Duncan Lewis


Asylum, Detention/ Fast Track

Managed Migration, Public Law

A loophole rule allowing people living abroad to claim pensions in UK is to be scrapped

Date: (8 May 2013)    |    

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Hundreds of thousands of people living abroad were able to claim pensions in UK despite never having worked in the country it emerged.
Pensions Minister Steve Webb has said how huge numbers of people were exploiting a loophole in the law that allowed them to claim a so-called spouse’s pension even if they had made a little or no national insurance contributions.
Mr Webb said in some cases those involved were found not to have set foot in Britain at all.
The problem lies with the rules that allow people to claim a married person’s allowance’ worth up to £3,500 a year based on their spouse’s contributions. The allowances are costing taxpayers £410 million a year - up by a third in the last 10 years.
In this years Queens speech, measures are being included which would see the scrapping of allowances to new claimants but the existing claimants would continue to receive the payments for the rest of their lives.
Mr Webb said the situation was unacceptable where around 220,000 people living abroad now received some sort of state pension based solely on their spouse’s British work history.
He said there were women who have never been to Britain but claim on their husband's record. There were also men who have never been to Britain claiming on their wife's record.
He added if a foreigner married a British woman he could claim allowance, if she had a full record of contributions, pension of £3,500 a year for their entire retirement having never paid a penny in national insurance. Most people would think that is not what national insurance was for.
Under the Coalition's new single tier pension, which will be put in place by 2016, people will receive a pension worth about £7,000 a year provided they can show a record of at least 35 years working in Britain or caring for children or elderly loved ones.
Separate claims will no longer be accepted from spouses who have no record of contributions in Britain. Mr Webb also warned that many middle class workers were not saving enough for retirement and face a dramatic fall in their income when they finish their work.
He urged employees to sign up to so-called 'automatic escalation' deals where they commit money from future pay rises to their pensions to bolster their nest eggs.
He said there was evidence from the United States and other countries that the deals could help boost saving for retirement.
He added no one wanted to put in some extra cash now but people were willing to say that next time when they had a pay rise for that they commit now that part of that would be going into the pension.