Thousands of state pensioners to miss out on £5,000 payment increase

BBC Money Box experts explain increases to State Pension

State pensioners living abroad are at risk of missing out on a £5,000 increase in their retirement payments.

Thousands of older British expats face a diminished state pension compared to their counterparts living in the UK.

This is due to the fact they are living in countries that have not agreed to a reciprocal pension agreement with the British Government.

Some 480,000 overseas pensioners will not be awarded the annual state pension payment increase, according to figures from the Department for Work and Pensions.

Around 82 percent of the older Britons affected live in either Canada, Australia or New Zealand.

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The plight of expats living abroad was addressed by Lord Davies of Brixton who addressed the issue while speaking in the House of Lords on the 75th anniversary of the Windrush generation.

He said: “Recipients in some countries have increased each year in line with those granted to pensioners in the UK, but those in other countries, totaling half a million, do not – their pensions are frozen at the date they moved abroad and in real terms their state pension falls each year.

“The impact is substantial. Simplifying somewhat, the basic state pension is currently £156 a week, but over half of those with a frozen pension are receiving £65 a week or less.

“That is lost income each year of £5,000 or more.”

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Thanks to the triple lock, state pension payments are guaranteed to be raised every year to help retirees with the cost of living.

This hike is either by the rate of average earnings, the rate of Consumer Price Index (CPI) inflation or 2.5 percent.

Inflation is likely to be the highest figure out of these three metrics despite it easing to 7.9 percent for June 2023.

However, even a 2.5 percent increase would award individuals on the basic state pension a payment rise from £156.20 to £160.10 a week.

Conversely, some Britons residing abroad are living on as little as £65 a week due to the frozen state pension.

Lord Davies added: “The injustice of the policy is clear, but the Government and past Governments have hidden behind the need for so-called reciprocal agreement.

“We pay increases to our pensioners in countries only if it pays increases to its pensioners in the UK.”

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