Frozen Pension Payments Prevent State Pensioners from Receiving Increases
Hundreds of thousands of state pensioners are being warned that they will miss out on the upcoming state pension increases, a situation critics are calling an "injustice." It is estimated that around 453,000 UK citizens will be affected due to their decision to relocate abroad, leading to what is known as "frozen pensions." This means that despite their National Insurance contributions made throughout their working lives in the UK, these pensioners will not receive the annual pension uprating that many state pensioners can expect.
The upcoming state pension increase in April 2025 is likely to be dictated by the earnings growth measure of the Triple Lock. The Triple Lock is a policy designed to ensure that state pensions rise each year by the highest of three factors: average annual earnings growth from May to July, the Consumer Prices Index (CPI) in the year to September, or 2.5 per cent. This mechanism was put in place to safeguard pensioners’ retirement income and ensure their pensions keep pace with inflation and wage growth.
Recent figures from the Office for National Statistics (ONS) show that August's CPI was recorded at 2.2 per cent, while the average earnings growth for the 12 months to July fell from 4.5 per cent to 4 per cent. This makes the earnings growth the current leading measure of the Triple Lock. Although the new state pension rates won’t be confirmed until the Autumn Budget, many are predicting that the 4 per cent earnings growth will determine the upcoming increase.
For those receiving the full New State Pension, this increase could result in weekly payments rising by £8.85, from £221.20 to £230.05. Since pension payments are typically made every four weeks, this equates to a payment of £920.20 every four weeks, up from £884.80. Over the 2024/25 financial year, the total annual payment would rise from £11,502 to £11,962, representing an increase of £460.
Similarly, individuals receiving the full Basic State Pension may see their weekly payments increase by £6.80, from £169.50 to £176.30. This would result in a four-weekly payment of £705.20, up from £678.00, and an annual payment increase of £276.80, bringing their total annual amountto £9,167. While these increases may provide some financial relief to many pensioners, an estimated 453,000 expats will not benefit from the uprating.
The issue of frozen pensions primarily affects UK citizens who have relocated to countries such as Canada, Australia, and New Zealand, where the UK does not have reciprocal pension agreements. In these countries, pensioners' state pensions remain frozen at the rate they were when they first emigrated, despite their contributions to the UK’s National Insurance scheme. This situation has prompted a campaign by the International Consortium of British Pensioners (ICBP), which has been actively fighting to "end the injustice" of frozen pensions.
The ICBP's "End Frozen Pensions" campaign is gaining support, with advocates pointing out that the cost of resolving the issue is relatively small compared to the overall state pension budget. Graham Dodd, a board member of the Canadian Alliance of British Pensioners, has been vocal in urging the UK government to address the matter. According to Dodd, the government has previously stated that they only uprate pensions where there is a legal requirement to do so, but critics argue that this policy is within the government’s power to change.
Dodd explained that unfreezing pensions would not require backdating payments to previous years. Instead, it would involve applying the current rate of annual increases to frozen pensions, as was done in previous cases for expats in the USA. The cost of unfreezing all current and future pensions to the level they would have been if they had never been frozen is estimated at £0.94 billion, which represents just 0.7 per cent of the total state pension expenditure forecast for 2023/24.
For British retirees living in Canada, the amount needed to adjust their pensions is calculated at £26 million, which is just 0.019 per cent of the total state pension expense projected for 2024. For all 453,000 affected pensioners, the cost to bring their pensions in line with current rates for the financial year 2024/25 is estimated at £49 million, with £34 million needed for 2025/26 and £35 million for 2026/27. These figures represent around 0.02 per cent of the total state pension expenditure in those years, leading critics to argue that the financial burden of rectifying frozen pensions is minimal.
The Canadian Alliance of British Pensioners, along with other campaign groups, is calling on the UK government to take action to resolve the frozen pensions issue. They argue that the new Labour government could easily bring all frozen state pensions in line with current rates for an additional cost of just £50 million, benefiting hundreds of thousands of pensioners who have contributed to the UK's National Insurance scheme.
As the UK government prepares to announce the new state pension rates in the Autumn Budget on October 30, the issue of frozen pensions remains a contentious one. While the majority of state pensioners will see their payments increase in 2025, the hundreds of thousands of expatriates dealing with frozen pensions will continue to face financial difficulties unless the government acts to address this long-standing problem. For now, many state pensioners abroad are left wondering when, or if, they will ever see the benefits of the Triple Lock system.
Images: UnSplash / Christian Bowen
Read more...
The upcoming state pension increase in April 2025 is likely to be dictated by the earnings growth measure of the Triple Lock. The Triple Lock is a policy designed to ensure that state pensions rise each year by the highest of three factors: average annual earnings growth from May to July, the Consumer Prices Index (CPI) in the year to September, or 2.5 per cent. This mechanism was put in place to safeguard pensioners’ retirement income and ensure their pensions keep pace with inflation and wage growth.
Recent figures from the Office for National Statistics (ONS) show that August's CPI was recorded at 2.2 per cent, while the average earnings growth for the 12 months to July fell from 4.5 per cent to 4 per cent. This makes the earnings growth the current leading measure of the Triple Lock. Although the new state pension rates won’t be confirmed until the Autumn Budget, many are predicting that the 4 per cent earnings growth will determine the upcoming increase.
For those receiving the full New State Pension, this increase could result in weekly payments rising by £8.85, from £221.20 to £230.05. Since pension payments are typically made every four weeks, this equates to a payment of £920.20 every four weeks, up from £884.80. Over the 2024/25 financial year, the total annual payment would rise from £11,502 to £11,962, representing an increase of £460.
Similarly, individuals receiving the full Basic State Pension may see their weekly payments increase by £6.80, from £169.50 to £176.30. This would result in a four-weekly payment of £705.20, up from £678.00, and an annual payment increase of £276.80, bringing their total annual amountto £9,167. While these increases may provide some financial relief to many pensioners, an estimated 453,000 expats will not benefit from the uprating.
The issue of frozen pensions primarily affects UK citizens who have relocated to countries such as Canada, Australia, and New Zealand, where the UK does not have reciprocal pension agreements. In these countries, pensioners' state pensions remain frozen at the rate they were when they first emigrated, despite their contributions to the UK’s National Insurance scheme. This situation has prompted a campaign by the International Consortium of British Pensioners (ICBP), which has been actively fighting to "end the injustice" of frozen pensions.
The ICBP's "End Frozen Pensions" campaign is gaining support, with advocates pointing out that the cost of resolving the issue is relatively small compared to the overall state pension budget. Graham Dodd, a board member of the Canadian Alliance of British Pensioners, has been vocal in urging the UK government to address the matter. According to Dodd, the government has previously stated that they only uprate pensions where there is a legal requirement to do so, but critics argue that this policy is within the government’s power to change.
Dodd explained that unfreezing pensions would not require backdating payments to previous years. Instead, it would involve applying the current rate of annual increases to frozen pensions, as was done in previous cases for expats in the USA. The cost of unfreezing all current and future pensions to the level they would have been if they had never been frozen is estimated at £0.94 billion, which represents just 0.7 per cent of the total state pension expenditure forecast for 2023/24.
For British retirees living in Canada, the amount needed to adjust their pensions is calculated at £26 million, which is just 0.019 per cent of the total state pension expense projected for 2024. For all 453,000 affected pensioners, the cost to bring their pensions in line with current rates for the financial year 2024/25 is estimated at £49 million, with £34 million needed for 2025/26 and £35 million for 2026/27. These figures represent around 0.02 per cent of the total state pension expenditure in those years, leading critics to argue that the financial burden of rectifying frozen pensions is minimal.
The Canadian Alliance of British Pensioners, along with other campaign groups, is calling on the UK government to take action to resolve the frozen pensions issue. They argue that the new Labour government could easily bring all frozen state pensions in line with current rates for an additional cost of just £50 million, benefiting hundreds of thousands of pensioners who have contributed to the UK's National Insurance scheme.
As the UK government prepares to announce the new state pension rates in the Autumn Budget on October 30, the issue of frozen pensions remains a contentious one. While the majority of state pensioners will see their payments increase in 2025, the hundreds of thousands of expatriates dealing with frozen pensions will continue to face financial difficulties unless the government acts to address this long-standing problem. For now, many state pensioners abroad are left wondering when, or if, they will ever see the benefits of the Triple Lock system.
Images: UnSplash / Christian Bowen
