The UK government is being taken to court by a group of UK pensioners who have since moved overseas and disagree with the way in which their pension arrangements are being managed. In simple terms, the UK government allows former UK residents to claim their pensions even if they have moved overseas but it depends upon exactly where you move to as to whether you will receive an indexed pension payment, which will increase annually with a link to the rate of inflation, or receive a set payment for ever and a day.
The rules of the UK government state pension scheme
As we touched on above, as long as you have paid into the UK national insurance system you will be entitled to some form of pension even if you move overseas to spend your later years. However, there are two specific arrangements in place which are causing significant problems in some areas of the world where some UK pensioners see their payments increase in line with inflation and others have their payments set upon leaving the UK.
Countries with a reciprocal arrangement with the UK government
As the European Union moves towards a “super-state” it will come as no surprise to learn that the likes of Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden all have reciprocal arrangements with the UK government, as do Iceland, Liechtenstein and Norway who are members of the European Free Trade Association. Separate arrangements have also been made with the Swiss government, US government, Jersey government and Jamaican authorities.
In simple terms this means that any former UK resident moving overseas to one of the above countries will continue to receive their state pension which will be indexed in line with those received in the UK. When you consider that you could be overseas for 30 years or more in your retirement even the smallest of increases over the years will have an impact.
Countries with no reciprocal agreement with the UK government
While there is no reason why any country in the world cannot agree a reciprocal arrangement with the UK government for pension payments, although those not mentioned in the above list do not currently have any reciprocal arrangements in place. When you consider this will take in places such as Australia, South Africa and an array of other areas of the world, including South America, which are becoming more and more popular with expats there are potentially some serious issues to consider.
As trade relationships come ever closer between countries around the world there is an opportunity for those not currently “in the loop” to forge close relations with the UK government which could in due course benefit expats in the future. However, at this moment in time those who leave the UK for pastures new who do not have a reciprocal pension arrangement with the UK government will effectively have their payments fixed at the time they leave the UK.
The court case
The court case which is currently going through the legal system relates to a group of UK expats who have moved to countries that do not have arrangements in place with the UK government that allow their pension payments from the UK to be indexed linked on an annual basis. They believe, having paid their national insurance and taxes over the years, that they are as eligible as any other party to receive the same as those in qualifying countries and as we suggested above, with potentially 30+ years of payments to come, they could miss out on significant rises in the longer term.
It is estimated the case could involve up to 500,000 UK pensioners who are currently living overseas and drawing their UK state pension. When you consider the sums of money involved there is potentially a massive liability coming the way of the UK government if they lose the case. The fact that some UK residents appear to be treated differently to others, depending on where they make their new home, would in very basic terms appear to be some form of human rights abuse?
Claiming your pension overseas
Moving back to the very basics of those who move overseas and are eligible for a UK state pension there are a number of actions which you need to take in order to ensure receipt of the funds in an orderly manner. In simple terms, you need to let the UK Pension Service know that you are looking to move overseas and forward details of your new address and bank account. This information should be sent to the :-
International Pension Centre
Newcastle Upon Tyne
Telephone number : +44(0) 191 218 7777
Please note that these details are correct at the time of writing this article.
UK pension forecast
For those who are living overseas before their retirement date there is a service in the UK which allows you to request a formal pensions forecast. This particular figure can be requested up to 4 months before you reach your UK pension age and will confirm what your UK state pension payment will be and whether this will increase between the day of request and retirement. If you have any questions regarding pensions forecasts or indeed your national insurance contributions then you should contact :-
HM Revenue & Customs Charities, Assets and Residence (Residency)
Benton Park View
Newcastle upon Tyne
For those calling within the UK the telephone number is 0845 915 4811 and for those calling outside of the UK the number is +44 191 203 7010.
In simple terms, if you don’t ask then you won’t know what to expect!
Payment of your pension in a foreign land
As long as the pension authorities in the UK are aware of your current address they will send you a claims form roughly 4 months prior to your UK pensionable age which will ask you whether you want to claim a UK state pension. The form will also request details such as how long you have lived in your new homeland, details of state insurance and other pension rights in any other country. Once the information is returned to the UK authorities, details would then be passed to any other EEA country where you have been insured so that your total pension arrangements can be organised and payment begin as soon as possible.
Building a state pension in your new homeland
Even if you have paid into the UK state pension system and you are eligible to a pension payment in retirement you may still be able to contribute to a similar arrangement in your new country if you so wish. It is therefore vital that you take professional financial advice both prior to leaving the UK and upon entering your new country of residence so that you can arrange your financial affairs to the best of your abilities.
It is easy to forget that when in employment in a foreign land you will have income on a regular basis but what happens in your later years when you retire and you are likely to see a change in your financial situation?
Many people seem to live for the moment without looking too far ahead to later years when ultimately, having worked all your life, you are likely want to take it easy and live the kind of life that you always dreamed of without the pressure of everyday work. Without financial planning, for many people this will be nothing but a pipe dream!
The need for financial planning when moving overseas
As we have said on numerous occasions, more and more people who move overseas for a new life seem to focus on the very short term, finding a job, finding employment and settling down, and often neglect the need to look at the long-term picture as well. Can you imagine the pressure if you lived in the UK and you lost your job? Well imagine the pressure if you lived overseas and you lost your job and were possibly not entitled to state benefits!
While this may sound like something of a doomsday scenario and a depressing thought, there is a need to take in the bigger picture and ensure that you are financially stable for the future as well as for the short to medium term. You may have a family to support, you may have debts to finance and you may have other aspects of your life to consider. You are literally leaving everything behind to move to your new country and therefore need to ensure that your financial situation is as stable as possible and your prospects as bright as they could be for the future.
Financial liabilities in your new homeland
When moving from your former homeland, as we have also mentioned on numerous occasions, it is very easy to fall into the trap of assuming that the situation will be exactly the same in your new home country regarding benefits, pensions, etc. However, this is a very dangerous and potentially damaging assumption to make because not every country in the world has the same social benefits system, not every country in the world has a liquid mortgage market and not every country in the world will offer support to those who are struggling.
For those moving as a couple, potentially with a family, there is also the fairly depressing thought of how the situation would pan out if the main breadwinner was unavailable and how this will impact not only on the financial situation but family life. An elderly widow left overseas with a large mortgage to pay off and no income to speak of would be left in a very dangerous and potentially catastrophic situation. While sometimes we don’t like to look ahead to what may and may not happen there is a need to be realistic and plan as far ahead as we can.
There is no doubt that the European Union is becoming more of a “closed shop” as the member states become ever closer leaving those out of the loop to fend for themselves. Quite how the UK government can justify indexing pensions for those living in EEA, EU and the small band of countries with individual reciprocal arrangements is difficult to understand because ultimately those involved have to all intents and purposes paid the same money into the system and should quite justifiably expect the same money out?
The fact that any discrimination, such as that seen against countries without a reciprocal arrangement, would be illegal within the EU poses the question as to whether it should be illegal for countries outside of the EU?
Many people believe that the EU is moving headlong towards a super-state based upon a very similar system to that in America and the fact that the likes of the UK are effectively unwilling to do business on the pension front with those not within this “special group” gives the impression of a “them and us” mentality. It will be interesting to see how this particular court case develops because ultimately with around 500,000 people currently affected there could be a potential liability of billions of pounds for the UK authorities.
Aside from the pension situation which we have discussed in detail above there is also a need to look at your overall financial picture before you move overseas and when you are there. It is dangerous to assume, as we have said on numerous occasions, that the financial system and benefit system to which you are moving is the same as the one you are used to because in many cases this is not the case. You need to be aware of exactly what support is there for you in times of trouble, what financial services are available and ultimately how your own financial well-being would be impacted by certain unexpected events.
For those looking to move overseas the need to look not only at the short to medium term picture but also the long-term scenario is paramount. Focusing too much on the short to medium term can often be to the detriment of the longer term where there may potentially be a significant reduction in income and other money may need to be found from other sources just to survive.
Pension-Parity-UK is an independent site for all British Frozen Pensioners. It supports the International Consortium of British Pensioners (ICBP) in its campaign to rectify this pension disparity. Click the logo on the right for a page listing the ICBP member Associations