There is something peculiar about a pension system that decides the value of a lifetime of contributions partly according to where the pensioner happens to live when they become old. If you spent decades working in Britain, paying National Insurance, paying tax and contributing to the country in exactly the same way as the person at the desk beside you, it would be reasonable to assume that the pension eventually paid to you would be calculated according to those contributions. What would be rather harder to imagine is that the government might later decide that your pension should steadily lose value because, after retirement, you chose to live in the wrong country.
Yet that is precisely the position faced by British pensioners living in countries including Canada. Their UK state pension is paid, but it is frozen at the rate at which they first become entitled to receive it overseas. The annual increases enjoyed by pensioners living in Britain, and by British pensioners living in certain other countries, do not follow them. A person retiring abroad this year might initially receive exactly the same pension as somebody remaining in Manchester, Bristol or Glasgow. Ten or twenty years later, however, the two payments can be markedly different, despite both pensioners having made the same contributions during their working lives.
The oddity lies not simply in the loss of money. It lies in the geography. Move to one country and your pension rises each year. Move to another and it does not. The distinction is not based upon how long you worked, how much National Insurance you paid, whether you served in the armed forces, whether you worked for the NHS, whether you spent your career in private industry or whether you contributed more or less than somebody else. It is largely determined by where you live after leaving Britain and by the agreements that happen to exist between governments.
That produces absurd results. Two British pensioners can spend virtually identical working lives, retire at the same age with the same National Insurance record and initially receive the same state pension. One moves to a country where uprating applies and the other moves to Canada. From then onwards their pensions begin to separate. One continues receiving annual increases. The other does not. The longer they live, the wider the gap becomes.
The government has never denied that this happens. The policy is deliberate. Its defence has traditionally rested upon legislation, international agreements and the argument that successive governments have maintained the same position. All of that may explain how the policy operates. It does very little to explain why it is fair.
There is a tendency in government to confuse administrative consistency with moral justification. A rule does not become reasonable merely because it has existed for a long time. If anything, longevity should make us more willing to examine it. Bad policy can survive for decades precisely because the people affected by it are dispersed, elderly, living abroad and politically easy to ignore. They do not form a concentrated voting bloc in Britain. Most will never march through Westminster. Many simply accept the loss because fighting a foreign government from thousands of miles away is not how most people intend to spend their retirement.
I worked in Britain for many years before emigrating to Canada. Like millions of others, I did what the system required. I worked, paid tax and made National Insurance contributions. Those payments were not discounted because there was a possibility that I might one day live overseas. Nobody asked me where I intended to retire before accepting the money. There was no separate overseas contribution rate and no warning attached to each payment saying that its eventual value might depend upon which country I later chose to call home.
That is why the language surrounding the state pension matters. It is often discussed as though it were simply another welfare payment provided by government generosity. For most recipients it does not feel that way at all. It feels like the conclusion of an arrangement made throughout working life. People contribute for decades with the understanding that those contributions build entitlement. The system is complicated, certainly, and National Insurance is not a private investment account with a personal pile of money waiting at the end. But governments themselves reinforce the idea of contribution and entitlement. They tell people how many qualifying years they have accumulated and how many more they require to receive a full pension. The connection between contribution and eventual benefit is therefore fundamental to the way the system presents itself.
If entitlement is earned through contributions, residence after retirement should be largely irrelevant. The pension belongs to the working record, not the postcode.
The unfairness becomes clearer as the years pass. Inflation does not stop because somebody moves abroad. Food becomes more expensive in Canada just as it does in Britain. Electricity bills rise. Property taxes rise. Insurance rises. Prescription costs, transport, home maintenance and the thousand ordinary expenses of ageing do not pause out of respect for British pension legislation. Yet the frozen portion of a pension gradually loses purchasing power because its cash value remains unchanged while prices continue to rise.
This creates a particularly strange punishment for longevity. The longer a frozen pensioner lives, the more financially disadvantaged they become compared with somebody who made the same contributions but happened to retire elsewhere. We normally regard living longer as a success of modern society. Under a frozen pension policy, longevity steadily increases the penalty.
The policy can also work against Britain's own interests. Retirees living overseas generally place far less demand on British public services than pensioners living in the UK. Someone settled permanently in Canada is not normally using a British GP, occupying a British hospital bed, receiving British social care or making daily use of British public transport concessions and other services intended for residents. Canada, rather than Britain, carries much of the practical cost of that person's ageing. Yet Britain still refuses to uprate the pension on the grounds that doing so would cost money.
There is a narrowness to this accounting. It calculates the cost of increasing the pension but pays little attention to the expenditure Britain avoids because the pensioner lives elsewhere. Governments often do this. A cost visible in one departmental budget is treated as real, while a saving elsewhere remains conveniently abstract.
There is another argument occasionally made, which amounts to saying that people knew the rules when they moved. Even where that is true, it does not make the rule fair. Governments alter pension rules constantly. Retirement ages change. Contribution requirements change. tax allowances change. Benefits change. Public policy is not preserved in amber simply because citizens made decisions under an existing system. If a policy produces an indefensible distinction between people with identical contribution histories, pointing out that the distinction already existed is hardly an answer.
Nor is emigration some exotic lifestyle choice reserved for the wealthy. Families become international. Children move abroad. People marry citizens of other countries. Careers cross borders. British people have been settling in Canada, Australia and other Commonwealth nations for generations. Some retirees move to be close to their children and grandchildren precisely when ageing makes family support more important. Others spent part of their working lives overseas and simply remain there. Treating them as though they abandoned Britain in search of perpetual sunshine bears little resemblance to the lives many actually lead.
The Commonwealth dimension makes the policy more difficult to defend, not less. Britain speaks frequently of historical relationships with Canada, Australia and New Zealand. Governments celebrate shared institutions, military history, migration, trade and cultural links. The rhetoric is one of family. Yet pension policy can treat British citizens living within that supposed family very differently from citizens living elsewhere.
It is difficult to explain that distinction without eventually arriving at the phrase “because those are the rules”. Whenever government policy reaches that point, scepticism is healthy.
This is not really an argument about whether retirees abroad deserve special treatment. They do not. It is an argument that they should receive the same treatment as people who earned the same pension entitlement. Equality does not mean giving overseas pensioners something additional. It means stopping the gradual reduction in the relative value of what they have already earned.
The policy survives partly because the affected population is easy to divide. People living in Britain can regard it as an overseas problem. Younger workers can regard it as an elderly person's problem. Governments can regard it as an inherited policy for another administration to solve. Pensioners themselves are scattered across continents. There is rarely a single political moment when the injustice becomes urgent enough to force action.
That is how many unreasonable policies survive. Nobody actively defends them with enthusiasm, but nobody with the power to change them considers changing them urgent. Responsibility passes quietly from one minister to another and one government to the next. Each administration can point backwards and say the policy predates them. Eventually age itself becomes part of the defence. We have done it for decades, therefore continuing to do it somehow becomes evidence that it should continue.
I have always found that argument deeply unconvincing. In my working life I dealt frequently with systems and processes, and one of the surest signs of institutional failure was the answer: “We've always done it this way.” It usually meant nobody could provide a convincing reason for the process other than its own history. Sometimes there had once been a perfectly sensible explanation, but circumstances had changed while the system had not. On other occasions the original explanation had never been very good in the first place.
Public policy should be subject to the same test. If two people make the same contributions, acquire the same pension entitlement and retire at the same age, what compelling principle justifies steadily paying one less simply because of where they live?
Administrative history is not a principle.
A bilateral agreement is not a principle.
The existence of old legislation is not a principle.
Fairness is.
The answer should therefore be straightforward. British state pensions should be uprated according to entitlement, irrespective of the pensioner's country of residence. There can still be rules about qualification, contribution years and proof that a recipient is alive. Governments are entitled to protect the system against fraud and ensure payments are legitimate. What they should not do is reduce the real value of an earned pension simply because the recipient crossed a border.
There would, of course, be a cost. Almost every correction of an unfair policy costs somebody something. The relevant question is whether the cost is justified, and whether the government has been benefiting financially from an inequality it would struggle to defend if the people affected lived next door to one another rather than on opposite sides of an ocean.
Imagine applying the same logic within Britain. Suppose two workers retired after identical careers. One moved from London to Birmingham and continued receiving pension increases. The other moved from London to Belfast and was told the pension would now be permanently frozen. There would quite properly be outrage. The geographical distinction would appear arbitrary because everybody could see the two pensioners standing side by side.
Distance makes inequality easier to ignore.
There is also something profoundly uncomfortable about a wealthy country saving money specifically because some of its elderly citizens live too far away to create much political inconvenience. Pensioners are not asking for charity. They are not asking Britain to finance their decision to live overseas. They are asking for the same annual treatment given to another pensioner whose working record may be identical.
The state pension should follow the person who earned it.
Britain has spent years talking about fairness between generations, dignity in retirement and the importance of rewarding people who work and contribute. Those ideas should apply beyond the coastline. If contribution matters when the money is being collected, it should continue to matter when the pension is being paid.
A country cannot reasonably tell citizens for forty years that contributions determine entitlement and then introduce geography as a deciding factor after retirement.
The pension did not stop being earned when the pensioner boarded an aircraft.
And fairness should not stop at the border.