Expats in legal pension challenge
Brits who retire abroad could have their pensions increased each year as part of a landmark legal challenge being heard by a European court.
The European Court of Human Rights will this week hear a complaint from a group of 13 pensioners who want the British government to increase their state pensions each year in-line with inflation.
The state pension is reviewed each year with a view to increase payments to take into account the higher cost of living. Any increases are automatically passed on to pensioners living in the UK, the European Economic Area and countries such as the US.
However, UK pensioners who live in some commonwealth states, including South Africa, Australia and Canada, do not benefit from so-called ‘inflation proofing’. Instead, their payments have been frozen at the rate payable when they left the UK.
The 13 British pensioners, who spent most of their working lives in the UK and paid their national insurance contributions in full, have been fighting for an end to this ‘discrimination’ since 2002. Heading up the group is Annette Carson, who argues that pensioners living abroad have the same need for a reasonable standard of living in their old age as those living on British soil.
Carson emigrated to South Africa in 1989, and retired eight years ago. She currently receives £67.50 a week from the British government, despite have paid her full national insurance contributions while working in the UK and being entirely depend on this money to support her. Had she been entitled to an index-linked pension, it would now have increased to £82.05 per week.
Her case, and its subsequent appeal, was finally dismissed by the House of Lords in 2005. The Peers found that her situation was not relevantly similar to a pensioner of the same age living in the UK, as the cost of living was much lower in South Africa despite there being virtually no social security.
Now she and 12 other pensioners will state their case to the Strasbourg court. The hearing is likely to last two hours, but a decision will not be made until as late as April next year.
The legal challenge is being supported by age charities. Andrew Harrop, head of public policy for Age Concern and Help the Aged, says: "It's hugely unfair that pensioners who have made their national insurance contributions all their lives in the UK are being penalised for retiring abroad and losing out on the uprating of their pension."
A scheme originally established in 1944 to provide protection against sickness and unemployment as well as helping fund the National Health Service (NHS) and state benefits. NI contributions are compulsory and based on a person’s earnings above a certain threshold. There are several classes of NI, but which one an individual pays depends on whether they are employed, self-employed, unemployed or an employer. Payment of Class 1 contributions by employees gives them entitlement to the basic state pension, the additional state pension, jobseeker’s allowance, employment and support allowance, maternity allowance and bereavement benefits. From April 2016, to qualify for the full state pension, individuals will need 35 years’ of NI contributions.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).