Pension freeze for minorities who retire abroad

People who retire to countries such as India, Pakistan, Trinidad &Tobago, Grenada, Nigeria and Kenya are not entitled to their full pension payout, unlike those retiring and staying in the UK and Europe.

People from Black and minority ethnic (BME) background who retire to certain countries will have their state pension frozen for the duration of their retirement and this will have a detrimental effect on future of BME finances according to a report by equality think tank Runnymede Trust.

Runnymede, a leading and independent UK race equality charity recently published a ‘The Future Ageing of the Ethnic Minority Population of England and Wales’ report alongside a three year programme to research and monitor older BME people in UK.

One of the preliminary reports focus on the future ethnic makeup of older people in the UK in terms of financial inclusion, and another on the decision to retire abroad (“The Costs of ‘Returning Home’”).

The project funded by Nationwide Foundation was launched at the House of Lords. The report was produced to indicate to researchers, policy makers and prospective retirees the real costs and benefits of retiring to a particular country other than the UK.

The study found that while people who retire abroad may initially find it cheaper and gain a better quality of life, they could discover hidden costs to that decision. In Britain pension indexing or uprating is applied to state pension in line with earnings and price increases, depending on which are highest.

Uprating essentially increases the annual amount of the basic pension. A pensioner who retired to Canada in 2000 would be getting £67.50 per week in state pension which is £30 less than what their relatives would be getting in the UK.

On a long-term scale this means that a person who retired abroad in1980 has received £48,825 less than what they would have received if their pension was uprated.

But unlike most countries the UK does not uprate state pensions for those who choose to live abroad in countries that it does not have a reciprocal pension agreement with.

Pension increases therefore only apply to UK pensioners who live in the European Economic Area or in 15 other countries, but not in some Commonwealth states. At present there are around 1.1 million pensioners who live abroad and roughly half of these never see their pension uprated.

In effect this means that over 500.000 Britons who retire abroad have their state pension frozen (not uprated) when they leave the country and so do not receive their full pension rate.

Lords crossbencher Baroness Greengross said:”When people retire whether they were born in a central urban location in the countryside or abroad they should know and understand the full costs of this decision.

Runnymede Trust senior research and policy analyst, Dr Omar Khan concluded: “For people who have contributed consistently and significantly to the British social insurance fund but who are not currently drawing down from that fund, the British Government has an obligation to meet their entitlements in a fair way.

Other countries where uprating does not apply include: Bangladesh, China (incl. Hong Kong), Australia, Sri Lanka, Ghana, Uganda, Malaysia, Zimbabwe, Somalia, Iran, Singapore, South Africa and Morocco.

Canada a popular BME retirement destination for is also subject to pensions freeze, but Jamaica and Barbados are two of the countries where pensions are uprated.

A group of pensioners including some from South Africa and Canada appealed to the European Court of Human Rights to receive pension increases in line with inflation, but the case was rejected in March this year.

The Court decision saves the government at least £500m a year and is justified by the Department for Work and Pensions saying that its first responsibility is with pensioners living in the UK. To read the reports visit the Runnymede Trust.

By Regina Nyametscher