Thursday, 6 December 2018
United Kingdom: Pensions
I rise to speak about the inequitable pension freeze that affects British expatriates living in Australia. Glenhaven resident Dr Bernard Stone had an extensive and distinguished career as a researcher, manager and entrepreneur in the wool and textile industry in the United Kingdom. Throughout his career, Bernard made compulsory salary contributions into the National Insurance Fund in order to qualify for the state pension. In 2013, Bernard retired and moved to Australia, into my electorate.
When Bernard retired, he started to receive a pension from the UK government. Under this system, Bernard is entitled to pension payments determined by the number of years he made salary contributions to his pension fund. Pensions are generally indexed annually to keep up with inflation, but, as soon as Bernard left the UK and started receiving pension payments in Australia, his pension was frozen in time. This means Bernard's pension payments will never increase while he lives here. Bernard will find himself in a similar situation to the late Dela Willmott. In 1979, Dela retired, moved to Australia and received a UK pension of 17 pounds a week. In March this year, 39 years later, aged 98, Dela died in Australia, still receiving only 17 pounds a week from the UK government.
West Pennant Hills resident, Pat Redlich, aged 87, is another one of my constituents affected by the UK pension freeze. Pat trained as a civil engineer at Cambridge and joined a UK management consulting firm which saw him travel to Saudi Arabia, Greece and Ireland before his work brought him to Australia over 50 years ago. Pat first lived in Melbourne, then transferred to Sydney and is enjoying his retirement in my electorate. Pat started drawing the UK part-pension nine years ago. Pat told me that, since 2009, the amount he draws for his part-pension has remained frozen after all these years.
British policy is that British subjects retiring in 48 of the 53 Commonwealth nations, including Australia, Canada, New Zealand, South Africa and India, all have their pensions frozen when they arrive in their new home. This means retirees don't receive the annual indexation which accounts for inflation. By contrast, British retirees settling in the United States, Turkey, and the Philippines enjoy pension increases in line with inflation. The system is inherently discriminatory. Under this system, Bernard Stone's salary contributions he made while he worked in the UK are ignored. While Bernard lives in Australia his UK pension will never increase in value. In fact, he is basically taking a cut in real terms.
Pension payments have been a point of contention in our bilateral relationship with the UK for a long time. In 1958 Australia and the UK had a social security agreement that meant host countries provided income support for those individuals residing in their country. Under the agreement, the Australian government paid indexed pensions to former residents living in the UK. However, the UK government did not reciprocate. Australia terminated the social security agreement with the UK in 2001, because the UK government refused numerous requests to renegotiate the agreement to include indexation provisions.
In recent times the British government has argued that global indexed pension payments are unaffordable. Richard Harrington, a former Parliamentary Under Secretary of State at the Department for Work and Pensions, stated that it would cost an additional 500 million pounds a year to index all state pension payments in full to the current rate across the world. This is despite UK pensioners living in the EU receiving increases in their payments as well as retirees living in countries where reciprocal social security agreements exist.
Of the 1.2 million UK pensioners living outside the UK, almost half, 542,565, live in countries where the state pension isn't indexed. Of those, close to 250,000 reside in Australia. Approximately 180,000 UK pensioners here in Australia also receive payments from the Australian government.
The organisation British Pensions in Australia headed by the indomitable Jim Tilley estimates that, if those 180,000 UK pensions were indexed and paid by the UK government, as it does in other countries, the Australian government would save approximately $185 million in pension payments. This $185 million could go towards Australia's 2.5 million age pensioners, of which 11,000 people are on the age pension in my electorate.
While the rules around eligibility for the UK pension and indexation are ultimately a matter for the British government, I consider the current British policy of frozen pensions discriminatory and unjust. Over the years, the Australian government has made many representations on this issue and has provided low-cost options as a resolution. Julie Bishop raised the matter with Boris Johnson in 2017, and Malcolm Turnbull raised the matter with Theresa May in 2018. Despite these efforts, to date the UK hasn't agreed to change its indexation policy.
Britain's decision to exit the EU and negotiate a free trade agreement with Australia presents a potential opportunity for us to re-engage the UK on the indexation of pensions for British subjects living here. I'm calling on our government to maintain pressure on the British government to find an equitable solution for all the British pensioners living in Australia, including the significant number of British pensioners living in my electorate.