Ditching Triple Lock Hits Expat State Pensions

Expats in Europe and a few select countries worldwide have lost their ‘triple lock’ state pension guarantee for at least 12 months.

The British government has confirmed the measure has been shelved as too expensive due to an anomaly in the formula used to calculate the annual state pension increase for millions of retirees.

The triple lock offers state pensioners an earnings increase each year depending on September’s inflation rate, the rise in annual earnings or 2.5 per cent, whichever is the most.

But the state pension rise due in April 2021 is capped with a double lock of the highest of either the rate of inflation or 2.5 per cent.

The change has dashed pensioners’ hopes of a record state pension increase.

Uncharacteristic earnings growth triggered by the COVID-19 furlough scheme flagged an 8 per cent rise in the state pension, says the Office for Budget Responsibility.

How Much Will The State Pension Go Up In April 2022?

Under the new double lock, state pensions will rise by 2.5 per cent or the annual rise for the consumer price index for September.

The current inflation rate is 3 per cent.

Payments will go up 2.5 per cent – and possibly by a higher rate.

The lower rate increases the new state pension by £4.49 from £179.60 a week to £184.10.

The older basic rate pension for expats who retired before April 2015 also increases £3.45 from £137.60 to £141.05.

The government argues that the double lock instead of the triple lock will save the Treasury £5 billion.

Work and Pensions Secretary Therese Coffey explained ditching the triple lock ‘stops pensioners unfairly benefitting from a statistical anomaly’.

Has The Triple Lock Gone For Good?

It’s difficult to say what the future holds for the triple lock.

Ministers and MPs have grumbled about the arrangement since Prime Minister David Cameron, and Chancellor George Osborne introduced the measure in 2010.

The aim was to make sure state pension payments kept pace with inflation and earnings.

In 2019, the Tories confirmed that the triple lock would stay for t least the life of the current Parliament, which ends in 2023 – and that was before the coronavirus pandemic crippled the economy.

Influential MP Mel Stride, who chairs Westminster’s Treasury Committee, has publicly stated the triple lock cannot continue under the current terms, and the government should consider unlinking wages growth from the formula.

However, she added the triple lock would return next year and the remaining years of this Parliament as the manifesto pledged.

Worries About Fairness

Many politicians and thinkers are worried about the fairness of the triple lock.

Many worry that the measure is unfair to younger generations, who bear the cost of the state pension through national insurance contributions.

Others believe losing the triple lock is not a disaster if the country benefits from new social care funding.

Separately, the government has announced a new health and social care levy to pay for this.

Which Expats Benefit From State Pension Rises?

For years, expats have argued that state pension increases should be applied across the board instead of selected countries.

Expat state pensioners are divided into haves and have-nots.

The haves receive the state pension at the same rate as retirees in the UK, while the have-nots have their state pensions frozen at the level of the first payment for life.

The government says most expats knew this when they moved overseas and should have planned for the financial implications. The Treasury claims to uprate every expat’s state pension could cost as much as £35 billion.

Countries where the UK state pension is uprated

These are the countries where expats receive the full state pension and any annual increases:

Czech RepublicDenmarkEstoniaFinlandFrance
Rest of the world
Isle of ManIsraelJamaicaJerseyKosovo
MauritiusMontenegroNorth MacedoniaThe PhilippinesSerbia

State Pension Age Rising

The age retirement savers can access their personal or workplace pensions is rising, too.

Currently, anyone who has passed their 55th birthday can draw down their pension savings and spend the money however they wish.

From April 2028, the age threshold rises to 57 years as longevity increases, and more older people decide to continue working beyond the state pension age.

However, there is a loophole.

If a retirement saver joins a pension scheme that allows 55-year-olds access before April 2023, they can access their money from that age, even if they don’t turn 55 until after 2028.

This rule applies to expats as well as retirement savers in the UK.

So, a 50-year-old expat with a QROPS pension taken out before April 2023 can access the funds from April 2028, when they turn 55, even though the new age threshold is 57 years from them.

If an expat pension already allows drawdowns from the age of 55, the terms of the scheme will remain the same regardless of the rule change.

Triple Lock And State Pension FAQ

What does uprating the state pension mean?

Uprating ids the process of increasing the amount paid by the state pension each April. The new double lock provides the uprating formula of either the rate of consumer price index inflation in the previous September or 2.5 per cent, whichever is the higher.

How do frozen state pensions work for expats?

A frozen state pension pays the rate available when the expat reaches state pension age.

For example, an expat retiring in September 2021 who lives in a country without uprating would receive a maximum payment of £179.60. The state pension remains at this level for life or unless the expat moves home to the UK or to a country that has a reciprocal social security agreement with Britain.

Expats need at least a 10-year history of paying national insurance contributions to trigger the state pension. The maximum payment only goes to expats with a 35-year contribution record.

How much will the state pension pay with a 3% uprating?

If the new state pension goes up by 3 per cent, the rise is £5.38 a week to £184.98 a week.

What will happen to the triple lock after the next election?

No one knows what will happen to the triple lock after April 2023. Still, judging by the rumours and speculation around Westminster, the format will be revised or put on the back burner to make state pension costs more palatable for the Treasury.

How was the state pension uprated before the triple lock?

Before the triple lock, the state pension was uprated in line with inflation.

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