Wednesday, 8 May 2013

Foreign husbands claiming UK pensions

The government has made a big song and dance about foreign spouses receiving UK state pensions, to coincide with the Queen's Speech.

There are some interesting facts: for instance, that in the last couple of years 70% of overseas spouses or civil partners awarded a pension on the basis of their British partner's National Insurance contributions are men.

So the caricature of foreign brides getting UK pensions is no longer valid, if it ever was.

Just to recap, currently a spouse or civil partner can claim up to £66 a week on the basis of their partner's NI contributions, then up to a full pension if the partner dies.

The concession is being discarded when the Single Tier Pension is launched in April, 2016. It'll be paid at a flat rate of £144 (in today's prices), based on each individual's NI record.

Steve Webb, the Pensions Minister, has chosen to flag up the fact that 220,000 foreign spouses are receiving some UK pension, even though some may never have set foot in the UK - and that this money would be better spent elsewhere.

But that approach rather ignores the 1.7m spouses who are getting the pensions back home. Which is a much bigger number. What happens to this category?

There is some transitional help, for those couples whose retirement dates straddle the time of the Single Tier launch and for 3,000 women still paying Married Women's Stamp.

But the couple who both reach pension age after April, 2016 will have to make do with the Single Tier rules. Spouse's pension won't be available.

The Department for Work and Pensions has no figures to offer on how many people will be hit by this.

Anyone already getting a married or spouse's pension is in the clear. That arrangement will continue.

But there could be a cliff-edge effect.

Say the Single Tier Pension is introduced on 6th April, 2016. A spouse with an insufficient NI record reaching pension age on the 5th April would qualify for the old spouse's pension.

Yet if he or she reached Pension Age on the 6th, there might be no spouse's pension to fall back on.

Instead, these people would have to claim Pension Credit, which involves taking a means test, in order to qualify for a payment equivalent to the £144 provided under the new Single Tier Pension.

How much is all this worth? Currently the government is spending £7.3bn a year on married/spouse's pensions in the UK and £410m on the same thing for overseas claimants.

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