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Government U-turn could cut pensions for hundreds of thousands living abroad

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Wherever UK workers spend their retirement, they should be able to expect a pension that won’t decrease year after year.

The government’s refusal to guarantee future pension increases for UK retirees in EU countries has brought back into the spotlight an issue that blights the lives of hundreds of thousands of retirees.

These annual increases are not a perk. They are needed to make sure the value of pensions is not eroded over time by rising prices.

Denying this uprating to UK workers retiring to an EU country means inflation would whittle away more than a third of their pension over the course of a 20-year retirement.

But this is exactly the situation most pensioners living overseas in non-EU countries currently face.

More than half a million of them in countries from Australia to India to Nigeria are effectively denied their full pension. These pensioners earned their state pensions through National Insurance contributions and credits like everybody else.

The ‘End Frozen Pensions’ campaign has uncovered countless stories of elderly pensioners in these countries struggling to make ends meet. Many have seen their pensions as much as halved in real terms over time.

Some countries are covered by reciprocal agreements that legally bind the UK government to inflation-proof state pensions paid to residents, however.

This includes the USA, where around 130,000 UK pensioners live, and members of the EU, European Economic Area, and European Free Trade Area – home to almost half a million people in receipt of a UK state pension.

The announcement this week that the UK will continue uprating these pensions for the next three years in the event of a no-deal Brexit – with no guarantee after that – is hardly reassuring for this last group.

It is a significant watering down of earlier promises.

Pensions minister Guy Opperman has previously stated the government had reached an agreement to keep this uprating.

Even in the event of a ‘no-deal’ exit, the government had pledged that “where it is in our control, the UK will also continue to preserve certain rights of UK nationals in the EU, for example by continuing to pay an uprated UK state pension to eligible UK nationals living in the EU”.

The government must honour these pledges – short term guarantees are not enough. Otherwise it is likely the number of pensioners with frozen pensions will almost double to 1 million.

And it needs to go further. All of these pensioners have contributed through the National Insurance system on the same terms as the everyone else – they deserve the same pension rights.

This applies to Commonwealth or EU citizens who return to their countries of birth after working and contributing to life in the UK, or British citizens who want to retire to Spain or France.

Wherever UK workers spend their retirement, they should be able to expect a pension that won’t decrease year after year.