An international issue

Mike Morrison discusses how the recent Carson case should heighten awareness of pension issues for those who have retired abroad

Pensions are becoming an international issue, people come to this country to live and work and people leave to live and work in other countries.

Pensions built up in this country can be paid abroad and vice versa. In the House of Commons recently it was confirmed by Angela Eagle, the pensions minister, that as of February 2009, there were 1,126,000 individuals who were paid a UK state pension outside the UK¹ and unfortunately the rise of the value of the Euro against Sterling has meant that the average income for a UK pensioner in the European Union (EU) has fallen by nearly £250 in the last couple of years.

At least if you retire to elsewhere in Europe, the state pension will increase in the same way as the UK and be indexed in line with inflation in April of each year. It is here that we come up against one of those anomalies that the tax system often presents us with. While UK pensioners in the EU receive the indexed increase, there are a number of countries that do not.

Unfortunately this list includes a number of the Commonwealth countries such as Australia, New Zealand, South Africa and Canada, countries where a lot of UK expatriates have had links and have chosen to settle. Indeed it has been estimated that over 500,000 pensioners could be affected by this – so nearly 50% of the total number.

This whole issue is the subject of an ongoing legal action which commenced as long ago as 2002 and which is likely to carry on for a few months more.

The case of Carson and Others v The United Kingdom²  was heard by the Grand Chamber of the European Court of Human Rights (ECHR) in September 2009, with a decision expected in the first quarter of 2010.

The case was commenced by Annette Carson, a British national living in South Africa, and it got as far as the House of Lords before it was dismissed on appeal in May 2005.

Later in 2005 Ms. Carson was joined by 12 other pensioners in the same situation and the case referred to the ECHR. The Grand Chamber is the final appeal after a lower ECHR court rejected it last November.

The pensioners have argued that the restriction to their pension violates Protocol No 1 alone, which gives people the right to ‘peaceful enjoyment’ of their possessions, as well as in conjunction with Article 14 of the European Convention on Human Rights which prohibits discrimination on a number of specific grounds. Additionally, they argue that it violates Article 14 in conjunction with Article 8, which provides a right of respect for home, private and family life with the additional prohibition of any interference in this by a public authority.

The UK has argued that the decision whether or not to ‘up-rate’ UK pensions paid to expats is dependent on reciprocal agreements it has with the individual countries in which the expats live. Britain has such arrangements with its 26 fellow EU countries as well as with the US, Iceland, Liechtenstein, Norway, Switzerland and Turkey.

This means that UK pensioners living in the US or France have their pensions increased in line with the increases enjoyed by pensioners back home in Britain, because, UK officials say, the US and French governments have agreed to boost the pensions of American or French retirees living in the UK.

Discrimination

The European Court of Human Rights case hinges on whether the British government is seen to be discriminating against those pensioners whose pensions it ‘freezes’, by not freezing those of others.

The 13 pensioners are supported in their cause by an organisation known as the International Consortium of British Pensioners (ICBP), a representative group of pensioners who have experienced similar issues, based in South Africa.

We will wait for the outcome of the Carson case with interest.

¹www.parliament.the-stationery-office.co.uk/pa/cm200809/cmhansrd/cm091026/text/91026w0034.htm

²http://cmiskp.echr.coe.int/tkp197/view.asp?item=1&portal=hbkm&action=ht
ml&highlight=42184/05&sessionid=39026042&skin=hudoc-pr-fr