Skip to content

Will You Still be Entitled to Your State Pension when You Move Abroad?

You’ll be pleased to know that you are still entitled to receive your pension if you choosing to retire abroad. However, there are someone countries where they will freeze it at the rate it was first paid.

For example, if you are thinking about immigrating to Australia or Canada your pension will not rise in this country, but if you opt to move to the United States it will. Strangely enough if you come back to Britain for a short break, your pension will go up throughout the period of time that you are here but then drop again when you return to the US.

Here are the rules…

Will my pension be paid abroad?

State pensions are not affected if you decide to move abroad. The only thing that you are required to do is inform your local authority of your departure and provide them with them necessary details of a post office or local bank branch that is closest to your relocation destination.

It is important that you make sure you sort out similar arrangements for any personal or occupational pensions before you set off.

Will my pension rise in value?

Although you will still receive your state pension the choice of moving abroad means 500,000 emigrants will have their pensions frozen at the rate they were first paid.

This prickly matter sometime upsets those who have fully contributed to their pension but choose to move to a foreign country, and this applies to most living in British Commonwealth countries, including Australia and Canada.

Many have battled for years to change this legislation so that their pensions will be able to be uprated and rise in value with inflation, but many feel as though it has been a losing battle.

How the overseas pension system works

The current system refuses annual pension rises, to almost half of the 1,100,000 pensioners who have chosen to emigrate from Britain. The rest have been able to obtain full up-ratings, its goal is to counteract inflation which decrease the value of pension income.

It all comes down to the country you chose to reside. Extraordinarily, it is those living in British Commonwealth countries and British Overseas Territories who are most likely in have their pensions frozen.

Pensioners who move to a European Economic Area state or one of 16 other countries with long-standing reciprocal agreements, including America, Jamaica and Turkey, get their pensions increased each year along with those still in the UK.

Everyone else has their pension frozen at the point that they first collected them in their new country of residence.

Who does this affect?

In total there are 150 countries where pensions are frozen. Of the 540,000 pensioners living in those countries, almost 90% of them – 485,000 – live in Australia, Canada, South Africa and New Zealand.

Curiously, when these individuals come back to the UK or if they take a trip to a country that gets up-rated, they provisionally obtain a higher pension throughout the duration that they are there, but only if they inform the UK pension authorities.

What is it based on?

The arrangement is allegedly founded on long-standing mutual agreements. However, succeeding governments have refused to revaluate even though many of these countries give their own pensioners increases if they live in the UK.

Parliament itself could change the system but the Government’s reason as to why it can’t will not be able to change the structure is because it cannot afford to up-rate all overseas pensions.

How much would raising overseas pensions cost?

If policy was to change it is likely the aim priority would be to get people’s pension payments up to current levels, not backdating what people have previously lost out on.

The ICBP says the amount necessary to reach pension parity as of this year would be £540m, less than 1% of the Government’s present pension fund. This is less than an annual average of £1,000 per pensioner at present being deprived of their full entitlement.

Could this actually save Britain money?

The ICBP also claims raising overseas pensions could save the UK money. It suggests that the current system stops pensioners moving overseas to join family who have emigrated, or merely because they just want to retire abroad.

The UK government has specified that each person over the age of 60 costs the UK taxpayer £7,000 per year in NHS costs and other benefits which exceeds their basic and additional pension payments.

Therefore if they opt to move abroad, overseas pensioners are saving the UK £7,000 per year and with the cost of lifting overseas pensions for all about £1,000 per pensioner, the Government would be able to save £6,000.

Even though they are not spending money in the British economy it is still proposed that the savings far outweigh the costs.

This is the list of countries where pensions rise to cover the cost of living. All others are frozen.

  • All EEA Countries and Switzerland
  • Barbados
  • Bermuda
  • Bosnia-Herzegovina
  • Croatia
  • Guernsey
  • Isle of Man
  • Israel
  • Jamaica
  • Jersey
  • Mauritius
  • Montenegro
  • Philippines
  • Serbia
  • Turkey
  • United States of America
  • Former Yugoslav Republic of Macedonia