A warning has been issued to half a million state pensioners who have had their Triple Lock hike snatched back by the Department for Work and Pensions ( DWP ). 453,000 state pensioners who have retired abroad won’t see the increase.
Pensioners living abroad in retirement receive £3,000 in state pension payments annually on average – nearly £4,900 less than their counterparts who remain in the UK. This is because they do not benefit from the DWP Triple Lock promise.
State pensioners who choose to retire outside the UK may find that their state pension payments are “frozen,” meaning their payments remain at the same rate as when they first started receiving them in the country they moved to, without adjustments for inflation or other factors that typically drive increases.
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More than 95% of the ‘frozen’ pensioners live in Commonwealth countries, mostly in Australia, Canada, South Africa, and New Zealand, but also in India, Pakistan, Bangladesh, many Caribbean islands, and all African countries, according to the All-Party Parliamentary Group on Frozen British Pensions.
Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Moving abroad can be a dream come true for many Britons, especially as they approach their golden years. However, it is crucial to keep an eye on the finer details, particularly when it comes to your state pension.
“If you’re planning to retire in a country where the UK state pension is frozen, it means you won’t benefit from the annual increases that help keep up with inflation, and as such, your payments will decline in real terms throughout your retirement. This could significantly impact your financial comfort in later years, leaving some facing poverty in old age.
“Those contemplating retirement overseas should plan well in advance to ensure they’re able to enjoy a comfortable retirement. It is important to understand the state pension rules of the destination country. Those facing a frozen state pension might need to make extra contributions to their private pension or other retirement savings to offset the financial impact of the lack of uprated payments.
“By boosting your pension pot now, you can help ensure a more secure and comfortable retirement, regardless of where you choose to settle. Even modest increases can compound significantly over time to provide a boost to retirement funds. It is worth considering seeking advice from a financial adviser to fully understand the implications of retiring abroad and plan accordingly.”