Can UK expats rely on state pension to cover bills

Published:  13 Jan at 6 PM
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The UK state pension is one the most ungenerous in the developed world, forcing many British retirees to relocate in order to take advantage of lower costs of living elsewhere in Europe or Asia.

Taking into account that UK pensions are frozen unless the relocation is to countries whose governments have an agreement with the UK, even those who move to cheaper EU destinations can find it hard to manage due to currency fluctuations. Even so, for many expats, the UK retirement pension forms the majority of their retirement income.

Changes in how the pensions will be paid from April this year mean new retirees will receive a guaranteed, lifetime index-linked amount of £159.65 every week, representing 43 per cent of pensioners’ average income. However, the present percentage shows a 30 per cent fall since 1979, when payments were calculated at 61 per cent of retirees’ average income, and many retirees will be getting far less than they expected.

Another anomaly in the new flat rate pension introduced last April hits out at credits formerly given to stay-at-home mothers and the chronically sick. The full amount was paid based on 30 years of NI contributions, but the new rules specify that, although credits will still be given, the qualification period for the full pension has been increased to 35 years.

For expats who reach pensionable age, it’s even more complicated, with those having paid NI contributions for 30 years only receiving £136.84 in the 2017-2018 year. Others who contracted out earlier may even receive more than the new basic of £159.65, dependent on pension arrangements.

A major, long-term scandal of the UK pension system is its frozen pension rule, in that retirees who choose destinations including New Zealand, Canada, Australia, most of Asia and South Africa have their payments frozen at the rate first received. Oddly, the list of countries with the reciprocal social benefits agreement allowing pension updates includes the USA, whilst Commonwealth countries in the main are excluded.
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