[BITList] UK - Frozen Pensions

[John Feltham]

FWD Msg. Worth the read.

ooroo




To: "bapaemail at yahoogroups.com" <bapaemail at yahoogroups.com>
From: "clive walford clida2000 at yahoo.com [bapaemail]" <bapaemail at yahoogroups.com>
Date: 29 November 2014 8:14:41 pm AEST
Subject: Re: [bapanews] those missing attachments !
Reply-To: bapaemail at yahoogroups.com


I have taken the liberty of emailing Mr Hurd MP regarding the letter  to him from the Pension Minister.
A copy follows.  I do get angry at the attitude and pomposity of him.(the minister)
I hope I have not annoyed anyone of you by sending the email.
Clive walford (Indonesia)
 
 
 
Nick Hurd  nick.hurd.mp at parliament.uk <mailto:nick.hurd.mp at parliament.uk>
 
To the Right Honourable Nick Hurd MP
 
Dear Mr Hurd.
Re the Pension Ministers recent letter to you.
Acting on behalf of Mr and Mrs Evans you contacted the Pension Minister on their behalf with regard to the governments frozen pension policy for 550,000 expat pensioners living in any of 120 countries. (it should be pointed out that another 660,000 expat pensioners living in other overseas countries do not have their pensions frozen).
 
All UK pensioners during their working lives had to pay the National Insurance Contributions. All paid the same rate of contributions. So on the payment side all workers, (now pensions), paid EQUALLY. However on retirement that EQUALITY ceased if they moved to one of the 120 countries. For example a 95 year old war veteran who retired to Australia still receives the same pension he received then, 30 years ago. If he had retired to the USA or Germany he would have his full up-rayed pension.
That is not equality it is discrimination.
 
In the ministers letter to you he stated that;- “up-ratings were only payable outside the UK where agreements between the UK and the host country allowed for uprating”.
 
So in spite of;
 
 The Minister having stated, in writing, that the uprating of frozen pensions does not require a bilateral agreement,
 and in spite of;
 The freedom of information office confirming that agreements are not required,
and in spite of the House of Commons Library Standard Note also makes that statement.
And in spite of;
The 1997 Parliamentary Select Committee also concluded [ see para 39 ]   there is no need for individual bi-lateral agreements.
 
The Minister still says today “payable where agreements - - -“ !
 
The UK State Pension is provided for in the Pension Act which is “Domestic Legislation”. No other country is involved and does not need to be involved.
 
How can this policy be so? The inference is that an agreement is required, but it is not. Therefore that statement is misleading, inaccurate  and dishonest.
 
I sincerely hope that you agree that this frozen pension policy is unfair, unjustified and discriminatory.
You can support the ending of pension freezing through the APPG lobby group for British Frozen Pensions by emailing to appg at pensionjustice.org <mailto:appg at pensionjustice.org>
 
Clive Walford Chairman PPiI. (Pension Parity in Indonesia and Asia/Pacific)
 
I have copied the main part of Ministers letter to you and have added my* comments in red that justify the claim that the frozen pension policy should cease now.
* these views are basically the views of 550,000 other frozen pensioners. (The BPiA represents many Australians as dose BAPA and CABP the Canadian pensioners).
 
Ministers letter
“The current frozen pension policy has been supported by successive governments for the last 60 years. The UK state pension is paid worldwide and is based on the contributions that have been made (including any service in HM Forces)
The fact that the policy has been supported for 60 years does not make it a “right” policy. In fact the reasoning for it is questionable and erroneous.
 The Pension Act states if you have paid your contributions you are entitled to the State Pension based on the contributions that have been made. The state pension is up-rated annually.  So pensioners that have a frozen pension are not receiving the State Pension based on the contributions they have made.
The State Pension IS the current pension. It is not two payments of an old annual rate plus uprating’s.
The inclusion of a clause in the Pension Act that allows for the non-payment of part of the State Pension, (annual index linked increase), is a contradiction of the meaning of State Pension.
 
The National Insurance Fund is run on a pay-as-you-go basis.
The Fund was set up as an assurance for (in part) the future payment of the State Pension. This fund was set up as a secured fund, in particular for that pension that workers were assured they would get. (A form of guarantee). It was to avoid all the problems encountered with private companies.
(one can compare it with the life insurances, most people take out, which in the future makes payment to the beneficiaries. One can also say it is like the endowment policy that gives a future payment, ( say on reaching retirement age). (Even car insurance is similar in as much it is an assurance future accident costs would be covered)).
 
 This means that current income,  mainly from National Insurance contributions, pays for current expenditure on contributory benefits,  such as State Pension, Employment and Support Allowance, and Jobseeker's Allowance.
The Governments  own definition states that the fund is to receive contributions and make payment to such as the State Pension. It also  says it is there  to pay exceptional payments that may occur.
 
Because the Fund has no borrowing powers, it has to maintain a working balance of 1/6 of benefit expenditure recommended by the Government Actuary.
The fund balance has always been in excess of that 1/6 figure and the Government Actuary Report stated “the balance in the National Insurance Fund at 31 March 2014 is  estimated at £27.0 billion”..
 
With the erroneous non-payment of the full State Pension, to all pensioners, that they are entitled to the fund should and can be used, as defined as an exceptional payment, to correct that error.
 Whilst the fund has a balance it has been loaned out for the purpose of building schools and hospitals. The loans are made with a low rate interest charged and it is a reasonable use of the funds. However the funds main function must be considered its priority and loans should be repaid from other treasury sources when any exceptional payment is required.
To deny any exceptional payment from that fund is immoral, unjustified and in private practice would probably be considered illegal.
The fund was set up for the workers future and to deny that is an insult to those that have paid in all their working lives trusting the government to honour their side of the contributions agreement.
To deny payment to those that have paid into the fund surely is fraud. ( if your private insurance company refused to pay your entitlement they would be charged with fraudulently withholding payments).
 
The DWP through Mr Ben Gummer MP introduced a Bill to change the name of NI contributions to “warnings tax” and merge the NI Fund into the general fund. This proposal would in effect kill off the NIS.  (the Bill did not complete in time. (However new Bills will soon do the same.)
Workers would have lost any security for their future pension if this Bill had been enacted. The NIS is their insurance. The workers would have paid for and earned that right of security.
 
There are a number of assumptions made about employment and unemployment, contracting-out, and earnings levels when estimating the balances in the Fund.
Small changes in these assumptions can have a marked impact on the balance in the Fund, especially in the longer term because the effect of changes in the assumptions accumulates over time.
When introducing the new Pension Act 2014 the Minister would have calculated the needs of the fund for when the Act comes into force. Those calculations should have allowed for some plus or minus changes. Some people would say that those figures were not accurate and the Minister brought forward the date of implementation to 2016 to bring  in an extra £5.5 billion.  By increasing the age to 67 will bring in more than £100 billion.
 On those figures  as quoted the NI Fund should continue in balance for those new pensioners covered by the new Pension Act.
Mr and Mrs Evans suggest that this frozen pension arrangement is not used in the case of civil servants or politicians. However, they appear to have confused an individual's occupational pension with State Pension. Occupational Pensions that have been awarded to an individual are a matter between the individual and their employer.
 
Mr and Mrs Evans imply that this is somehow unfair, yet the legal position is quite clear. UK State Pensions have been payable in certain countries outside the UK since 1929- initially in HM dominions and then, between 1948 and 1955, in eight European countries. In 1955, UK State Pensions and widows' benefits became payable worldwide, but generally were not subsequently uprated, whether in the dominions or elsewhere outside the UK. Upratings were less frequent than now and were only payable outside the UK where agreements between the UK and the host country allowed for uprating.
 
The Minister has stated, in writing, that the uprating of frozen pensions does not require a bilateral agreement. The freedom of information office confirmed that and it is also stated in the House of Commons Library standard notes that agreements are not necessary to uprate pensions. The 1997 Parliamentary Select Committee also concluded [ see para 39 ]   there is no need for individual bi-lateral agreements. Simple UK domestic legislation can do it. Not a special Act that has to go through the full parliamentary procedures, but a simple amendment to an existing Regulation.
 
As the minister said earlier in his letter the current frozen pension policy has been supported by successive governments for the last 60 years. This policy was based on the erroneous statement that up-rating is only payable where agreements between the UK and the host country allowed for uprating. The previous paragraph clearly shows this that agreements are and never were required. Why, therefore, does the Minister still quote up-rating is only introduced where there is an agreement?
This reasoning is therefore not based on fact. Any frozen country can be up-rated by simply amending regulation 3 and not using clause 20 of the new Act to continue this erroneous policy. To continue this policy based on a misconception is using a list of countries that have an agreement for social conditions of workers is using that list to discriminate against pensioners.
The Minister told committee that the frozen pensions has been “like that for decades and decades and decades so we will not change it”.
Mr I. D Smith said to the same committee  “of the need to adapt the state pension system in the face of changing demographics and working patterns. ---- working patterns and family life have changed over years”, The Bill is about putting in place a welfare and pension system that both reflect the reality of our society ----
Mr I D Smiths statement surely outweighs the Pension Ministers statement that “its been like this for decades and decades and decades so we wont change it”.
The continuous use of Agreements for not up-rating is untrue, misleading and is used to discriminate unfairly against pensioners that made their contributions as required as those in the UK and other countries where pensions are not frozen.
One can only add the words of Mr Cameron “I passionately believe in equality for all”.
Over time, the number of agreements with other countries allowing for upratings increased from eight to over 30. Although most provide for payment of upratings, that is not the primary purpose of agreements. They are intended mainly to provide a measure of co-ordination between social security schemes for people moving between the UK and the other country during their working lives.
At last the Minister admits up-rating  are not the primary purpose of agreements. As he has also agreed that agreements are not required then where is the argument for continuing the frozen pension policy?
 
 A major consideration in deciding whether to enter into an agreement  is the extent to which the advantages to be gained outweigh the cost of negotiating and administering the agreement.
As it is already stated that agreements are not required there is no cost for negotiating or administering an agreement.
There is an advantage for up-rating for both the pensioner, (who will receive his full entitled pension), and the other country, (that will benefit from the pensioners spending in that country).
 There will be a cost in up-rating to the pension office of £590million. There will then be an on-going  saving in administration having not to segregate the frozen pensions from the rest. Of course the savings made by frozen pensioners to the UK Treasury overall, by not using the NHS, or other benefits, far outweighs the minimal cost in comparison to the DWP up-rating frozen pensions.
 
 Most of the UK's agreements are over 25 years old. The last to come into force which provided for upratings was in 1992 (with Barbados) and fulfilled a commitment given in the 1970s.
Up-rating for pensioners in Barbados could have been done in the 1970s by simple domestic legislation. (amendment to Regulation 3.  (there was no agreement with Sark. That was done by an S.I. so its not a new procedure.
 
Ultimately the decision to move overseas voluntarily is one that is made by the individual taking account of their personal circumstances and the State Pension rules of entitlement that are applicable at the time.
Of course it is the individual’s decision to move overseas. But a discriminatory policy of freezing the State Pension will deter some. Some want to join their families in their later years instead of being alone in the UK. At this point one has to refer to those few remaining war veterans that survived the war. They fought for their King and Country, for the freedom from dictatorship, the freedom to live a good life with the freedom to move as they wanted. They did not fight for politicians to dictate where they can live by  discriminating against them if they moved to some countries but not others. Particularly when the reason for that discrimination is erroneous.
 
I am grateful to you for bringing this matter to my attention
(signed) Steve Webb
Rt Hon Steve Webb MP
Minister of State for Work and Pensions.”
 
Surely the “evidence” for stopping this outrageous frozen pension policy is un-arguable. The cost is minimal, counteracted by other greater savings to the Treasury. It has proven that Agreements are a red hearing still proclaimed by the DWP. Even the Minister admitted that its an anomaly and an oddity.


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Posted by: clive walford <clida2000 at yahoo.com>
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Visit the BAPA web site http://www.britishpensions.org.au/ <http://www.britishpensions.org.au/>

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