Everything you need to know about claiming the UK state pension in Australia

Dec 14, 2019
Pensions can be tricky, let alone when you're trying to get it in a different country! Source: Getty.

The status of the UK state pension in Australia has long been a point of contention due to policies that deprive British expats in Oz of part of the benefit, while Brits living in other countries receive the UK pension in full.

With 234,000 UK pensioners residing in Australia, understanding the ins and outs of eligibility and possible income amounts is vital, especially due to this inconsistency in the way older Brits in Australia are treated. So, if you’re unsure whether you’re eligible for a UK pension when living abroad or are confused by the amount you’re receiving, read on to get a rundown of what’s involved when claiming a UK pension in Australia.

Claiming the UK state pension in Australia

Retirees can claim the UK state pension abroad if they’ve paid sufficient UK National Insurance (NI) contributions to qualify. NI payments are usually made through work (in a similar way to which Medicare levies and superannuation contributions are taken from your salary payments in Australia), government allowances if unable to work or as voluntary payments.

With a transition currently happening between old and new UK pension systems, the necessary amount of contributions or credits made to your NI record depends on the year you were born.

To claim the basic state pension, you have to be either a man born before April 6, 1951, or a woman born before April 6, 1953, and have paid or been credited with NI contributions. If deemed eligible, the current maximum weekly pension payment is £129.20 or AUD$248.27.

Anyone born after these dates must claim the new state pension, which currently provides a maximum weekly income of £168.60 or AUD$324.06, although the percentage of this sum received by pensioners is determined through the number of years’ worth of NI contributions made. To qualify for the new pension, applicants need at least 10 years of NI contributions made either consecutively or separately over a certain period of time.

Those who are eligible will most likely receive an invitation letter no later than two months prior to reaching their personal state pension age, which varies based on gender and the year you were born and can easily be found using this calculator. A claim can still be made without the letter through a number of ways, however, and the easiest for those abroad would be to complete a claim form through the official government website.

For those living in the UK or the select countries that hold social security agreements with Britain, the pension is subject to annual increases. The indexed amount each year is linked to whichever area shows the largest increase out of the average growth in wages in Great Britain and the growth in prices based on the Consumer Prices Index, or simply by 2.5 per cent if both fall below this percentage.

The big issue with the UK state pension in Australia

Unfortunately for British expats in Australia, although they can still get the pension while living abroad, the amount they receive is frozen at the first time they claim it. This is because of the lack of social security agreement between the UK and Australia.

The Australian Government terminated its social security agreement with the UK in 2001 because the UK Government had long refused to change its policy of not indexing pensions paid to Brits in Australia, despite providing indexation to pensioners in other countries with similar social security agreements to that held with Australia.

Without yearly increases to match the increasing cost of living, UK state pensions in Australia gradually lose their value.

Brits in Australia aren’t the only ones penalised in this way; the same occurs several countries including Japan, Canada and New Zealand. In contrast, the 660,000 British pensioners who live in the US, Germany, Jamaica, Israel, Turkey, the Philippines and across the European Union, receive indexed pensions.

A non-profit group called British Pensioners in Australia (BPiA) have long called on the UK Government to stop freezing retirement incomes, saying that it not unfairly penalised pensioners but also hurt Australia as a whole. Brian Ownes, the chairman of BPiA, said that the unfair situation had hit the Australian economy for the past 70 years.

“Not only does it prevent $500 million per annum entering the economy, but it also costs around $180 million in extra payments by Centrelink, to those who also receive some Australian, means-tested Age Pension,” Ownes said.

Some British expats can receive the Age Pension while living in Australia if they meet the eligibility criteria, however the amount they receive from their UK state pension is considered in their Centrelink income test, which will most likely decrease the benefit paid by Australia.

The freezing policy was introduced by the UK in 1946, with the lack of pension increases affecting not only UK residents retiring in Australia, but also Australians who worked in the UK and therefore made sufficient NI contributions to be eligible for a pension.

 

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.

Do you receive the UK state pension in Australia? Have you struggled with the lack of indexation?

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