Planned changes to be introduced by the UK government on pensions will affect 220,000 overseas residents who, through virtue of their British spouse’s work history, will qualify them for the ‘married person’s allowance’, entitling them to a British state pension. The Pensions Ministry calculates the stoppages will save The Treasury around £410m
Now I’ll be the first to say a saving of £410m is not an amount to be sniffed at, but with experts already pointing out that the cost of administering such rules on those living outside of the UK would far outweigh the savings, it’s hard to see the sums adding up. Nor does Mr Webb’s justification that most overseas spouses should not be entitled to a pension as they have never set foot into the UK or paid into the system sound credible when you take into account the half a million British pensioners living in countries such as Canada and Australia who have had their pension payments frozen.
The current rules mean that a pensioner who paid National Insurance contributions throughout their working life yet moved to a country in 1995 where pension payments are frozen still only gets £59.20 per week, compared to the current basic state pension allowance of £102.15 per week. Now by my calculations that’s a saving of over £1bn, or more if you take into account savings to the NHS through not having to supply healthcare.
Frozen pensions
And there are other potential ramifications for expats. The planned changes not only apply while living outside the country, but also affect those returning to the UK. Indeed there are currently 1.7 million spouses claiming the married person’s pension living in the UK. While those currently claiming will not be affected, expat families returning to the UK whose spouses are coming up to retirement in 2016 when the changes kick in will have little time to work on a Plan B in terms of funding their retirement.
Most of those likely to be affected will be women accompanying partners on an international assignment and who have given up work to look after the home and raise a family, rendering them unable in many cases to build up enough individual savings to fund a private pension or National Insurance contributions to qualify for a state pension. This is a vulnerable sector of the population and one that deserves better treatment and support.
Yet as governments worldwide introduce pension reforms that ensure the onus is on the individual to fund their own retirement, I doubt that this latest erosion of expats’ state benefits and pension rights is over. But at what cost?
