24 June 2011
State Pension Reform Consultation Team
Pension Analysis and Incomes Division
DWP
5th Floor
Caxton House
Tothill Street
London SW1H 9NA
Subject: Response to ‘A State Pension for the 21st Century.’
This response is made by the
International Consortium of British Pensioners (ICBP) on behalf of the
members of its five Partner Organisations in Australia, Canada and
South Africa and the almost 550,000 British pensioners in more than 120
countries around the world whose Basic State Pension (BSP) is frozen
solely because of where they have chosen to live in retirement.
We would like to respond on three specific issues as follows:
1. The Minister`s emphasis on Fairness.
2. Making workers feel confident that it is worth saving for the future.
3. The principal of Cost Neutrality.
Issue 1: Fairness
• Over twelve and a
half million people receive the basic state pension. ALL of them
contributed similarly to that pension through their compulsory National
Insurance Contributions (NICs).
• The amount of
pension they initially receive is directly proportional to the number
of years they paid those Contributions.
• Of those 12 million plus pensioners, more than one million now live outside the UK – Overseas.
• Half of that one
million plus receive the same annual uprating as the pensioners who
still live in the UK, just as though they had never left. They
live in places like the EU, the USA, the Philippines, Israel, Bosnia,
etc.
• The other half
million plus, over 95% of whom live in Commonwealth countries like
Australia, Canada, South Africa, New Zealand, etc, do not receive any
increases – EVER! Their pensions are permanently frozen at the
level at which they first received them in their country of residence,
solely because of where they have chosen to live in retirement.
There is NO fairness in such a
policy! No pension scheme should penalize some of its
beneficiaries because of where they choose to live, especially when the
number of years of contributions to the scheme directly determines the
amount of pension they will receive. Consequently, over half a
million pensioners have made first class contributions to a second
class pension; that is morally wrong!
The reason the Government continues to
provide for not changing its policy is that pensions are uprated to
overseas pensioners only when there is a legal requirement to do so, as
with those living in the EU, or when there is a reciprocal agreement in
place with a particular country; it goes on to say it has no plans to
expand the reciprocal agreements to more countries. How can a
Government that stresses the need for fairness for all, and that
expresses its concern for the well being and dignity of the elderly,
penalize half a million of its pensioners just because of where they
choose to live in retirement?
Numerous Ministers of the Crown have
made a mockery of this policy by admitting in Parliament, both in the
House and in Committee, that there is no legal requirement for a
reciprocal agreement to be in place before extending parity to all
pensioners if the Government had the will to do so. The most
recent statement was made by the Hon James Purnell MP on 25th January
2007 during Committee debate on the 2007 Pensions Bill; in addressing
the issue of pension parity he stated, “Of course it is not legally
necessary to have a reciprocal agreement in place before making such
payments. Any Government could do this unilaterally.”
Finally, during their time in
opposition, many members of the current UK Government, including the
Minister himself, have repeatedly stated that the freezing of pensions
is immoral and unfair.
Issue 2: Making workers feel confident that it is worth saving for the future
Figures from chart 1 of the Green
Paper indicate a significant increase in the number of pensioners over
the future years. The impact of the Baby Boomer bubble is already
beginning to be felt. The 45-60 year old age group comprises many
individuals who work, travel or reside outside the UK; it’s a fact of
life today in what is often referred to as ‘The Global Village’.
Many will give serious consideration to emigrating upon retirement.
This is clearly indicated in the survey carried out by Opinium Research
in February 2011; a copy of the report has been passed to the Minister.
The percentages of individuals vary significantly dependent on whether
their BSP will be uprated or not. Freedom of choice and freedom
of movement will have a significant impact on the willingness of
individuals to emigrate and most, if not all, will consider their BSP a
significant piece of their savings for retirement.
Issue 3: The principal of Cost Neutrality
Pension Parity can provide not only
cost neutrality but in fact significant savings to the UK
economy. Pensioners who live overseas, excluding those in the EU,
already create an economic savings of more than £3 billion
annually. The main source of those savings is from lack of demand
on the NHS, no added benefits, no social costs, etc.
A recent study by Oxford Economics
(March 2011) considered data from the recent survey by Opinium
Research, referred to above, on the intentions of individuals to
emigrate after retirement; these data indicate that removal of the
pension freezing policy would significantly increase the numbers
wishing to emigrate and thus produce a corresponding additional
increase in net savings to the UK economy of some £33 billion over the
next 25 years with an NPV of some £1.1 Billion in year 15 and
some £7.2 Billion in year 25. The Minister has been provided a
copy of that report.
An additional benefit, not included in
that £33 billion above, is that emigrants also relieve pressure on the
shortage of hospital beds, facilities for the elderly and the shortage
of affordable housing units.
Finally, this response would not be
complete if reference were not made to the issue of Britain’s image and
relationship with other (mainly Commonwealth) countries around the
world. Just two examples are provided as follows:
At a recent conference, when
introducing the author of this response, a prominent leader of a
pensioner organisation made these remarks which are paraphrased
here. He referred to the pride and the welcome that the British
public displayed to soldiers, sailors and airmen of the Commonwealth
nations (at that time of the Empire) when they marched through the
streets on arrival on these shores to help Britain in her time of
need. He referred to the times that Britain encouraged its
citizens to migrate to those same countries after the Second World War;
and to those war brides who followed their particular returning heroes
back to their homelands, many of whom will be back this year in the
newest Cunard liner on a visit of nostalgia. And finally, to
Britain’s reward to those who risked their lives to preserve the
democracy that Britain treasures and so readily gave to its Empire
Nations – a frozen pension to some and not to others – just because
they had the audacity to decide where they wanted to live when they
retired. Is this an example of Britain’s fairness, dignity and
concern for the elderly?
The second example is that the
Commonwealth countries have accepted the principle that once someone
has earned a pension, particularly when it has a contributory element,
it’s theirs to keep, no matter where they decide to live in their
retirement years, and it is uprated annually. For example, the Canadian
Government annually uprates the CPP (Canadian Pension Plan (equivalent
to BSP) to its citizens resident in the UK and elsewhere throughout the
world.
This response is respectfully submitted for your careful consideration.
Sincerely
A.B. W. (Tony) Bockman
Chairman
International Consortium of British Pensioners