Pension may suffer if you retire abroad

Published on Saturday 20 March 2010 12:43

ANYONE thinking of retiring abroad should consider their state pension carefully after the government won a court battle giving them the green light to withhold annual increases to state pensions paid to overseas expats, denying them the up-rating available to UK citizens.

Half a million UK pensioners living in 150 countries, including Canada and Australia, are paid a state pension because they contributed to National Insurance in this country during their working lives. But they receive no annual increases.

This means, for example, that a pensioner who paid National Insurance contributions throughout their working life but moved to Australia in retirement and took a pension from 1995 still only gets 59.20 per week, compared with the current basic state pension allowance of 95.25 per week.

These rules do not apply to those retired within the EU, in countries such as France and Spain, where the annual increases are paid.

Those elsewhere took a Bottom of Form test case to the European Court of Human Rights, which last week ruled that the UK's refusal to give equal pensions to those living in 150 countries was justified.

The Department for Work and Pensions argued that it should target its resources on the least well-off pensioners, who are resident in the UK. Anyone planning on emigrating should give careful consideration to where they choose to go and how this will affect their financial position.