There are only 13 countries where British expats can receive uprated pensions; click to enlarge.

A “fun” fact: if you are a British expat who retires to a country where your pension isn’t uprated (adjusted for inflation), you stand to lose GBP 24,000 worth of potential income in 20 years.

Freezing expat pensions is an unpopular policy. There is a veritable chorus of criticism out there written by individual expats. Now a report from The Runnymede Trust, To Stay or Note to Stay, argues expat pension freezes are not only unfair but economically ineffective.

British expat pensions are frozen in more than 40 countries. You could easily mistake a list of them for one of expat hotspots. It includes Australia, Brazil, Japan, Singapore, Thailand and Hong Kong, plus most of the Caribbean and all of Africa. In fact there are only 13 countries outside the EU where UK pensions are uprated.

The policy (in many cases combined with loss of free public healthcare) is a major obstacle to retirees moving overseas. Bear in mind a basic state pension is worth only GBP 102.15 a week.

The British government usually trots out two main arguments in defense of pension freezes:

  • Most countries outside the EU refuse to sign reciprocal treaties with the UK.
  • It’s not fiscally prudent to uprate pensions.

To Stay or Not to Stay tackles both these assumptions head on. In terms of the first it argues 1) countries like Canada and Australia are willing to make such agreements but the UK refuses to accept them, 2) Parliament could simply approve uprating all expat pensions unilaterally.

When it comes to fiscal prudence there is a strong counter argument as well. The report cites a 2011 Oxford Economics paper that concludes uprating pensions would only hurt tax revenues and increase government spending in the short run. Eventually both would be offset by larger numbers of retirees moving overseas, saving the government money by reducing demand for social services.

In the words of author Phil Mawhinney:

The current system of overseas pensions uprating is arbitrary, with no logic behind a pension being uprated in Jamaica but not Trinidad. We therefore call on the Government to uphold fairness and uprate all overseas UK pensions.

The full Runnymede report is available here.