Pensions triple lock scrapped for millions of Brits
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The Prime Minister Boris Johnson and Chancellor of the Exchequer Rishi Sunak have agreed to temporarily drop the triple lock pledge – a mechanism which was committed to in the 2019 election Conservative Party manifesto. Rather than the state pension rise out of whichever is the highest out of average earnings, inflation or 2.5 percent, it will instead increase next year by 3.1 percent.
However, the news won’t be of much comfort to an estimated half a million pensioners, who won’t be able to get the boost due to where they live.
This is because some people who claim the UK state pension while living abroad miss out on the annual uprating.
For instance, the UK state pension only increases each year if the person overeats lives in:
- The European Economic Area (EEA)
- Countries that have a social security agreement with the UK (but a person can’t get increases in Canada or New Zealand).
State pension: Therese Coffey said the triple lock is to be altered for a year due to the pandemic (Image: GETTY / BBC)
Those who live outside these countries will not get yearly increases.
The End Frozen Pensions campaign has said around 500,000 British pensioners are affected by this policy.
Should they return to live in the UK, the state pension would go up to the current rate, the Government website states.
As at November 2020, Government statistics show that of the 1,126,313 State Pensions paid abroad, 637,567 pensions are uplifted in line with the UK. Meanwhile, 488,746 are frozen, hence 43 percent of those paid abroad at that time were frozen.
Research by Canada Life has found just one in five (19 percent) of those planning to move abroad know which countries had reciprocal payment agreements in place – which see those in certain countries to receive an uprated state pension.
It also found one in four (25 percent) did not even know such agreements existed.
Sean Christian, MD and Executive Director, Wealth Management Division for Canada Life commented: “Despite Brexit and the ongoing global pandemic, many over 50s continue to harbour the dream of a retirement which includes better weather, a more desirable lifestyle, or cheaper standards of living than the UK.
“There are a number of key considerations when planning a move abroad, such as which countries offer reciprocal payment agreements, thinking about the impact of currency exchange rates and whether State Pensions will keep pace with the cost of living.
“To help navigate the complexities around retiring abroad, it’s important to seek specialist professional advice. An expert in expatriate finance will be able to help and ensure you make the most of the retirement people have worked long and hard for.”
For those who do decide to retire abroad, Canada Life shared some top tips.
State pension UK: The payment usually rises via the triple lock (Image: GETTY)
This includes getting an estimate of one’s state pension via the Government’s “state pension forecast” tool.
Furthermore, the pensions specialist suggested seeking independent financial advice before moving.
“Tell HM Revenue and Customs that you are moving overseas,” Canada Life added. “This allows them to let you know of any UK tax liability you may have even though you are planning to live overseas. And more importantly can allow any UK pension you have to be paid gross (no tax deducted) and taxed in your country of residence (only applies if the country you live in has a double taxation agreement with the UK).
“Check what reciprocal social security agreements are in place with the destination country regarding your UK state pension [including whether it will be increased or frozen] and other benefits,” the firm also warned.
Finding out about welfare rights while abroad is also important.
“Keep an eye on exchange rates as state pension and other income is likely to be paid to you in pounds and you will then need to convert to the local currency which may mean your income fluctuates,” is another top tip.
Furthermore, people are urged to:
- Check the cost of healthcare in the country they are thinking of moving to, and consider some form of medical insurance
- If they decide to keep their property in the UK, they will need to let their mortgage provider and insurance company know if it will be rented or remain empty
- Do their homework on the cost of living in the country they want to move to
- Notify utility companies, financial institutions and their local council when they are leaving
- Contact the electoral register, and arrange for mail forwarding via the Post Office
- If they plan to keep an account at their UK bank, contact it and ask if they will face any new rules or restrictions after moving abroad.