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The Department for Work and Pensions (DWP) has issued an alarming warning about thousands of pensioners missing out on up to £25,000 worth of state pension payments.
This issue primarily affects those living abroad, particularly in popular retirement destinations such as Canada, New Zealand, and other Commonwealth nations, where pensioners are not entitled to the annual triple lock uprating.
How the Triple Lock Works for State Pensions
The triple lock ensures that the UK state pension rises each year based on the highest of the following three figures: inflation (based on the previous September’s figure), wage growth (average increase between May and July), or 2.5%. In April, for instance, the state pension increased by 4.1%, bringing the new weekly state pension to £230.25, or £11,973 annually for new pensioners.
Why Some Pensioners Are Missing Out
However, a significant issue exists for pensioners living abroad. The DWP only uplifts pensions for individuals who reside in the UK, the European Economic Area (EEA), Gibraltar, Switzerland, or countries that have a social security agreement with the UK.
Unfortunately, many pensioners who retire in popular destinations outside of these regions, such as Canada and New Zealand, do not qualify for these uprates.
For these pensioners, their state pension payments remain fixed at the amount they first received when they left the UK.
Even though they are British nationals, their payments are frozen at the same rate, which means they miss out on the annual increases that those living in the UK benefit from.
The Financial Impact of Not Receiving Uplifts
Pensioners living abroad without a social security agreement with the UK could face significant financial losses.
For example, someone who retired 15 years ago to a country without an uprating agreement would have seen their annual state pension remain at £5,077 – the amount it was in 2010.
Potential Financial Losses for Pensioners Abroad
| Time Period | Potential Loss |
|---|---|
| 5 Years | £7,391 |
| 10 Years | £13,162 |
| 15 Years | £25,832 |
Interactive Investor has estimated that pensioners living in such countries could lose a significant amount over time. As shown in the table above, over a period of 15 years, they could miss out on £25,832 due to the lack of uprates.
Pensioners who live in countries within the UK’s social security agreement will see their state pension increase each year, benefiting from the triple lock promise.
Why You Should Think Twice Before Moving Abroad
Myron Jobson, a senior personal finance analyst at Interactive Investor, explained that while moving abroad may be appealing for warmer climates or an improved quality of life, it’s crucial for pensioners to understand how it can affect their state pension entitlement.
“If you move to a country where the UK has no uprating agreement, your state pension will be frozen at the level you first receive it.
That means you won’t benefit from the valuable triple lock increases that pensioners in the UK enjoy each year, and over time, that can seriously erode your spending power,” Jobson said.
The International Consortium of British Pensioners (ICBP), which has been lobbying for changes to state pension rules, estimates that around 453,000 pensioners are currently not receiving the annual uprates.
DWP’s Stance on Freezing State Pensions
The DWP recently confirmed that it has no plans to review its current policy on freezing state pensions for those who move abroad.
Pensions Minister Torsten Bell stated in response to Liberal Democrat MP Liz Jarvis’s inquiry that there are no immediate plans to change the policy regarding state pension uprates for those living abroad.
Pensioners living outside the UK, particularly in popular destinations like Canada and New Zealand, may be missing out on significant financial benefits.
With potential losses amounting to £25,000 over 15 years, those considering retiring abroad should carefully assess the impact on their state pension.
The DWP’s stance remains firm, but pensioners must stay informed to make the best decisions about their retirement.
FAQs
What is the triple lock promise for state pensions?
The triple lock ensures that the UK state pension increases each year by the highest of inflation, wage growth, or 2.5%.
Which countries are eligible for state pension uprates?
State pension uprates are available for pensioners in the UK, EEA, Gibraltar, Switzerland, and countries with a social security agreement with the UK.
How much can pensioners abroad lose due to frozen payments?
Pensioners living abroad could lose up to £25,832 over 15 years due to frozen state pension payments.