The cost of uprating the UK state pension for overseas residents could be £860mn for 2023/24, according to new figures.
According to the Department for Work & Pensions, UK state pensions for overseas residents are increased in-line with the annual index-linked increases where there is a legal requirement to do so.
As of March 2022, there were around 480,000 recipients of the UK state pension living overseas who do not get state pension increases – 84 per cent of those live in Australia, Canada and New Zealand.
But figures from the DWP have found that uprating the state pension in frozen rate countries could cost £4,590mn from 2023 to 2028.
Year | Estimate cost (£mns) |
2023/24 | £860 |
2024/25 | £940 |
2025/26 | £930 |
2026/27 | £930 |
2026/27 | £930 |
Total (2023/24 - 2027/28) | £4,590 |
Earlier this year, a petition urging the government to increase state pension payments for UK pensioners living abroad was signed by more than 50,000 people.
At the time of writing (February 23) the petition had secured 56,300 signatures.
The petition called for all UK citizens who live abroad, and who have paid the necessary national insurance contributions, to receive the same state pension payments as those resident in the UK.
Under current rules a UK pensioner who moves abroad will have their state pension frozen at the level it was at when they left the UK or first claimed their pension overseas, unless their new country of residence has an agreement with the UK that says otherwise.
A similar petition was launched last year which had the government respond.
Estimates of projected costs
This publication updates figures last published in 2019 on the costs of uprating the state pension in frozen rate countries.
DWP said the estimate is based on the latest available data (March 2022) from the 5 per cent extract of DWP’s state pension administrative data, the quarterly statistical enquiry (QSE).
The QSE is used to estimate the volume of individuals in frozen rate countries and their state pension amounts.
The state pension amount, for all current and future recipients, is uprated (using the relevant indices) to the level they would have been if they had never been frozen.
To estimate the costs for subsequent financial years, DWP said it makes adjustments to the underlying caseload and associated costs by:
- applying mortality rates to existing cases, based on age and gender;
- adding forecasts of future state pension claims, which are based on historical trends and expected changes in the population, and are adjusted for mortality; and
- uprating state pension amounts using economic assumptions from the Office for Budget Responsibility at Spring Budget 2023.
The total cost for a given financial year is the difference between the uprated state pension amounts and the frozen state pension amounts.
sonia.rach@ft.com
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