Frozen expat pension issue raised in Isle of Man

The decades-old problem faced by British expatriates in certain countries whose State Pensions are not “up-rated” in order to keep up with inflation has unexpectedly surfaced in the Isle of Man, where it seems Manx pensioners who retire abroad are subject to the same pension “freezing”.

The matter surfaced last week in Tynwald, as the Isle of Man’s Parliament is called, when treasury minister Alfred Cannan admitted, in response to a question put to him, that the Manx government’s hands were tied, as far as being able to do anything about the frozen pensions problem,  the Isle of Man Today reported over the weekend.

The matter was also recorded in the official minutes of the proceedings.

According to the person who raised the question – a member of the Isle of Man’s House of Keys named Dr Alex Allinson, pictured left  – some 512 former Isle of Man residents now living in countries such as Canada, New Zealand and Australia have had their pensions frozen at the time they moved away, out of a total of 723 Manx pensioners who currently live overseas.

This appeared to indicate, Dr Allinson went on, that “Manx pensioners choosing to retire abroad can no longer rely on the state pension, and will need to take out extra financial provisions to maintain their standard of living”.

Cannan replied, according to the Hansard report: “By virtue of international social security agreements, the Treasury is legally obliged to follow the UK Government’s policy in this area, and it is therefore unable to unilaterally review the provisions by which pensioners living in certain countries do not benefit from annual increases to their state pensions.”

Cannan went on to explain how, after World War II, the UK Government entered into agreements with some countries but not others to “up-rate” the pensions of expats living in the other country, and that the Isle of Man, because of its Crown Dependency relationship with the UK, is covered by those agreements.

Cannan noted that the UK had been unable to fix the problem – which is said to affect as many as 550,000 of the estimated 1.2 million UK expats who live abroad – “simply because of the political decisions to focus and concentrate on pensioners resident in the United Kingdom, rather than deal with a number of issues and potential complications that could arise from up-rating pensions in countries for which there is no relationship, or social security relationship, with the UK”.

Dr Allinson later told International Investment that he had raised the question in Tynwald after the matter had been brought to his attention by a constituent, “and I thought it merited being raised in the House of Keys”.

“In essence the IOM government is tied to the same agreements [that the UK is],but I think it is important that pensioners considering retiring abroad are aware of all the facts, and make the right extra provisions to maintain their incomes,” he added.

It wasn’t immediately clear as this article was going to press whether Guernsey and Jersey pensioners who live away from those islands also have their pensions frozen, in the same way as British and Manx expat pensioners do, in certain countries. Guernsey and Jersey spokespeople didn’t immediately reply to requests for comment.

However, it is thought likely that their expats’ pensions are also frozen in those countries, as they, like the Isle of Man, are also UK Crown Dependencies, and thus have a similar legal and regulatory status.

Countries in which British and Manx expat pensioners don’t have their state pensions up-rated include Australia, Canada, New Zealand and South Africa.

Expats living in EU countries, the US, Turkey, Barbados, Israel and the Philippines do enjoy up-rating benefits.

As reported here last month, the front in the long-running battle to get UK expat pensioners state pensions up-rated at the same rate as those of their UK counterparts has moved to Europe, where 1.2 million British expats currently live,  and where the UK’s plans to leave the European Union have thrown the future up-rating of expat pensions in the EU into question.

The UK government has stated that it intends to continue up-rating the pensions of Brits resident in the EU, along with seeking to ensure that such other benefits they currently enjoy as their ability to obtain free healthcare from the national health services in the countries in which they now live will also continue, but as yet nothing has been finalised.

Setback in 2010

A long-running attempt by expat British pensioners to gain pension parity through the courts was dealt a major blow in March 2010, when the European Court of Human Rights ruled against them, holding that Britain’s refusal to link their pensions to inflation, the way it does those of retirees living in the UK and in certain other countries, was not discriminatory.

The battle has continued to rage on in the Houses of Parliament, however, and earlier this year, UK MPs voted in favour of a motion that would see the axing of the Government’s pension-freezing policy. Labour party leader Jeremy Corbyn has been among those calling for all expat pensions to be up-rated.

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