Retiring in almost 60% of top expat destinations means a frozen pension!

Pensioners in Canada, South Africa, New Zealand and Australia Suffer

As international travel and migration become common-place, over 1 million UK pensioners are choosing to retire abroad*. However, a new study from Alliance & Leicester International (ALIL), the Isle of Man based international savings bank, highlights the fact that all retirement destinations are not equal in the eyes of the UK Department of Work & Pensions.

Indeed, pensioners retiring to seven (58%) of the top twelve most popular destinations for UK Expats will have their state pension frozen at the rate when they first started drawing it (men: 65 years - women: 60 years) - see table below.

Table 1: ALIL Cost of Living and Quality of Life Scorecard

This decision by the UK Government means that pensioners in affected countries do not receive any annual uplifts or inflationary increases to their state pension payments. With the average 65 year old man currently expected to live to 82 years old (+ 17 years***) and the average women to 85 years old (+20 years***), this has significant consequences for their retirement finances.

Admittedly, many of the destinations where pensioners suffer from frozen state pension payments have a lower cost of living according to the ALIL Cost of Living Scorecard**. However, it is still difficult to imagine that the basic weekly pension of twenty years ago (single: £43.60 - couple: £69.80)***** is sufficient to live a comfortable retirement now.

Indeed, if you compare a basic grocery item such as a pint of milk, you will see that while in the UK it costs 0.45p, in countries where the pension is frozen such as Australia (£1.10), Canada (£1.40) and New Zealand (£1.18) it costs significantly more. Clearly illustrating that while some costs may be cheaper in these countries, this is not necessarily the case across the board.

Simon Ripton, Joint Managing Director of Alliance & Leicester International comments:

“Many UK pensioners retire abroad to move closer to friends and family or simply to enjoy a better standard of living. However, they don’t necessarily realise that by choosing to move to Cape Town rather than Capri, they will have their state pension frozen at the level at which they first started to draw it.

“While many of the countries where UK pensioners do not receive an annual uplift offer a lower cost of living, it is still difficult for these expats to enjoy their retirement on an income that - in some cases - is over 20 years out of date. This brings the need for individuals to have additional retirement savings sharply into focus.

“Making regular retirement savings and then actively managing this money when you start to draw your pension is key to enjoying your later years. This is something that ALIL actively promotes amongst its customers and anyone who opens an eSaver or Select account is given a free guide to Expat finance entitled ‘Expat Money’

“In addition, a pensioner who chooses to deposit their savings into one of our recently launched best buy savings accounts would benefit from a low risk and competitive monthly interest rate of up to 3.00% AER as well as the option to take a regular monthly or quarterly income. In addition, they would also feel safe in the knowledge that they can access their savings using internet banking 24 hours a day”

Peter Kennan, Chairman of the Canadian Alliance of British Pensioners, a partner organization in the International Consortium of British Pensioners based in Canada, Australia and South Africa and with members across the world - comments

“Just because a person chooses to retire to Johannesburg, Ottawa or Sydney does not mean they should have their state pension frozen and effectively become a second class citizen in the eyes of the UK Government.”

“It is good to see an international company like Alliance and Leicester drawing attention to a government policy which treats one half of expatriate pensioners as though they”d never left home while freezing the other half. It helps us greatly in our ongoing efforts to achieve equality for all hardworking UK retirees.”

The Consortium is underwriting a discrimination suit against the UK Government in the European Court of Human Rights.

The information contained in this press release is intended solely for journalists and should not be used by consumers to make financial decisions.