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January 2012

Government considers unfreezing expat pensions

According to the International Consortium of British Pensioners (ICBP), the government has set up a working group to investigate the possibility of unfreezing the state pensions of around half a million UK pensioners who currently live overseas.

While the pensions of individuals residing in the European Economic Area and countries with which the UK has reciprocal arrangements rise in line with inflation, pensioners living elsewhere – including Australia, Canada and South Africa – receive only the same rate as when they originally retired.

Although the government conceded that meetings had taken place to discuss the issue, it added that these had concluded for the time being.

Consequently, anyone considering retiring to one of the countries where rates are frozen should ensure that they have enough additional savings to combat their reducing spending power.

They may also wish to consider transferring their UK pension overseas, in order to benefit from a low or tax-free pension income. Using a Qualified Recognised Overseas Pension Scheme (QROPS), it is not necessary for the pension to be registered in the holder's country of residence, so the retiree could, for example, retire to a popular destination, but move the pension to a light-tax jurisdiction like Monaco or the Channel Islands.
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