What are “frozen pensions” in the UK?
Pension “freezing” refers to British expats' pension becoming locked at the amount it was when they relocated abroad. It means that if a British citizen moved to South Africa in 2000, he would still be getting the same amount that a retiree received back in April 2000: £67.50 per week. Even if his peers back in the country are now getting £185.15, an amount more in line with the cost of living of 2022.
There's another contradiction: not all expats have their pensions frozen. The UK does have social security agreements with certain countries that allow expats to get their full pension from there. British expats in all countries of the European Union, the United States, Jamaica, Barbados, Bermuda, Mauritius, Israel and the Philippines have their pensions increased each year in the exact same way as citizens domiciled in the UK.
However, all expats outside of this short list of countries get lower frozen pensions. This includes those in Australia and Canada, two top destinations for British expats. Even if they paid contributions to the National Insurance for their whole lives before moving abroad, they will still receive a much lower pension amount.
How do frozen pensions affect expats at a time of global inflation?
Most countries around the world have been struggling with inflation since the pandemic. Social services have increased in line with inflation so that people can survive. In April 2022, the UK's State Pension increased by 3.1%, from £179.60 to £185.15. That is the full pension that a citizen who's been contributing to the National Insurance for at least 35 years gets. Inflation in the UK in 2022 is over 10%: while the 3.1% pension raise does not compensate for all of that inflation, it does help.
However, retired expats who get less than £100 as State Pension are struggling with the cost of living. In a Guardian article of 2021, a retired expat in South Africa by the name of Valerie Hepplestone shared her financial difficulties. She explained that even if inflation was high, even if the cost of electricity had gone up by 13% in South Africa, and even if her husband had multiple costly health conditions, they both still received only £65 per week as pension from the UK. She highlights that just their medical aid contribution cost £60 a week, which left them with only £5.
Hepplestone and her husband were only surviving by depending on their adult children. She felt this situation was deeply unfair, as she had paid National Insurance contributions for all of her working life in the UK and wasn't clearly informed of the freezing of her pension when she moved abroad. This is an opinion shared by Fred, a British expat in Indonesia, on the Expat.com forum. While he says there's a long time to go before he retires and is directly affected by this issue, he opines that “the essential truth is expats paid the same in [the National Insurance] so should be entitled to the same payments out.”
Another British expat on the same forum, however, disagrees. He says that expats have to pay attention to all the legal implications of expatriation: “Honestly, there are rules to follow for your pensions, and it is up to you to understand and follow.” In his opinion, deciding to move to a country without a social security agreement with the UK “is a matter of choice and planning.” He says that if he had remained an NHS employee instead of moving abroad, today his pension would be higher, but he had calculated that he would still be able to live well abroad through a combination of various pensions.
In the UK, there exists a group called the All-Party Parliamentary Group on Frozen British Pensions. As the name says, it unites British parliamentarians of various parties who want to unfreeze the pensions of expats. They highlight the anachronistic and arbitrary nature of allowing pension increases for only some expats. They point out that many of those who are being denied a full pension are in Commonwealth countries which, by the very nature of that political association, should have all had social security agreements with the UK. These expats include retirees of ethnic minorities who had spent their careers contributing to the UK's public services (e.g., NHS) but had to move back to other Commonwealth countries to reunite with their families.
This group of parliamentarians wants the UK to draw social security agreements with more countries. For instance, in a parliamentary session on 8 November, MP Alan Brown urged the government to enter into an agreement with Canada, given that 125,000 elderly British retirees live there.
