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Unfreezepensions - epetition reply

3 January 2008

We received a petition asking:

"We the undersigned petition the Prime Minister to remove the discrimination against British State pensioners who retire in certain overseas countries."

Details of Petition:

"British State pensions are uprated in the following overseas countries: Austria, Barbados, Belgium, Bermuda, Cyprus, Czech Republic, Estonia, Finland, France, Germany, Gibraltar, Guernsey, Hungary, Iceland, Ireland, Isle of Man, Israel, Italy, Jamaica, Jersey, Latvia, Lithuania, Luxembourg, Macedonia, Malta, Mauritius, Norway, Philippines, Poland, Portugal, Sark, Slovakia, Slovenia, Spain, Sweden, Switzerland, The Netherlands, Turkey, USA and Yugoslavia. British State pensions are frozen in these countries: India, Pakistan, Bangladesh, Malaysia, Australia, Canada, New Zealand, South Africa, Zimbabwe and most other Commonwealth countries. British State pensions are paid out of the National Insurance Contribution fund which, the Government's own Actuary Department stated in early 2006, has a surplus exceeding current requirements of over £30 billion and growing."

Read the Government's response

Thank you for your e-petition about the annual uprating of State Pensions payable to British pensioners residing abroad.

As the petition correctly points out, State Pensions are paid out of the National Insurance Fund (NIF) rather than general taxation. The petition argues that the Government should use the current surplus in the Fund to meet the cost of uprating the State Pensions of all recipients living overseas.

The NIF is maintained under the control and management of Her Majesty's Revenue and Customs. It is run on a "pay-as-you-go" basis; current income, mainly from national insurance contributions, pays for current expenditure mostly on Contributory Benefits. There is a requirement for the NIF to have sufficient funds, together with a working balance, to meet benefits expenditure. The uses to which the NIF can be put are clearly specified in legislation, with the majority spent on state pensions.

National insurance contributions and the associated social security benefits operate within the Government's fiscal rules designed to ensure sound public finances. When there is a surplus it is invested. Without this the Government would need to raise the equivalent through other means to fund public services. The NIF surplus is not therefore an extra resource available to spend.

To fund annual pension increases for all recipients in countries where upratings are not currently payable, we would have to raise additional income from UK taxpayers. Our priority, given the limited resources available, is to ensure that pensioners resident in the UK continue to see an increase in their living standards commensurate with the growth of the economy as a whole.

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