Pensions: Reciprocal Uprating Agreements
House of Lords

Lord Oakeshott of Seagrove Bay (Spokesperson in the Lords, Treasury; Liberal Democrat)

asked Her Majesty's Government:

Which are the countries with whom they do not have reciprocal agreements on social security; when negotiations last took place on reciprocal agreements with each of these countries; how each country treats the pension entitlements of its own retired citizens in the United Kingdom; and what pension-related benefits are available to United Kingdom pensioners resident in each of these countries; and

How many United Kingdom pensioners are resident in each country without reciprocal agreements on social security; and how many pensioners from each country without reciprocal agreements on social security are resident in the United Kingdom; and

In relation to the pensions of British citizens retiring to countries without reciprocal agreements on social security, for each country, what is the estimated cost of indexing those pensions from now on (a) for each of the next five years; (b) in 2015; (c) in 2020; and (d) in 2030.

Lord Hunt of Kings Heath (Parliamentary Under-Secretary, Department for Work and Pensions; Labour)

The table below shows the numbers of UK state pensions paid to people residing in countries outside the European Economic Area and with which the UK does not have a reciprocal social security agreement covering uprating of UK state pensions

Source:DWP caseload data—October 2005

Although most reciprocal agreements provide for payment of upratings, that is not their primary purpose. They are intended mainly to provide a measure of co-ordination between social security schemes to protect the social security of workers moving between the two countries during their working lives. They prevent employees, their employers and the self-employed having to pay social security contributions to both the home state and the state of residence at the same time.

From 1981 to the present day, successive UK governments have taken the view that no new commitments should be entered into to seek to negotiate new agreements with other countries that would include provision for the payment of social security, benefits to persons abroad, including the uprating of UK state pensions abroad. Most of the UK's existing agreements are in fact consolidations of earlier long-standing ones and were entered into with a view to administrative improvements and efficiencies and also to take into account developments and changes to both countries' schemes over time, rather than to extend the scope for payment of increased amounts of benefits abroad.

As shown in the table above, the UK state pension is paid to over half a million people residing in over 100 different countries outside the EEA with which the UK does not have a reciprocal social security agreement covering uprating of the state pension. Around 90 per cent of these overseas pensioners reside in Australia, Canada, New Zealand or South Africa.

Only limited information is available on the rules applicable to the export of pensions from these four countries. Such information as is available is as follows:

In Australia, the tax-funded, residence-based age pension is payable outside Australia but only if it was claimed while the person was resident in Australia; it cannot be claimed from outside Australia other than from a country with which Australia has a reciprocal agreement. In contrast the UK state pension can be claimed from anywhere in the world.

In Canada, benefits under the contributory Canada pension plan are payable to people who live outside Canada and are uprated once a year in January. The residence-based, tax-funded old age security pension can be paid indefinitely outside Canada provided the pensioner has lived in Canada for at least 20 years after reaching 18 years of age.

The arrangements in New Zealand are that the tax-funded New Zealand superannuation is generally payable outside New Zealand at 50 per cent of the rate payable in the country. As with Australia, it is paid only to people who claimed the pension while resident in the country. However, the rate payable to those moving to a country with which New Zealand has a reciprocal agreement will depend on the terms of the agreement.

There is no universal contributory pension scheme in South Africa. However there are some income-tested social security benefits, including social pensions for the elderly. Payment is subject to a stringent income test, meaning that only those at the bottom of the economic scale are entitled to receive benefits, which are generally uprated once a year, usually in April. The benefits are not payable outside South Africa.

The table below shows the estimated costs of uprating state pensions paid to people residing in countries where it is not currently uprated.

Source: Forecast expenditure figures based upon DWP retirement pension administrative data, HM Treasury short-term retail prices index forecasts and GAD overseas pensioner forecasts.

Reliable long-term estimates are not available. However, the costs would increase significantly over future years.