David Fawcett (Wakefield, Liberal Party) Share this | Link to this | Hansard source

I move:

That the House:

(1)

notes that:

(a)

over 242,000 British pensioners living in Australia have their pensions frozen in value and thus not increased when the pensions in the United Kingdom (UK) receive annual increases;

(b)

this practice of freezing these pensions is wholly unfair and discriminatory: many UK pensioners living overseas do have their pensions increased annually, as expected, given their lifelong mandatory payments into the national UK scheme and in contrast, Australia fully indexes the pensions of its expatriate pensioners living in the UK; and

(2)

calls on the Australian Government to take this issue to the Commonwealth Heads of Government in Kampala in October 2007 and to urge the UK Government to end the unfairness in the current indexation of overseas UK pensions.

If you go to the website of the UK Department for Work and Pensions—the department which since June has been overseen by the Rt Hon. Peter Hain—it states that the pension service supports pensioners by helping them to receive all that they are entitled to. It talks about how it helps people with planning for their future and planning the appropriate pension. The reality is that here in Australia there are some 242,000 residents who are eligible for a UK pension, but these pensions are frozen. So, unlike the remainder of pensioners in the UK and those in many other parts of the world whose pensions are indexed on a yearly basis, these people have their pensions frozen. Sometimes they are frozen at quite low levels. There was one lady living in Sydney who at 99 years old was starting to worry about whether she could afford her funeral costs. Her pension from the UK was just £4.50 a week since she arrived here in 1969. The Australian government had done the right thing and topped up her pension. The value of the top-up to her since her arrival was in the order of some £60,000. But it should not be that way.

Unlike the system here where employers make contributions to superannuation schemes and people who have no other means may receive a pension, people in the UK are required to pay into a pension scheme. For women once they have paid in for 10 years, and for men once they have paid in for 11 years, to the national insurance fund they are entitled to a pension. That fund has grown to be quite large. It pays pensions to anyone who is entitled to them—all around the world with the exception of a few countries such as Australia, Canada, New Zealand and South Africa. UK pensioners living in other countries such as Turkey, the Philippines, the USA, Israel, the European Union, Barbados, Jamaica, Cyprus, Malta, Mauritius and others—like pensioners in the UK—have their pensions indexed. But people here do not.

The UK government have consistently said that they will maintain this discrimination because they say that they cannot afford to update the pensions and pay these people what they are owed. Again, bear in mind that, unlike our system, these people have paid into this scheme with the full expectation that they will receive the pension and that that pension will be indexed. After all, the UK Department for Work and Pensions advertises on its website that people can plan for their future knowing their pension amount and that the department is there to make sure that people get what they earn. Their argument is that they cannot afford to do it. But in January this year Christopher Daykin, who is the government actuary in the UK, tabled a report which says in paragraph 1.5 of the summary:

On the basis of the estimates in this report, no Treasury grant is required for this insurance fund—

in other words, the pension fund—

in 2007-08, as the balance in the fund at 31st March 2008 is estimated to be £43,292 million ... and so significantly exceeds one-sixth of estimated benefit payments in 2007-08—

Those payments are the benefit payments that the fund is required to hold in there. It is estimated that the growth will continue. The report says:

Estimates for the period up to 2011-12 suggest that the National Insurance Fund will continue to grow, reaching over 90% of estimated benefit payments by 31 March 2012.

The UK government is clearly in a position where it can afford to pay this benefit. It is also discriminatory in that other countries do have it paid. The UK pensions minister recently agreed that there was no need to have bilateral arrangements—that they could change their arrangements in the UK to index this if they wanted to. People are now taking this to the European Court of Human Rights to highlight the fact that this discrimination occurs. The people in Australia will benefit from this payment because Centrelink have confirmed that they will keep 60c in every extra dollar coming from the UK.

I ask the Prime Minister to take this information to CHOGM and to the new British Prime Minister and make sure that he ends discrimination against British pensioners. This is a burden on the Australian people that we have been bearing with good grace, but we would not have to bear it if the British government did what they are morally obliged to do.

Anthony Byrne (Holt, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Link to this | Hansard source

I am pleased to speak today on this issue of great importance to retirees from the United Kingdom who are living in this country. I have been advised that there are over 242,000 people living in Australia receiving payments from the United Kingdom who have had their pensions frozen. Contrast this with British expatriates living in the United States, the European Union and a number of other countries outside the Commonwealth. They receive a fully indexed pension.

It seems extraordinary that residents from the same country are arbitrarily discriminated against purely on the basis of where they chose to reside. An example is contained in a video that was uploaded to YouTube in an attempt highlight the nature of this issue. This video explains it quite succinctly. It refers to a fellow called Ron who is a British expat living in the US. He retired in 1999 and moved to the United States for his lifestyle. As another example, Bob is a British expat living in Australia who retired in 1999 and moved to Australia to be with his grandchildren. In 1999 Ron received a pension of £66.75 a week. While living in the US he now receives £84.25 a week from the British government. In 1999 Bob received a pension of £66.75 a week and eight years later, in 2007, Bob still receives £66.75 a week. This is only one example and there are clearly many more, including some British expat pensioners in their 90s who receive only £10 a week. We heard from the member for Wakefield that we have got one who is receiving £4 a week, the same amount they received when they moved to Australia in the 1970s.

In 2001 the Howard government terminated Australia’s social security agreement with the United Kingdom. The termination of the agreement was announced in an attempt to force the UK government to address conditions such as the non-indexation of pensions. This attempt, I think, has clearly failed. The consequence is that, in addition to pensions now not being indexed, new arrivals from the UK of pension age now need to accrue 10 years residence in Australia to qualify for the Australian age pension. Six years later I believe the Howard government has saved a lot of money by not paying pensions. But what about those people who have come in good faith to this country; what about the government negotiating a new agreement with the British government pertaining to their pensions?

In my electorate of Holt there are over 7,400 residents who were born in the United Kingdom. A significant proportion of these people came prior to 1991 and a significant proportion will have moved to Australia after spending their working lives in the United Kingdom. They have settled in large numbers in Cranbourne, Hampton Park and Doveton. They did this to spend time with children and grandchildren and because they enjoy the Australian lifestyle and climate. A retired British expat settling in Hampton Park in 1991 would have received a pension of £52 a week. If this situation had continued, that same British expat would have received a frozen pension of about £52 a week. If this British expat had settled in the US or the Philippines, the pension would be over £80.

The UK government’s main reason for not indexing pensions is the cost. It would cost roughly £420 million a year, we believe, to unfreeze these pensions. It is argued that the policy change would be unfair to taxpayers in the UK and that the British government would need to negotiate bilateral agreements with each country individually to change the indexing. These arguments are difficult to swallow for the many British retirees living abroad, particularly when the UK National Insurance Fund Account balance—on the figures that I have—is £38 billion and increasing each year. This is £27 billion more than the UK government actuary’s required minimum working balance. Indexing the pension would only make a small difference to the growing balance of the National Insurance Fund Account, which it is estimated will reach almost £70 billion by 2012.

According to British Pensioners in Australia Inc, the pensions of 490,000 British expats are indexed by the UK government—these recipients are residing in the United States, the European Economic Area and countries such as the Philippines and Turkey. Reports indicate that a simple change to British law would enable the indexation of pensions in countries such as Australia. Bilateral agreements would not be necessary for this change to occur.

The important point for this chamber and for the Australian government to realise is that this is not just Australia’s battle. Whilst the largest proportion of British expats are in Australia, there are many others who are affected worldwide. Other Commonwealth countries, in particular, also have organisations lobbying for change. This is an issue that is not difficult to fix up. I have a lot of constituents in my electorate who have been affected by this. They deserve to have an outcome. They deserve to be paid their pension entitlement—the one they have paid into for much of their working lives. (Time expired)

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

I believe that, in the changeover between the Speaker and me, we failed to get a seconder. Would the member for Kingston second the motion before he begins his speech.

Kym Richardson (Kingston, Liberal Party) Share this | Link to this | Hansard source

I second the motion. I rise today to support the motion before the House. Australia now has 242,200 residents whose UK non means tested state pensions are frozen. These represent about 46 per cent of the 520,000 UK pensioners worldwide who do not receive regular inflation upgrading to their UK pensions. A further 150,000 living in Canada, 35,000 living in South Africa and 34,000 living in New Zealand are similarly affected. This practice of freezing pensions is wholly unfair and discriminatory—across the nation, let alone in my electorate of Kingston. Many UK pensioners living overseas do have their pensions increased annually, as expected given their lifelong mandatory payments into the national UK scheme, and Australia fully indexes the pensions of its expatriate pensioners living in the UK.

The UK pension arises because everybody who has worked in the UK—that is, for about 10 years for women and 11 years for men—pays into the National Insurance, NI, fund each week, and it is from this fund that today’s contributors fund state pensions for today’s pensioners. About 450,000 UK expat pensioners do receive regular inflation adjustments courtesy of bilateral agreements. These fortunate pensioners live in such countries as Turkey, the Philippines, the USA, Israel and the EU countries. Because of this illogical state of affairs, it is claimed that the UK pensioners in Australia, Canada et cetera are being discriminated against on the basis of their country of domicile. The UK government complains that it does not wish to impose on current contributors the cost of £420 million per year to up-rate all pensioners worldwide and that contributions are for the pensioners at home. Currently this claim is a fabrication, because the NI account has a forecast balance at 4 August of £43.3 billion. The actuary writes that it ‘is significantly above the required prudential balance’.

This prudential balance should be about £11.7 billion. The forecast excess funds therefore approximate to £31.6 billion. Four hundred and twenty million pounds per year represents about 0.53 per cent—a mere fraction—of the total £75 billion annual 2007-08 income from NI contributions. Pension fraud alone cost the UK government many times this amount. Moreover, interest income for the NI fund approximates to £1.6 billion per year in a low-interest, low-dividend environment. By expats living away from the UK, almost £1 billion per annum in National Health costs are saved, significantly more than the cost of the indexed pensions that pensioners are trying to recover. This alleged discrimination is the subject of an ongoing legal case, which has been heard and lost in the House of Lords. Lord Carswell, however, dissented. He was of the opinion: ‘There is no justification for paying some pensioners less than others.’

In support of this approach, the Commonwealth’s Singapore 1971 and Harare 1991 declarations unanimously commit the Commonwealth Heads of Government to foster human equality among all in the Commonwealth. One must ask why some Commonwealth residents, with indexed pensions, are treated more equally than others, who do not have their UK pensions indexed.

Britain boasts of and promotes its adherence to the rule of law, which, when defined, includes the fact that British law is supposed to be even-handed, promoting equality and fairness as its main aims. Again, how does this rank when one considers the treatment meted out to those UK expat pensioners who have chosen to retire mainly to Commonwealth countries? I reiterate: Australia fully indexes the pensions of its expatriate pensioners living in the UK. I call on the Australian government to take this issue to the Commonwealth Heads of Government in Kampala in October 2007 and I urge the UK government to end the unfairness in the current indexation of overseas UK pensions.

Jenny Macklin (Jagajaga, Australian Labor Party, Shadow Minister for Families and Community Services) Share this | Link to this | Hansard source

I rise to speak on this motion because hundreds of thousands of Australians are suffering as a result of the Howard government’s termination of Australia’s social security agreement with United Kingdom on 1 March 2001. There is no question that these people are under pressure from the rising cost of living, whether it be in grocery prices, in gas and electricity bills, in petrol prices—the list goes on.

It is true that the Howard government attempted to force the UK government to address some of the conditions of the agreement, specifically the nonindexation of UK pensions paid in Australia. However, it was a crude tactic and a failure that has left many senior Australians and residents entitled to a British pension worse off. As a result of this government’s decision to terminate the agreement, we now have new arrivals of pension age from the UK not able to access an Australian age pension for up to 10 years, and former Australian residents will no longer be able to claim a non means tested UK retirement pension using their Australian residence. I say to the Prime Minister: how do you expect these older Australians to maintain even a modest standard of living in retirement?

Over six years after it foolishly ripped up the old arrangements, the Howard government has failed to secure a new agreement. From Labor’s point of view, this is simply not good enough. A new social security agreement with the United Kingdom will be a priority for the next Labor government. Securing such a change of course will be difficult; however, the Labor Party believe a solution can be found, and we will put our shoulder to the wheel to get an agreement. These issues matter. They matter because there are so many senior Australians from the United Kingdom who deserve our support.

Recently Labor initiated a Senate inquiry into the cost-of-living pressures facing senior Australians. That is particularly important in this debate regarding the senior Australians from the UK who are suffering because the Howard government is unable to get an agreement with the UK government. What we wanted was to listen to the concerns of our senior Australians, to understand the pressures on them from the cost-of-living rises.

According to the submissions to the inquiry from the Australian Bureau of Statistics and National Seniors, the living costs of aged pensioner households have seen the highest increase compared to those of other household groups. Even the submission to the inquiry of the government’s own Department of Families, Community Services and Indigenous Affairs admits that over 25 per cent of senior Australians—that is, over one in four senior Australians—describe themselves as ‘just getting along’.

There was a submission to the Senate inquiry from a National Seniors group in Queensland which looked into the cost of the weekly grocery shop. Buying the items on the list cost $55 two years ago but may cost $75 today at the local supermarket. They go through a number of items: bread two years ago cost 89c but now costs $1.29, margarine was $3 but now is $4.20, a kilogram of mince two years ago was $3 but now is $8, and a cooked chicken was $5.99 two years ago and is now $10.50.

The Salvation Army highlighted the problems starkly in their submission when they said:

A significant percentage of older Australians presenting for assistance at Salvation Army services are assisted with food and/or food vouchers.

Fuel and utility costs have also hit many senior Australians very hard. From the inquiry we heard that many senior Australians are going to bed early or sitting in cold living rooms to save power. This is the reality for senior Australians under this current government. Unfortunately, they include many senior Australians from the UK, who the government has not turned its mind to help. The government seems to be saying to these senior Australians that they have to turn to the Salvation Army or other charities for help. Maybe this is what the Prime Minister means when he says that Australian families have never been better off. (Time expired)

Joanna Gash (Gilmore, Liberal Party) Share this | Link to this | Hansard source

I rise to support this motion on the indexation of United Kingdom pensions. It is only fair that I do so, because of the number of immigrants from the United Kingdom who have retired or settled in Gilmore. The decision of the United Kingdom to freeze the indexation of British pensions in Australia is an unfortunate one. The Australian government readily accepted reciprocal arrangements and still do, but this decision is one that is beyond any influence of ours. Without being seen as being too parochial, in terms of fairness and equity I believe these British pensioners have been ‘dudded’.

The Australian government has, for a number of years, called on the United Kingdom to increase, in line with inflation, the retirement pensions of British pensioners who live overseas, including in Australia. The Australian government, at the highest levels, takes every opportunity to raise this matter with the United Kingdom government. In early 2006 the Minister for Families, Community Services and Indigenous Affairs, the Hon. Mal Brough MP, wrote to the Secretary of State for Work and Pensions, the Rt Hon. John Hutton MP, asking him to look afresh at the merits of the United Kingdom government’s position. The response was that the United Kingdom government has no intention of changing their existing policy, because of the cost.

As the majority of member countries of the Commonwealth Heads of Government Meeting, CHOGM, are not adversely affected by this policy, I am advised we do not believe they would support raising this issue or supporting the Australian position if it were raised at CHOGM. Despite this, I believe that October’s CHOGM this year provides the ideal opportunity to put the issue on the table to end the unfairness inherent in the approach by the government of the United Kingdom.

I understand also that a consortium of pensioners is taking action against the United Kingdom government on this matter in the European Court of Human Rights. The case is expected to be heard later this year. Like all of the United Kingdom pensioners in Australia, I am hopeful that the court in Strasbourg will find in favour of the pensioners.

In 2005 a British expatriate living in South Africa, Mrs Annette Carson, mounted a legal challenge in the High Court in England. The case was dismissed. The British tabloid the Daily Telegraph says that, despite making full national insurance contributions throughout her working life, Mrs Carson’s pension will never rise above £103.62 because she lives in South Africa. If she returned to Britain, it would be instantly raised. Mrs Carson said:

I can only say that from my point of view it is heartbreaking news for all the very elderly pensioners who are in countries like South Africa and especially Zimbabwe who can not make ends meet. They have difficulty feeding themselves and providing medicine when they are sick. They have been hoping that their position might be alleviated by the House of Lords and they have all been let down.

The Daily Telegraph also reported that the relevant Australian minister at that time, Senator Kay Patterson, exploded when asked to comment on the dismissal of the Carson appeal. ‘I am appalled,’ she protested. ‘I am outraged. How can this happen in a democracy? How can you justify penalising contributors to a mandatory pension scheme? It is morally indefensible.’

Another Australian based expatriate who has been leading the campaign for pension parity, Jim Tilley of Sydney, is also concerned at the ‘apparent bias’ of the judiciary during the Carson case and subsequent appeal. ‘What the judges seem to be saying,’ he complained, ‘is that although the frozen pension policy is discriminatory, it cannot be changed because of what they claim to be the daunting cost to the government.’ Mr Tilley reports that more than 160,000 British expatriates now depend on their Australian entitlement because they can no longer survive on their United Kingdom pensions. ‘The immoral cost to Australia now exceeds $A100 million or £40 million a year,’ he says.

In my mind, I am content that Australia is actively pursuing with the UK government the issue of pension indexation for UK citizens living in Australia and that it will continue to work with the UK government to attempt to resolve this issue. In pursuit of this objective, we welcome efforts by UK pensioners to raise awareness among British parliamentarians of the anomalies in the payment of UK pensions abroad.

There is an inequity and injustice existing that needs to be righted here and we are doing our level best to do that. As long as the British government persists in denying justice to its expatriates, it brings into question the sense of natural justice inherent in British law which has sustained its democracy for a millennium.

If CHOGM does not afford us the window of opportunity we are seeking, we should give consideration to supporting the two Australian frozen pension organisations—the Sydney based British Pensions in Australia group and the Adelaide based British Australian Pensioners Association, who have indicated that they plan to pursue the case. There is no doubt that the British government needs to be lobbied and the best people to do that are the relatives of the British expatriates in Australia and other countries. Despite our very best intentions, we cannot do this alone and need the support of their relatives living in the United Kingdom. We must persist until justice is done. I wish to assure my constituents that I will continue to fight against this injustice. I wish to thank them for the excellent citizens they have become in Australia and how positively they have contributed to the welfare of our nation.

Craig Emerson (Rankin, Australian Labor Party, Shadow Minister for Service Economy, Small Business and Independent Contractors) Share this | Link to this | Hansard source

More often than not motions moved in that part of parliament dealing with private members’ issues are supported by both sides of the parliament, and that is the case here today, but towards the end of my remarks I want to comment on the effectiveness, or lack thereof, of the motion that is before us on United Kingdom pensions. The core problem is that residents of the UK spend their working lives paying into a social security fund in order to gain eligibility for an age pension. The practice of the UK government for many years has been to freeze the value of their UK pension at the level it is when they leave the United Kingdom. It seems rather unfair for that practice to be adopted because during their working lives these pensioners have made these contributions. It is almost a penalty that when they leave the UK their pensions are frozen. Interestingly, the same treatment is not given to UK residents who go to live in European countries. So, again, applying the practice to Australia but not to other European countries seems to be quite discriminatory.

Australia indexes the pensions of its residents moving to the United Kingdom. So there is fairness being extended by Australia but not being received from the UK government. It was foolish of the Howard government to terminate the social security agreement in 2000. The reason may have been well motivated in seeking to press the UK government to change its position on the freezing of the indexation, but it appears to have blown up in the government’s face because the consequences have been that no progress has been made since that time. New arrivals coming to Australia from the UK cannot access the age pension for up to 10 years. They face a very high cost of living. The Leader of the Opposition, who has joined us in the chamber, has demonstrated most clearly that food prices in particular have risen at much faster rates than the general cost of living, and that is a very big problem for pensioners in general, and particularly for the UK pensioners who do not have their benefits indexed. I have also had a look at electricity prices. Electricity is very important in the spending patterns of pensioners. Electricity prices, too, have risen quite rapidly in Australia over the last few years. Food prices in Australia compared with those in other developed countries have risen at probably twice the rate. So there is something very bad going on there and it is the pensioners who feel the burden.

In my electorate of Rankin, which is wholly within Logan City, there are thousands of UK pensioners, and they are feeling the pressure of these cost-of-living rises. The fact that their UK pension is not indexed is a great penalty to them. I lament the Prime Minister’s statement that Australian families have never been better off. He should get around the electorates more than he does and talk to UK and other pensioners about the high cost of living before he repeats the statement that Australian families have never been better off. It is an insult to Australian families—working age families and pensioners—that the Prime Minister firmly believes that they have never been better off when they face these sorts of pressures.

The problem with this motion relates to the active part of it, which says:

(2)

calls on the Australian Government to take this issue to the Commonwealth Heads of Government in Kampala in October 2007 and to urge the UK Government to end the unfairness in the current indexation of overseas UK pensions.

The government has had 11 years to deal with this problem and now we have members of parliament on the government side calling on the government to do something. It confirms how out of touch the government is when its own members have to call on the government to go to this heads of government meeting. Other Commonwealth nations will not be interested in this issue. The time for action is now.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Order! The time allotted for this debate has expired. The debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting.