the exchange rate should - in theory - compensate for the difference.  In practice, of course, it won't happen exactly like that, and you will either gain or lose, but that's not the responsibility of the UK government: it was your decision to emigrate.   

[allanb]

Sorry, accidental duplication.

[NormanH]

1) Surely the rise in Pension is linked to UK inflation (or lack of it) so that pensioners don't suffer unduly by seeing their income falling behind the cost of living...in the UK.

Someone living in another country will experience a different rate of inflation according to the local economy. Theoretically  it could even be a deflation, so there is no reason to tie that person's pension to UK inflation, and the ideal solution of tying it to the inflation of the country in which the pensioner lives is clearly unworkable.

For example UK inflation = 5% so  a pension of £100 a week rises to around £105

Bur for someone living in New Nowhere where there is no inflation the rise is not needed, and for someone living in Couldobetterland where there is 10% deflation it would represent an unjustified rise....

2) Betty speaks of having to work extra years to maintain people on an index linked pension. Don't forget that at the moment a  full OAP is  given to people with only 30 years contributions, whereas many of these older people paid 40+ years of contributions, so it could also be argued that now younger people  contribute less..

[YCCMB]

[quote user="allanb"][quote user="You can call me Betty"]...if I was pressed to come up with an equitable solution I'd say that at best I'd suggest people living outside the UK had their pensions index linked to inflation in the UK, or the country they were residing: whichever was the lower.[/quote]With respect, that doesn't make sense.  Inflation refers to a currency.  If you have a pension determined in sterling, it should be indexed on the basis of the inflation of sterling.

If you live in a country with a different currency and a different inflation rate, the exchange rate should - in theory - compensate for the difference.  In practice, of course, it won't happen exactly like that, and you will either gain or lose, but that's not the responsibility of the UK government: it was your decision to emigrate.   

[/quote]

I wholeheartedly agree. However,at the moment, the OP and the Telegraph article are requesting that people have their pensions index linked to UK inflation irrespective of where they choose to live in the world. I don't agree. If pressed, however, as I said, to come up with a solution (assuming that the existing solution is tampered with in any way) then I think that at best people should - where they're living in a country with lower inflation than the UK - receive an increase equivalent to their local level of inflation.

[YCCMB]

[quote user="NormanH"]1) Surely the rise in Pension is linked to UK inflation (or lack of it) so that pensioners don't suffer unduly by seeing their income falling behind the cost of living...in the UK.

Someone living in another country will experience a different rate of inflation according to the local economy. Theoretically  it could even be a deflation, so there is no reason to tie that person's pension to UK inflation, and the ideal solution of tying it to the inflation of the country in which the pensioner lives is clearly unworkable.

For example UK inflation = 5% so  a pension of £100 a week rises to around £105

Bur for someone living in New Nowhere where there is no inflation the rise is not needed, and for someone living in Couldobetterland where there is 10% deflation it would represent an unjustified rise....

2) Betty speaks of having to work extra years to maintain people on an index linked pension. Don't forget that at the moment a  full OAP is  given to people with only 30 years contributions, whereas many of these older people paid 40+ years of contributions, so it could also be argued that now younger people  contribute less..

[/quote]

Norman, I've clarified my view on your first point in my reply above. Regardingh your second point, this is absolutely correct. However, a couple of things... I am willing to be corrected as I am not sure, but I do believe that the school leaving age increased at some point..effectively reducing the number of years one could expect to work by at least a couple. Not much in the great scheme of things, but of course there needed to be some reduction in the number of years taken into account for calculating pensions as a result.

Speaking personally, an accident of birth makes me too young to retire at 60 by some 14 months. As as consequence, I'll need to put in another six years. Someone a mere 14 months older than me will still only require 30 years of contributions but will enjoy six extra years of retirement. Someone a few years older than me will have been able to get a full pension earlier, but may have needed to work longer overall to qualify for it. There are winners and losers in this, of course. It may be that working for only 30 years entitles one to a full pension now, but if you've racked that up by the time you're 50, you still can't receive that pension for another 16 years. I suspect there are relatively few people nowadays who will have accrued sufficient disposable capital to support them for those 15 years without working, and few occupational pension schemes these days pay out much before 55 or 60. Hence, it's all very well for the Govt to say that you'll get a full pension after 30 years of full contributions, the fact is that you'll still have to work considerably longer than that to actually reach the age when it's paid out...and all the extra years you DO work, you'll still be paying tax and NI for no additional benefit!! So IMO this "30 year" business, whilst accurate, is a bit of a red herring in reality.

[Thibault]

I haven't read all the posts in this thread, so apologies if someone has already raised this........

 

As I understand it, whether or not pensions were increased in line with UK pensions for those who live abroad (outside EU) depended on whether or not there was a reciprocal agreement.  I lived in Australia in me yoof and at that time there was a reciprocal agreement which was later discontinued.  However, it meant that I could count the years I worked in Australia as contributing years to my UK pension entitlement as I paid into the Australian state pension fund (but I won't get an Aussie pension [:)]).  I believe that these types of reciprocal agreements have been phased out over a number of years, or did not exist in the first place, therefore leading to the position where, for some people, pensions are frozen.

[allanb]

[quote user="I"]Inflation refers to a currency.  If you have a pension determined in sterling, it should be indexed on the basis of the inflation of sterling.[/quote]

[quote user="You can call me Betty"]I wholeheartedly agree. However, at the moment, the OP and the Telegraph article are requesting that people have their pensions index linked to UK inflation irrespective of where they choose to live in the world. I don't agree.[/quote]

But that's exactly what I said.  "Inflation of sterling" means the same as "inflation in the UK" - where else could you measure sterling prices?  So I'm not sure whether you agree or disagree. 

But the point is that if the UK inflation index moves from 100 to 103, the state's obligation is to preserve the real value of a sterling pension by a 3% increase in the nominal amount. 

If you live in Australia, the real value of your UK pension - i.e. your purchasing power - is affected by two other things: (1) inflation of the Australian dollar, and (2) the exchange rate.  But there is no reason for the UK government to make any adjustment for either of those things: they are the consequences of your personal decision.

(When I say "you" of course I don't mean you.)  

[YCCMB]

Sorry, my fault. I agree that that's what inflation IS...I disagree that the pension of someone not living in the UK should have their pension linked to the inflation rate in the UK. As I said before, I think it should be indexed to whichever is the lower of UK inflation and country-of-residence inflation at the time of each review.

[Benjamin]

Fancy being dropped in it by your own big Sister. (Rabbie from a couple of pages back).

It appears that the conversation I remembered appertained to the court case which the "Commonwealth Pensioners" finally lost their appeal to have their pensions index linked in the same way as UK pensioners and those of several former colonies.

In my defence she is very Aussie and is prone to arranging the "facts" to best suit the discussion at the time.

[cooperlola]

[quote user="You can call me Betty"] So IMO this "30 year" business, whilst accurate, is a bit of a red herring in reality.
[/quote]Well, it saved me a shedload of money, for one.  I took my occupational pension at 50 and was able to stop paying NI a year later when my 30 years were up.  How bonkers is that?  I was paying voluntary contributions from the time I stopped working and would happily have carried on doing so but the rules were changed.  I honestly still do not know how a strapped economy could manage to do that and I reckon I should still be paying really as I expect an old aged pension from Britain.

[YCCMB]

You're lucky, Coops, that you probably turned 50 at the "right" time, and probably also had a single occupational pension. I've got 3 occupational pensions. One I was able to take at 50, the second I missed the boat on taking at 52 so had to wait for 55, and the third (French co. !!) I can't touch till I'm 60. Indidivually, none of them is worth enough to allow me to retire. In fact, added together they're probably not worth a lot, either!! (My hard luck!). The last of the 3 mentioned was, literally months before I left, changed so that in future (and this applied also to the proportion fo contrbutions made by existing employees after the date of the change) the earliest age for being able to draw it was raised to 62.

AFAIK, increasing numbers of companies are raising the age at which pensions can be taken, and of course fewer and fewer final salary schemes are still running, so if a person changed jobs in the last 8-10 years, it's unlikely they'll have a final salary scheme anyway.. One of the reasons Mr Betty is still nose to the grindstone is that he's got a final salary pension which will do better the longer he can remain in it!

All that aside, what I'm getting at is what you've gathered: for the vast majority (I suspect) of people still working, and certainly those a lot younger than thee and me, there's going to be scant opportunity for early retirement because their occupational pension (even if they can get it) probably won't be anything like as "gold plated" as those of 10 years ago. Not to mention the fact that, in its infinite wisdom, the "Government of the Day" keeps trying to persuade youngsters that leaving tertiary education with up to £50K of debt will all be fine, thanks to their "easy payment terms"...so saving anything extra for a pension is but a dream!

[cooperlola]

I weep for the current generation of workers, I truly do.  They will not be able to enjoy the sort of life I've had nor, as you so rightly point out, the length of retirement available to me and Mr C.  But heck, on the positive side, maybe once they reach my age they'll have found a cure for cancer.  Swings and roundabouts, what?

 My mother has now had her old aged pension for 29 years - how many more of her can Britain afford?

[KathyF]

Our daughter is a solicitor in a commercial firm where she specialises in pensions law and she would agree with every word you've just written, Betty. She reckons she'll be lucky if she's able to retire before she's 70 (she's 40 at the moment) and is certainly not on a final-salary scheme.

[Russethouse]

Not to mention the fact that, in its infinite wisdom, the "Government of the Day" keeps trying to persuade youngsters that leaving tertiary education with up to £50K of debt will all be fine, thanks to their "easy payment terms"...so saving anything extra for a pension is but a dream!

 If I remember correctly the remainder of the debt is written off after 30 years - just in time for you to stop paying NI too - is that coincidence or what ?

[YCCMB]

[quote user="cooperlola"]

I weep for the current generation of workers, I truly do.  They will not be able to enjoy the sort of life I've had nor, as you so rightly point out, the length of retirement available to me and Mr C.  But heck, on the positive side, maybe once they reach my age they'll have found a cure for cancer.  Swings and roundabouts, what?

 My mother has now had her old aged pension for 29 years - how many more of her can Britain afford?

[/quote]

Personally, as I hope you gathered, Coops, I feel I've nothing to complain about. I worry, I really do, for my kids, and even more for those a few years younger than them who are (or were) hoping to be able to go on to university. Whatever the politicos may say, it seems deeply ironic to me that in attempting to rectify all the ills brought about by "spend now, pay later", they don't see that recent policies have condemned at least the immediate future generation to choices involving either long term unemployment (because they might not be qualified enough) and welfare, or long term debt (because they WANT to be qualified enough) and still, possibly, welfare..because there may not be a job at the end.

I'm not bitter, angry, upset or insert any other adjective of your choice, but, veering tangentially back to the OP, I would like to ask whether the "older generation" might consider what THEY could do to ease the burden on these younger people, rather than increase it, even if only fractionally, by insisting on a few extra quid in their own pockets each month. I know that's a comment that will almost certainly enrage some, but how much more do people think the younger generation really CAN pay?????

[idun]

Betty said: but how much more do people think the younger generation really CAN pay?????

They can't pay. I hope that they put on blinkers and look forward and not back on my generation and older. What a merdique legacy we have left for them, I am so sorry.

[Thibault]

It all started to go horribly wrong post 1945 when the then government decided that a full state pension would be paid to anyone qualifying, rather than their receiving a pension based on their own specific contributions.  Since then, the state pension fund has been playing "catch up".  That, coupled with a falling birth rate and a rising number of state retirement age people has led to the present problems.

Also, it is worth remembering when the "Old Age Pension" was first introduced in (I think) 1906, people rarely lived very long to enjoy it, making it quite affordable, whereas today, people are living 20 plus years after the state retirement age.

There are no easy solutions.  However, for some people, there would have been a "Golden Age" of pensions - perhaps around the 1980s-1990s - but that has gone now and it looks increasingly likely that it will never return.  It is also a problem which has to be addressed by all Western Industrialised Nations, including Greece [;-)]

[allanb]

Going back to the original question of freezing UK pensions paid outside the EU: 

I should declare an interest.  I have a relative in Canada who has suffered from the "freeze" rule ever since retirement.  The effect is serious and will of course get worse each year.  Betty's proposal is better than nothing, but it would still would have grossly unfair results.

Let's use the example of Japan, where inflation in the last year or so has been significantly different from the UK: actually close to zero, but let's call it 1% to illustrate the arithmetic.  Since inflation in the UK during that time has been around 5%, you would expect the Japanese yen to have increased in value against the pound, and it has. Theoretically the exchange rate should have changed by around 4%, and that's roughly what has happened, from about 130 to about 125.  (It doesn't always work as neatly as that, of course, but it tends to happen in the long run.)

Suppose you have a UK pension and you came to live in Japan a year ago.  Every pound of your pension would have bought you 130 yen when you arrived: a year later you need slightly more yen (1%) just to be able to buy the same stuff.

According to Betty's proposal your sterling pension should be increased by 1%.  So for each pound of your original pension you will now get £1.01.  At the current exchange rate of 125, each pound of your original pension amount will get you 126.25 yen.  So your real income has fallen from 130 yen to 126.

UK pensioners in the EU would get an increase of 5%.  So the UK government has saved money by paying you only 1% more instead of 5%, and you've paid the price.  How can you call that fair?

[Araucaria]

[quote user="Thibault"]

It all started to go horribly wrong post 1945 when the then government decided that a full state pension would be paid to anyone qualifying, rather than their receiving a pension based on their own specific contributions.  Since then, the state pension fund has been playing "catch up".  That, coupled with a falling birth rate and a rising number of state retirement age people has led to the present problems.

Also, it is worth remembering when the "Old Age Pension" was first introduced in (I think) 1906, people rarely lived very long to enjoy it, making it quite affordable, whereas today, people are living 20 plus years after the state retirement age.

There are no easy solutions.  However, for some people, there would have been a "Golden Age" of pensions - perhaps around the 1980s-1990s - but that has gone now and it looks increasingly likely that it will never return.  It is also a problem which has to be addressed by all Western Industrialised Nations, including Greece [;-)]

[/quote]

I think quite a lot of people (including my grandparents) would take issue with the idea that "It all started to go horribly wrong post 1945 when the then government

decided that a full state pension would be paid to anyone qualifying,

rather than their receiving a pension based on their own specific

contributions". If you only give pensions to people who were able to afford contributions when they were working, then you condemn many people to follow a low-paid working life with poverty in old age.

The government back in 1945 took a conscious decision NOT to have a funded state pension scheme, and all governments subsequently have gone along with this. There never has been a "state pension fund" in the UK. Old age pensions have always been paid out of current taxation and current national insurance contributions. For my part, I find it quite impossible to believe that at a time when visibly we in the west (and not just the UK, obviously) have never been better off, we can't afford to pay a decent pension to those who are too old to work.

[minnie]

Allanb - you've summed this up perfectly. This mainly affects people who have worked all their working life in UK and paid all contributions. They then decide that they wish to join family members elsewhere (outside Europe) during retirement but cannot afford to do so. This is what we would like to do. There are categories which make it easier for parents to join children in NZ and immigration should not be too difficult i.e. ypou don't need loads of money just the ability to support yourself with child providing guarantee of this.

As an aside I believe that if you go to live in America your UK state pension does increase with inflation. I wonder why this is so.

[Russethouse]

[quote user="allanb"]Going back to the original question of freezing UK pensions paid outside the EU: 

I should declare an interest.  I have a relative in Canada who has suffered from the "freeze" rule ever since retirement.  The effect is serious and will of course get worse each year.  Betty's proposal is better than nothing, but it would still would have grossly unfair results.

Let's use the example of Japan, where inflation in the last year or so has been significantly different from the UK: actually close to zero, but let's call it 1% to illustrate the arithmetic.  Since inflation in the UK during that time has been around 5%, you would expect the Japanese yen to have increased in value against the pound, and it has. Theoretically the exchange rate should have changed by around 4%, and that's roughly what has happened, from about 130 to about 125.  (It doesn't always work as neatly as that, of course, but it tends to happen in the long run.)

Suppose you have a UK pension and you came to live in Japan a year ago.  Every pound of your pension would have bought you 130 yen when you arrived: a year later you need slightly more yen (1%) just to be able to buy the same stuff.

According to Betty's proposal your sterling pension should be increased by 1%.  So for each pound of your original pension you will now get £1.01.  At the current exchange rate of 125, each pound of your original pension amount will get you 126.25 yen.  So your real income has fallen from 130 yen to 126.

UK pensioners in the EU would get an increase of 5%.  So the UK government has saved money by paying you only 1% more instead of 5%, and you've paid the price.  How can you call that fair?
[/quote]

To play devils advocate: the UK based pensioner never really stops contributing to the society in which they live, they have to buy goods or services  those purchases in turn create tax or jobs. The person living in Japan creates jobs or services there.....

I appreciate the reciprocal arrangements were phased out, however how many people are there  claiming now that were effected by this and also have no pension from their new country of residence?

Actually I do know people who moved to Australia after their retirement, both their children had emigrated. Actually they came back about 3 years later and due to health issues that was their one and only trip back to the UK as the man was never able to fly again.

For any one emigrating now I think its clear that rules will only get tighter....in addition my own view is that this petition is pretty badly timed - as a UK tax payer I can think lots of things that come before dealing with this when money is tight.

[pachapapa]

Me two!

PPP has also been affected deleteriously by the effects of the pension regime policies effected by the UK authorities.

[Russethouse]

For my part, I find it quite impossible to believe that at a time when visibly we in the west (and not just the UK, obviously) have never been better off, we can't afford to pay a decent pension to those who are too old to work.

 Good grief - whats your middle name,  Macmillan? [;-)]

With rising unemployment and the economy only improving by baby steps, if that, I think you might need to re assess that!

 Where do you think the extra funds to pay a bigger pension are going to come from ?

[YCCMB]

It could be argued, however, that those now retired had, for the most part, the luxury of being able to work. One which isn't necessarily available to the generation which is now going to be expected to contribute to funding current AND future pensions.

Some questions:

1. Are there really - among pensioners who have emigrated abroad - a majority who rely solely on their STATE pension as a means of income? It would seem just a little foolish to me to go to the expense of moving to another country knowing (and, let's be honest, in general people moving to the affected countries DO know) that you'll have to live on a state benefit which will be frozen at whatever level it has reached when you make the move.

2. Is there real justification for increasing payouts to people who are no longer working, when pay increases to a significant number of the working population are being either frozen or pegged at below inflation??

3. Do pensioners - wherever their country of residence - assume that the purchasing power or disposable income of the working population is actually increasing at the moment?