The British Government has never denied that
pensioners living overseas are entitled to the same uprating as their
stay-at-home compatriots. But they have over the years made many
attempts to side-step the issue. In this essay we examine their excuses
and expose them for being just that - lame excuses.
The excuses have been repeated so often that they
have taken on the character of myths. In the Houses of Parliament, and
in written communications, politicians and public servants have relied
on these myths, giving them the guise of "policy". So let's look at them
in detail.
(The list keeps on growing like Pinocchio's nose -
remember the little wooden puppet whose nose grew every time he told a
lie).
British pensioners living in Australia have their
pensions supplemented by the Australian Social Security system.
False.
The (now defunct) Agreement on Social Security
between Australia and the United Kingdom was beneficial to emigrant
pensioners during their first 10 years in Australia, provided they
qualified under the means tests. After 10 years, a resident is entitled
to a pension in his/her own right, subject to the means tests. Those who
failed the means tests got no benefit from the Agreement.
When the agreement was terminated, Australia passed special legislation
to protect the rights of migrants who were already resident in Australia
but for less than 10 years.
Australian age pensions, and other similar
benefits, are subject to two forms of means testing. The pension is
reduced or even eliminated if other sources of income or total assets
exceed threshold levels.
Overseas pensioners receive their uprating if they
live in a country with which Britain has a reciprocal agreement.
False.
Britain had a reciprocal agreement with Australia,
and it did confer some benefits on British citizens emigrating to
Australia and vice versa. But it made no provision
for annual increases in pension to match those paid in the home country.
Australia does upgrade
pensions of its overseas pensioners in line with the 6 monthly
increments for resident pensioners. It does not need a reciprocal
agreement and does not wait for one to be signed.
In 1988, Mr. Nicholas Scott, M.P., then
Secretary-of-State agreed that "reciprocal agreements are not
necessary to pay pensions to all beneficiaries living abroad at the same
rates as those paid in the United Kingdom."
The Social Security Select Committee Report
(January, 1997) conclusions included the statement:
"39. It would clearly be impractical to negotiate
bilateral agreements with each of the other countries in the world where
people draw British state retirement pensions, and in any case
unnecessary; a simple change in British law could enable upratings to be
paid in any or all overseas countries, provided the political will was
there to do so."
And on 10th Mar 1999 the following exchange took
place:
Dr. Lynne Jones: To
ask the Secretary of State for Social Security what discussions he has
held with other Governments about extending bilateral agreements to
protect the position of UK overseas pensioners; and if he will make a
statement.
Mr. Timms: My right
hon. Friend, the Secretary of State has held no discussions about
extending bilateral Social Security agreements to cover uprating of UK
State Pensions paid to pensioners living overseas. Bilateral agreements
can be the means of providing annual increases of Retirement Pension,
but that is not their primary purpose. An agreement is not strictly
necessary to allow payment of pension increases, as that could be
achieved through changing UK domestic legislation.
So when on 7th February 2000 Jeff Rooker said:
"International treaties are the main factor, and there really should not
be any argument about that." he was telling a porky (rhyming slang -
pork pie). The Austrian government tried the same line of argument in
the Gaygusuz case, but the ECHR rejected it.
An international treaty could
force the government to
do the honourable thing; but no treaty could
prevent them from doing so.
In 1979, when Margaret Thatcher came to power,
she broke off negotiations which could have led to the end of the
"frozen" policy. This despite the fact that, in a letter to a South
African pensioner in September 1975, she had said that she would be
doing all she could in Parliament to help pensioners living in South
Africa to benefit from pension increases, and this matter would be
raised in the House of Commons.
In July 1994, Winston Churchill asked why the
pensions of British pensioners living in the Falklands were frozen when
Thatcher had spent so much money reclaiming these islands as British
sovereign territory.
The Social Security system is designed primarily
for people living in Britain. However desirable and worthwhile , . . .
the substantial additional cost involved would have to be found from the
money available for Social Security.
False.
There are two quite separate sources of money for
Social Security.
Source 1 is general revenue, the annual budget,
funded by taxation. Call this "Social Welfare".
Source 2 is the National Insurance Fund funded by
contributions from employees and their employers. Call this "Social
Insurance".
The principles of the Beveridge Report, written in
1942, are still as valid today as they were then. The Atlee Labour
government introduced a system of universal and uniform benefits, funded
by universal contributions. The objective was to eliminate poverty and
want. Basic benefits for all were to be provided from a state insurance
fund, irrespective of needs, and without the indignity of a means test.
Citizens were to be encouraged to supplement the state benefits by their
own efforts, so that the number of people who relied on Social Welfare
would be reduced.
It was never intended that Social Welfare benefits
be paid from the Social Insurance fund.
In any event, this excuse would not justify
discriminating between pensioners living in Darwin and those living in
Dallas.
The United Kingdom Government feels that its
priority is to direct the limited resources available to those
pensioners in the United Kingdom who are in most need.
False.
The United Kingdom Government feels that its
priority is to direct the limited resources available to those
politicians who are in most need - of votes. On 7th
February 2000, Jeff Rooker put it more crudely "Frankly, we have other
and better ways of spending ?300
million." In the Gaygusuz case, the Austrian government tried to justify
its discriminatory policies on the grounds that the money should be used
for its own citizens; the Court was not prepared to accept this
proposition.
The decision to uprate or not to uprate is not
based on need, nor should it if the principles of the Beveridge report
mean anything. The decision is based solely on country of residence. A
needy pensioner living in Canada gets no uprating, while a well-off
pensioner living in the USA does get uprating.
Here is a quote from a letter from the DSS dated
29/12/99:
"You are correct in stating that whilst
being permanently resident in the USA, you are entitled to
receive the annual increases in pension. However, if you decide
to reside in Australia you are no longer entitled to claim
annual increases in your pension, even if you do have US
citizenship."
So it is not even determined on citizenship - just
on country of residence.
A couple of quotes from the Commons Debate of
7th February 2000. (Both the speakers are Labour members.)
Mr. Andrew Mackinlay
(Thurrock): Will the order remedy the anomaly whereby--I
believe--460,000 British pensioners resident overseas currently do
not enjoy the uprating, while 390,000 do? It is not a blanket
embargo; it is a case of "some do, some do not". We are the only
country in the Organisation for Economic Co-operation and
Development that has been treating pensioners in that way. Will the
order remedy the unfairness? If not, why not?
Mr. Jeremy Corbyn
(Islington, N): ........no doubt he(the Secretary of State)
will shortly come in and announce that he agrees with everything my
hon. Friend and I are saying about the uprating of the overseas
pension.
The position is entirely illogical. Those
who live in one country will receive the pension, while those living
in another country will not. As I have said, people live in
countries for a variety of family and related reasons, and I think
that we should deal with the moral issue involved.
Then from Jeff Rooker
on Monday 13 November 2000
I have already said that I am not prepared
to defend the logic of the present situation. It is illogical. There
is no consistent pattern.
An Old Story with a
New Twist
An old lady had been living for a
number of years in a little old farm cottage just north of
the USA/Canada border.
With the advent of modern
surveying equipment such as the GPS, it was decided that the
house was located at 48? 59' 59" North, and was therefore
in the USA.
When the old lady was informed,
she was overjoyed. "Whoopee", she said, and "goody goody
gumdrops".
The border official, thinking her
reaction was a bit strong, asked her why.
Now the old ending to this story
has her replying: "I couldn't stand another one of those
Canadian winters".
But in the new ending she says:
"At last my British pension will be uprated".
Which ending is the more absurd?
Pensions are not uprated for immigrant workers who
spend their working lives in Britain then return to the country of their
roots to spend their retirement years among people of their own culture.
Pensions are uprated for pensioners living in the
UK (who, after all, can determine by their vote whether an individual MP
will be elected next time), and they are uprated for pensioners living
in any country that has been able and willing to force the issue.
Money is available for vote buying exercises,
such as granting free TV licenses to elderly voters. In effect, the
government is guilty of fraudulent conversion, stealing money from
"frozen" pensioners to buy votes for itself.
The National Insurance Fund has a surplus,
according to the Government Actuary, and this surplus is steadily
growing. In the past it reached a total of over 20 billion pounds.
Currently the surplus is
increasing by 2.5 billion pounds a year, which is many times the annual
cost which would be incurred in the National Insurance Fund if overseas
pensioners were treated with fairness and justice.
Another angle on the argument arose
in a letter from a British MP.
"A major consideration in deciding whether to enter
into an agreement is the extent to which the advantages to be gained
outweigh the cost of negotiating and administering the agreement."
This is the oddest piece of reasoning that we have
seen for a while. The cost of negotiation would be a one-off cost, and
would hardly justifying robbing the frozen pensioners year after year.
Treating all pensioners alike would actually be simpler and therefore
cheaper than the present mish-mash.
For example, at present they must record in the
system that the pensioner is or is not resident in a
frozen country. And when a pensioner in a frozen country goes on a world
trip or goes back to the U.K. for a visit, they have to cope with the
claims for uprating while the pensioner is in a non-frozen country.
Unless of course the non-frozen country is the U.S.A.
So if pensions were unfrozen, and all pensioners
treated alike, the cost of administration would be reduced.
The annual cost of social security fraud is over
fifteen times the cost of the missing uprating
The government has lavished money on building new
offices for Members of Parliament. The money being spent on these would
be enough to meet the cost of uprating for all frozen overseas
pensioners for one year.
The government has allocated hundreds of millions
to give free television licences to pensioners over age 75. One minister
remarked that this was "cheap, given the number of voters who benefit".
As expressed by Baroness Hollis "pensioners who
live abroad have chosen to do so, and they knew that their pension would
be frozen when they made that decision."
Partly true.
The same lame excuse was used by Jeff Rooker
on 7th February 2000. "Before people leave the country, they fully know
the rules on how pensions are uprated around the world. There is no
secret about the countries with which we have international treaties."
In an 84-page booklet issued by the Department of
Social Security, you can, if you search long enough, find a statement
that pensions are uprated only for emigrants to certain countries. You
are left to deduce for yourself that the old "empire" countries are not
among the favoured nations.
Pension freezing is a hidden clause, buried in the
fine print of the social insurance system. It is simply not good enough
to bring it out and brandish it when a pensioner emigrates; by then it
is too late to do anything about it. This is specially so in the case of
SERPS pensions, because a decision whether to contract out could have
been affected by knowledge of this secret condition.
The author was not told, when he emigrated as a
young man, that his part pension bought (bought) by his
own contributions would be frozen. Nor were his parents told that if
they decided to spend the last years of their lives with their son and
their grandchildren their pensions would be frozen.
But even if this myth were wholly true it would be
heartless and unethical.
If someone were to ring the noble Baroness and tell
her: "I am coming to rob you", and then did exactly that, would it be a
good defence in court? "Your honour, I told the lady that I would rob
her, so I think it is her own fault."
Would this be a good defence? Or would it be
instead evidence of criminal intent? In this myth, is the Baroness
really saying that all past governments and the present government knew
what they were doing, and always intended to rob overseas pensioners?
Jeremy Corbyn (Islington, N):said it well.
"people live in countries for a variety of family and related reasons,"
In a piece published in a Canadian newspaper
in 1995, one sufferer wrote:
I have a 93-year-old mother who has a
frozen pension. She has been frozen for 11 years. She was able to
keep up by doing some back and forth. But she became too frail to
travel and settled here - like people do when they reach pensionable
age and choose to spend their last years in Canada with the kids and
grandkids."
Not exactly a myth, but an excape mechanism used by
politicians in the guise of sympathetic support, i.e.:
"I understand the strength of your feelings about this," "I think you
have a strong logical case." "this unquestionable injustice "
True
but such apparently supportivesentiments are so
often followed by "but". " but I think you are also aware of the UK
Government policies on the matter." "but I am bound by party rules."
The truth is that the UK Governments of all three
colours (blue, red,
and the current mauve) have always been
driven by the ballot box, and individual members are driven by the party
whip. When in opposition, parties support the arguments of pensioners
resident overseas, but when in government they follow the same policies
as their predecessors.
This is not a party matter. It is a matter of
conscience. It is a matter of National Honour.
A Government Green Paper published in early 1999
entitled:
"Partnership in Pensions - A new contract in
welfare" said:
"Everyone entitled to a UK
pension should be able to get access to good quality welfare
services, wherever in the world they happen to be. Increasingly,
many people who build up their pension entitlement in the UK
move abroad when they retire. We mean to ensure that these
customers also get the best possible service."
AND
"The basic state pension will remain as the
foundation of retirement income for rich and poor alike. It will
not be means tested. We will raise it in line with prices, to
keep its real value over time."
BUT the Pensions Minister confirms the
discrimination against expatriates will continue.
Australian residents overseas who fail the
Australian means test must be well off and do not need to have their
pensions uprated.
Irrelevant.
Australians living overseas who fail the Australian
means test have done exactly what the Beveridge Report was anxious to
encourage - make additional provision for themselves.
No such criterion is applied to UK pensioners
resident in the UK or in Europe or in the USA. Pensions are uprated even
for those who have made adequate additional provision for themselves.
No such criterion would be permitted in private
occupational schemes. No pension fund administrator would be allowed to
argue "These people are well off, so we will pay them a lower benefit
than the rest of our members."
In any event, this excuse would not justify
discriminating between pensioners living in Manitoba and those living in
Michigan.
It has always been like this. (Not usually
expressed as bluntly as this).
False.
In the first place, the antiquity of an injustice
does not excuse it. Magna Carta was written to correct long-standing
injustices!
In a speech in the House of Lords, Baroness Fookes
reported that Lord Shore of Stepney, who was a Member of the Cabinet
which made the decision in the first place explained that the only
reason upratings for overseas pensioners were not allowed was that there
were severe exchange control difficulties at a time when tourists were
allowed to take out only ?50 in currency. Thus it was a precautionary
measure in a time of monetary crisis.
Jeff Rooker has admitted that there is no logic in
the distinction between frozen and unfrozen countries. In a BBC program
broadcast on 16th October 2000, he said: "There isn't a
logical pattern. There are 130 countries where the pension is frozen and
40 countries where it's uprated every year. This is for historical
reasons . I don't seek to defend the logic by the way......"
The situation has changed over many years as
gradually the British government has been forced to pay annual increases
in more and more countries. Before Thatcher the government was moving to
change the system.
Here is an excerpt from a "boiler plate" letter
received from one of the Minister's assistants:
"Pensions have been payable in certain countries
outside the UK since 1929 - initially in HM Dominions and then, between
1948-1955, in a small number of European countries, In 1955, retirement
pensions and widows benefits became payable worldwide. Upratings were
not normally payable. Upratings were less frequent then than they are
now and the fact that they were not generally payable abroad seems not
to have been considered
controversial."
"The last to come into force which provided
for upratings was in 1992 (with Barbados) and fulfilled a commitment
given in the 1970s."
Does it really take 20 years?
Here is a fuller explanation received from DSS
in May 2000.
When the rate of pension was
increased in 1946, the increase was not paid to pensioners
abroad. The reasons for this decision appear to have been
related mainly to then forthcoming new schemes of National
Insurance. It was considered that the substantial increase in
pension, from 10 to 26 shillings, was a first instalment of the
new scheme and that
pensioners abroad had
made only a small contribution to their pensions and could not
reasonably expect a share in the new scheme.
To which one BAPA member responded:
I paid my National Insurance
contributions IN FULL since starting work in 1945. and until I
migrated to Australia in 1991. During that period neither my
wife or myself were ever informed either by correspondence or
verbally that if we ever left the U K we would forfeit the right
to our rightful FULL pension therefore the pensions of myself
and my wife should be uprated.
Here is the full version of the myth as
expressed in a letter from the Minister's office.
"Ever since it was established the NI scheme
has worked on a 'pay-as-you-go' basis. This year's contributions go to
this year's pensioners. An individual's contributions provide a
foundation for calculating personal future benefit entitlement, but do
not actually pay for those benefits."
Irrelevant.
When a scheme is run on a pay-as-you-go basis,
this is another way of saying that the scheme is "unfunded"; that the
contributions are not invested to provide for future benefits; that the
government spent contributors' money instead of saving it for them.
Private pension schemes are always funded, but it is not unusual for
civil service and parliamentary pensions to be paid from an unfunded
scheme.
The failure to fund the scheme does not defeat
the members' rights to benefit - unless, of course, all the funds have
been embezzled as happened in the "Maxwell" fund.
But the department's letter does at least
acknowledge the link between contributions and benefit entitlement.
A distinction can be made between Social
Insurance and Social Welfare. Social Insurance implies that the pensions
are granted as of right because they have been purchased by past
contributions. Social Welfare implies that the pension is granted
because of need. A social insurance pension is not means tested; a
social welfare pension is.
But even if this myth is still held as Gospel
truth, consider the fact that UK pensioners who retire to Australia
were, in their working lifetime, taxpayers whose taxes paid for other
people's pensions. Why should they now be treated worse than pensioners
who live in the UK, or those who live in Milwaukee? Are not all pensions
paid from a taxpayer supported fund, and should they not all be treated
alike. Bear in mind also that overseas pensioners do not claim other
taxpayer funded benefits such as winter fuel payment, bus passes, and
health benefits.
Any uprating of pensions for pensioners in
Australia would only result in more money going into the Australian
Treasury.
This was the line peddled by Oliver Heald and
his staffers during the 1996 hearings of the Social Security Committee.
Jeff Rooker said much the same thing in the
House of Commons on Monday 13 November 2000:
If the Government did change their policy
in respect of Australia, we would be paying to the Australian
Treasury.
A callous
attitude to a sister country.
What they
should
have said was "Any uprating of pensions for pensioners in Australia
would only result in more money going to relieve the burden on the
Australian Taxpayer."
In any event it is only partly
true. Apart from new migrants who receive an Australian pension under
the ten-year rule of the (recently terminated) agreement,
all UK
pensioners would retain some or all of the uprating for their own
benefit.
In 19xx, the UK paid over ?nnn million to UK
pensioners living in Australia. Those people are contributing to the
Australian economy and very many will have done so for many years as
workers in Australia before they retired.
Fatally Flawed and Fractured!
The people most greatly affected are those who have
moved to Australia on or after retirement in order to join children who
emigrated in earlier years. After a lifetime of contributing to the UK
economy and the National Insurance Fund, they have a pension of 100% of
the base rate, plus, in many cases, SERPS pension. Such pensioners never
contributed to the Australian economy as workers.
Their children came to Australia as migrants in the
prime of life under the ?10 migrant scheme, and their pensions, if any,
are proportional to the number of years they contributed to the UK
economy. Their grand children were either born here or came as young
family members and have no entitlement to a UK pension; which is
reasonable, since they never contributed to the UK economy nor to the
NIF.
These children and grandchildren are Australian
taxpayers who have to shoulder part of the burden caused by the UK
government's failure to honour its responsibilities.
Another point worth noting is that British citizens
who spend a large part of their working life in Australia, then return
to Britain prior to retiring age, get a fully indexed pension. In most
cases the pension would be 100% of the standard rate. And all this
without contributing to the NIF and to the British economy during
the years spent in Australia.
The rate of contribution payable has never included
any element for the indexation of pensions payable abroad.
Specious, sophistry, red herring.
The Government Actuary simply does not use fine
grained calculation methods. He uses a crude projection of the gross
benefit payments of recent years in an attempt to predict the total
benefit payments of the next few years, and adjusts his calculations
regularly to allow for emerging trends.
As a consequence, there is allowance for indexation of
pensions payable in Israel and the freezing of pensions payable in
India. There is allowance for the paying of uprated pensions during a
temporary visit to the UK, and for the non-payment of pension uprating
to people who either do not know about temporary uprating or are
deprived of it because they are unaware of the periodic changes and
inconsistencies in the rules.
In consequence of the method used, the current
contribution rates do contain elements for all the variations mentioned
above.
Here are some points to ponder.
1.The reasoning is back to front. If there were any
merit in this statement, it certainly could not be advanced as the
reason, nor as justification, for the lack of indexation. It is the lack
of indexation that affects the calculation rather than the calculation
method justifying the lack of indexation.
2. The total cost of uprating pensions for expatriates
would make but a small dent in the annual accrual of surplus in the NIF,
and a minuscule adjustment in the rate of contribution paid by current
contributors.
3. When collecting class 3 contributions, the
department makes no distinction between those who contemplate receiving
an indexed pension and those who will have their pensions frozen. The
same rate of contribution is applied to both groups.
4. No differentiation in contribution rate is made
between those with a propensity to emigrate because they have
grandchildren living in a "frozen" country and those who do not.
It is clear that the writer was defending a statement
provided from on high, a statement that she did not understand and
expected that the average pensioner will not understand.
The underlying question after all these myths have
been exposed remains:
Why practise selective
discrimination? Why advance such arguments against unfreezing
pensions for Australian residents, but not apply them in the case of
American residents?
Ex
Pats Campaign
