…or so some people in this government want you to think
Everyone needs to ensure they get a good pension at the end of the day. So join Lib Dems Overseas Fringe Event: Frozen Pensions to Lost Pensions at the autumn conference 1pm on Sunday 27 September to update yourselves on the politics of pensions and campaign to safeguard your future!
For decades the UK state pension lagged seriously behind the growth in average earnings. In 2011 the coalition government introduced a formula to protect pensions against the vagaries of inflation. It introduced a mechanism to guaranteeing that the state pension would rise every year by the highest of the following:
– The rise in average earnings
– The rise in the Consumer Price Index
– Or 2.5%
It was called the Triple Lock and was hailed with great fanfare.
But no-one foresaw the coronavirus and the need to spend billions of pounds to shore up the economy and protect jobs. Where would money to pay for it come from? One soft target identified is – you guessed it – the Triple Lock. The rationale is that earnings and prices this year could fall, yet pensioners would still get the 2.5%. Then, the following year pensions could surge in line with fast-rising earnings.
But those who think that our pensioners are spoilt are probably unaware of the fact that in 2019 the OECD provided data showing that the UK state pension was the worst in the developed world, paying only 29% of average earnings. By comparison, the Netherlands led the table at 100%. Mexico was closest to the UK at 29.6% while the average across the OECD was 62.9%.
What about occupational pensions?
Many British workers could compensate for the relatively poor state pension if they held company or private plans. These schemes for the most part ensured a pension, usually at 65, based on salary and service or at least an annuity which was not so generous but would still pay a pension for life.
Then in 2015 came the bombshell announcement from the government that pension pots could be accessed at age 55 and could even be cashed in subject to a large tax deduction. It was a popular decision and a vote winner. Now, five years on, many of those pension pots are exhausted. Over 30 billion pounds has been withdrawn from them. Those remaining are being drawn down at unsustainable rates. Thousands of pensioners have fallen victim to scams to a point where the Work and Pensions Committee has had to launch an enquiry into the impact of pension freedoms.
But who are the biggest losers?
The dubious honour goes to half a million pensioners who have settled in countries that do not have suitable reciprocal agreements with the UK. Their state pensions are frozen at the rate they received when they retired or left the UK. The Triple Lock has no meaning for them as they have not benefited from any increase for the last 70 years. A gross injustice which was ignored for decades. But more recently a campaign to right the wrong has been gaining traction and has support across party lines.
Ed Davey is supporting Lib Dems Overseas’s campaign on Frozen Pensions, and we have just made a detailed submission to the recently-formed All-Party Parliamentary Group on Frozen Pensions.
Join us on Sunday!
* Colin Bloodworth is a member of the Lib Dems Overseas Executive .
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6 Comments
Given what the government has been doing to try and maintain an economy, perhaps we should be looking at pensioners slightly differently. These are people with time on their hands and with a decent pension money in their pockets, so perhaps what is needed is a government scheme such as the recent Eat Out campaign that are focused on pensioners. In this way whilst the headline pension may not be that great, spent wisely in the local economy it could be worth much more.
This also enabling further trials and experience to be gained over the potential implementation of a much wider citizens income.
Are you really arguing that we need to give pensioners more money because some of them have chosen to cash in some of their own pensions?
I’ve been a ‘pensioner’ now for nearly twelve years, although, as an early retiree from teaching, make that twenty one. Since then I have earned extra cash as a councillor until 2017 so I have been lucky. Do I feel guilty about my ‘income’? Not really as, for the final twenty of my thirty four years at the chalk face, I decided to pay an extra 3% on top of the 6% of my teacher’s salary to catch up with the four years of contributions I would have paid had I not spent those four years teaching abroad. Also, because the government only counted my contributions to my state pension from the time I started full employment in 1966 (despite insisting that I paid a ‘full stamp’ when I worked as a student during most university holidays), I do not qualify for the maximum payout. That said, neither I nor my wife would wish to grumble at what we get and are in the fortunate position to be willing to take a hit. I’ve just gone back to paying my TV licence after a two year hiatus and I’m perfectly willing to forgo the £100 Winter Fuel Allowance. I think my wife is as well.
Regarding ‘reciprocal agreements’, it’s important to undertake due diligence before you decide to spend your final years abroad. My brother and sister in law emigrated to Namibia (yes, NAMIBIA) in 2010, seeking the kind of life style that the good old pound sterling could not have bought them over here. What they should have realised was that Nambia, formerly German South West Africa, unlike places like the RSA or Kenya, to give just two examples, had never been a British colony. That ought to have rung a few bells. So their state pension has, as far as I can ascertain, been frozen at 2010 levels. They even approached their former UK MP a few years back; but got nowhere. However, given their generous occupational pensions, they have been able to enjoy life and afford regular visits to their family still over here.
Call it sour grapes if you want – you can even call me a smug so and so – but if anyone takes this particular plunge without carefully doing their homework, which includes doing the basic maths, they only have themselves to blame!
Some annoying things, people who have paid their NI and get the state pension end up paying council tax whilst those on lifetime benefits get pension tax credit and do not pay council tax. Handouts like the Green Grant always need you to be on some benefits to qualify (for the 10k grant) whereas those on the state pension only do not qualify despite often having a lower income than those on benefits. George Osborne upped the no, of years of NI contribution to get the full state pension to 35 (from 25), which seems a touch excessive given the way people go in and out of work.
Maybe the answer is UBI replacing benefits and state pension for those over the retirement age (with a ten year residence test to make sure we are not overwhelmed with pensioners from abroad), perhaps partially paid for by pushing the retirement age up to 70… but with Covid that needs to be 60 with UBI to keep the older people out of danger, or at least give them the choice of early retirement (only until Covid fades, though unless it is also done to get more youngsters in employment).
So early retirement for all with UBI instead of the pension or welfare, would help with the Covid mess and unemployment.
BTW people who retire to countries where state pension do not increase, do so out of their own choice so it is not a priority at this time of Covid madness.
PS BOE “printed” 300 billion to cover Covid so why would taxes need to rise, the govn already has the money.
Frank West
“BTW people who retire to countries where state pension do not increase, do so out of their own choice so it is not a priority at this time of Covid madness.”
Often for family reasons to be with younger family who can help them in their old age. There are still WW2 veterans who risked their lives who now live abroad.
I have a different session to chair, so will not join you. However, I wish you well, particularly after several decades of enabling pensioners with frozen pensions to put their case to Government – in one case, helping UK pensioners in Australia to ambush the UK Pensions Minister in Perth, WA. Can I draw your attention to another group of overseas pensioners? I helped set up a structure in Spain over 20 years ago to give direct help and advice to UK citizens and it has done that job ever since with occasional support from the Foreign Office. One of our successes was to ensure that returning pensioners (for instance after bereavement or suffering from dementia) had a right to go to the local authority where they had earlier lived rather than being the responsibility of the authority where their arrival airport was situated – often Hillingdon. Those services are particularly important with COVID-19 threatening well-being and health both in Spain and in the UK. Their services are currently under threat because FO cuts are now likely.