Here at Expatriate Healthcare we recently reported on how thousands of British pensioners that have retired to the sun are potentially missing out on considerable sums of money.
In essence most British pensions are tagged to the economy; as the cost of living goes up, so do pensions in line. This ensures that pensioners are able to benefit from the same standard of living, no matter how long they live for after retirement.
The alternative, of course, is that pensions are “frozen” and don’t increase with inflation. Just such an arrangement can mean that formerly comfortable retirees find that their pension goes less and less far.
In such cases many British retirees have found it harder and harder to survive financially abroad with their dwindling pension essentially shrinking in value each month. It’s a major problem for many hard-working individuals who have diligently paid into their pension fund throughout their working life.
Just as they’re able to start enjoying life, so the money they’ve worked so hard for starts to drop in real terms.
Sadly, this is exactly what has happened to a large number of expats who have retired abroad in recent years. The policy doesn’t apply to all expats; it all depends on the country to which one retires.
Countries where pensions are frozen include popular expat destinations like Canada, Australia and New Zealand, and it is estimated that roughly half of British expat pensions are now frozen in this manner.
The first thing to realize, therefore, is that if you want to avoid such a situation yourself when retiring abroad it’s essential that you select the right country. Not doing so can have a serious impact on your finances.
Recently, however, a new glimmer of hope has shown its face, as reported in the Guardian. As it turns out, Labour leader hopeful Jeremy Corbyn is strongly opposed to the principle of freezing expat pensions. In a number of speeches he has openly renounced the policy.
He has been quoted as telling other politicians:
“We should arrange for the current state pension here to apply to British pensioners wherever they happen to be, provided that they are eligible to receive it.”
If, as the book-makers expect, Mr Corbyn becomes the new leader of the Labour Party, he might just be the catalyst necessary to begin campaigning hard to reverse a policy that he has described as “morally wrong”.
Quite how successful Mr Corbyn will be, if he wins the leadership vote, remains to be seen. But the biggest news is that for the first time in some years it seems that a premier British politician might just be in a position to fight the cause of behalf of expats, resulting in a stronger financial future and a stronger retirement for hundreds of thousands of retirees.