In the past we have reported a number of times on the British government’s policy to “freeze” pensions paid to British expats living in a number of popular retirement destinations. This freeze means that many British pensioners find their pension payments are fixed at the same rate as when they are first paid out.
This is in stark contrast to expats living in – or coming from – a range of other countries. Here their pensions are linked to the rate of inflation, meaning that such expat retirees often enjoy a pension that increases over time with the cost of living.
The impacts of this policy are far-reaching. One such example is that many expat retirees find that their finances are squeezed ever tighter in old age, as the value of the payments they receive slowly decline in line with inflation.
Additionally, there have been reported cases of pensioners drawing additional funds from their adopted countries in an attempt to make up for the shortfalls they experience. To a degree these countries are therefore financing such retirees, which can make them less than welcome with some individuals.
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Also note that this is not necessarily a “new” news story. Over the last few years a number of large British media companies have highlighted the problem, which is largely unknown outside of expat circles.
For example The Guardian reported in 2012 that a 100 year-old expat retiree was trying to survive on a pension frozen at just £6 a week. This is on contrast to the £100+ she would be benefitting from if she had remained in the UK.
The BBC also pointed out that this was far from an isolated incident. In August 2013 they reported the story of Delycia Willmott who worked hard for 40 years in the UK before retiring to Australia. At the time of writing, thanks to her fixed pension, she was trying to make ends meet on just £17 a week.
Such pensioners are potentially missing out on thousands of pounds of pension money which they would otherwise have enjoyed after working hard all their lives, if only they’d retired to a different country where such policies do not take effect.
Now it seems that Australian website “Independent Australia” has taken up the mantle, referring to the policy as “immoral”.
IA is keen to point out that the UK is the only OECD country which selectively freezes pensions based on where an expat is retiring to, which is leading to hardships for expats who have worked hard their whole lives.
In addition, IA calculates that the situation of frozen pensions could be costing Australia over a $1 billion a year, thanks to a decline in means-tested pension payments being made to Brits retiring to Australia.