Overseas UK pensions 'blocked for spouses'

15 May 2013

People living abroad will no longer be entitled to a UK state pension based solely on their spouse's work history, under government plans. Pensions Minister Steve Webb said some of those claiming a married person's allowance had never been to the UK.

Some 220,000 overseas residents receive this payment at a cost of £410m a year.

The measure will be part of an overhaul of the state pension, to be included in the Queen's Speech on Wednesday. Existing pensioners will be unaffected. The Pensions Bill will introduce a new flat rate pension based on individual contributions during a person's working life.

'Unfair and unsustainable'

Current rules allow spouses who haven't paid their own National Insurance contributions to claim a "married person's allowance" of up to £66 per week based on their husband or wife's history of NI contributions.

The total number of spouses receiving such payments has risen to 220,000 from 190,000 a decade ago. While increasingly rare in Britain, the practice has become a popular option for people who live overseas and who are married to British citizens.

Mr Webb said sometimes these allowances were claimed by people who never set foot in this country, and that this was unfair and unsustainable. He told the Daily Telegraph: "Most people would think, you pay National Insurance, you get a pension. But folk who have never been here but happen to be married to someone who has are getting pensions.

"Say you are an American man and you marry a British woman, you can claim, if she has a full record of contributions, a pension of £3,500 a year for your entire retirement having never paid a penny in National Insurance. Most people would think that is not what National Insurance is for."

Once the pensions bill becomes law, any new claims from 2016 would be prevented. But British pensioners and their families who currently live overseas and make such claims would not be affected.

'Unfair treatment'

Norman Cudmore, who served in the RAF for 22 years and worked overseas for another 16 years, lives in the Philippines with his Filipina wife.

"I have contributed to the UK pension scheme for all those years and will qualify for a state pension. I did this so my wife would have some security when I finally pass away," he told the BBC.

"However, now I am being told this will not be the case. It feels the government are not treating their people fairly. It seems to be one rule for those living in the UK and one for those who have left."

The government's overhaul of the state pension system will see a single-tier pension - of £144 a week at today's prices - being paid to every qualifying new pensioner from April 2016 at the earliest.

While many people will gain as a result of any changes, some who currently pay into a second state pension - which is being abolished - will lose out.

Tom McPhail, head of pensions research at Hargreaves Lansdown, said that, as the current pension system is being replaced anyway, Mr Webb's planned block on payments to overseas spouses would have a limited impact.

"From 2016 onwards the state pension will be based entirely on your individual record and there will be no inheritance of state pension rights," he said.

Source: BBC News 

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