Currently, British expats which are drawing a pension and residing in Australia do not get pension increases in line with inflation. This deal is only available to British citizens living in the European Economic Area, United States and Israel, countries which the British Government has a special agreement with.
Many British pensioners down under, therefore, are surviving on just a few pounds per week. The government in Australia has helped the situation by handing out a supplementary pension to these individuals, but in the recent economic climate they are beginning to have second thoughts.
Providing British expats with supplementary pensions is estimated to cost the Australian tax payer around £64 million per year. Australian Foreign Minister Bob Carr said “I will be raising [the issue] with my UK counterpart, William Hague, and be pressing the case very strongly” before a recent meeting they had together.
Mr Carr believes that Australia have a very strong case here. British expats which have migrated and retired in Australia shouldn’t have to rely on handouts from the Australian Government, where they have never paid a penny of tax themselves. Many Foreign Ministers have raised the issue before, without success.
The UK Foreign Office state that a change would be unlikely. Because pensioners living in Australia have not paid UK tax to offset pension increases, it is not fair to apply these changes.
Furthermore, it’s not just pensioners in Australia which are suffering. There are a total of over half a million British retirees abroad with frozen pensions. Canada, New Zealand and South Africa also make up a large proportion of the numbers.
For people planning to retire abroad, it is always worth considering the impact the move may have on your future pension allowance.
A recent drive by the International Consortium of British Pensioners has resulted in over 15,000 people signing a petition demanding a rethink of the expat pension system. If the petition reaches 100,000 it will become eligible for discussion in the House of Commons. However, it’s unlikely any major changes will take place even if enough support is drummed up. The UK Government have recently been tightening up on domestic pensions, so it’s hard to see why they would back track on the frozen expat pension situation.
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